Complex Procurement

1. Complex Procurement (Service Procurement) Summary
Overview:
Complex Work in the Procurement Suite
Much of services spending go to complex services, such as outsourced high-value projects that require extensive collaboration between the
buying and supplying organizations. Complex services can include consulting, advertising, construction, research and development, and
professionalservices, and they typically require negotiated contracts with complex terms and payment arrangements. Oracle’s Complex Work
feature streamlines all aspects of the acquisition process for complex services including:
 Negotiation of service contracts with emphasis on terms related to contract financing and progress payment arrangements
 Tracking of work progress against an agreed schedule in the contract
 Processing of payment requests
By supporting real time online collaboration involving key stakeholders throughout the lifecycle, organizations can significantly improve the
acquisition process of this important spend category.
This feature is designed for fixed price contracts with either interim progress payments based on cost or milestones. Complex w orkprocurement
spans across Oracle iProcurement, Oracle iSupplier Portal, Oracle Purchasing, Oracle Projects, Oracle Procurement Contrac ts, Oracle Sourcing,
and Oracle Accounts Payable.
Terminology commonly used with complex Service Contracts
• Progress Payments Schedule….A ProgressPayment Schedule is an industry term that represents a schedule of services and work
components required to complete a complex services contract. Each of these service components is typically associated with payments.
Specifically in Construction Services, the Progress Payment Schedule is also referred to as the Schedule of Values.
• Progress Payments….These are payments released for workpartially or fully completed on a Progress Payment Schedule.
• Pay Items…A Pay Item is an Oracle term that refers to a specific w orkor service component of the Progress Payment Schedule. It describes
the w orkor service that needs to be completed, and the payment amount associated w ith that w orkor service. So a Progress Payment Schedule
basically consists of severalpay items. Pay Items can be of different types – they can be based on rate of w orkor service being delivered, or
based on a lump sum amount for a service, or they can even be based on an event or milestone on the contract.
• Progress PaymentRate … This is a payment term used on cost reimbursement contracts. On these contractsprogresspayments released to
the Contractor are based on the costs incurred by the contractor during the execution of the contract. The progress payment rate is used on these
contracts to compute the reimbursement amount based on the cost incurred by a contractor. The Progress Payment Rate is usually negotiated
betw een the Buying Organization and the Contractor.
• Contract Financing…Contract Financing is often used on Public Sector Contracts. Contract financing is paid based on w orkperformed or cost
to date. If the contractually specified performance or cost milestones are met, financing is given to aid in the completion of subsequent workprior
to the delivery of the contract line item.
• Advances.. An Advance is a type of financing payment and is usually released before any w orkor service has been performed on the contract.
It is often used to offset some of the upfront costs associated with initiating w orkon the contract.
• Recoupment…. Recoupment refers to the liquidation of previously released financing payments. This liquidation is done frompayments
released for the delivery of services.
• Recoupmentis quantified in the form of a Recoupment Rate. This term represents a rate (as a percentage) that is applied to Invoices submitted
by the Supplier for the delivery of services specified on the contract. This rate determines the fraction of the Invoice Amount used tow ards
recoupment of previous financing payments.
• Retainage…Retainage is often used in the procurement of Construction servicesby the Client to mitigate the risks of ensuring completion of the
contract. Often in large contracts whichare at the point of substantialcompletion, there is often a list of jobs that need to be completed. On these
contracts if the balance payment due to the contractor is not large enough to cover the costs of completing the list of jobs, the contractor may not
finish them. Retainage is w ithheld fromprogress payments to ensure a sufficiently high balance payment amount so that the contractor finishesall
jobs on the contract. Flow ing fromthat, the Retainage Rate specifies a percentage of the invoice amount billed by the contractor that is w ithheld
frompayment. This retainage amount represents a deferred liability due for payment in the future.
Major Features
Incorporate Payment Schedule into a Contract

2. With Oracle’s Complex Work feature, buying organizations can negotiate w ith their contractors on the progress payment schedule using the
Sourcing RFQ and Quote process. When negotiations are complete, the buyer can autocreate the Contract fromthe sourc ing document and
incorporate a detailed progress payment schedule as part of the contract. The schedule consists of “pay items” that specifies the w orkcomponent,
the associated dollar amount and due date for completion. The feature provides for maximum flexibility in defining these pay items based on the
w ay progressneeds to be measured. The pay items could be:
 Milestone: This pay item is based on a ‘Milestone’ that needs to be fully complete before the associated payment can be claimed by the contractor. Example:
Final Acceptance of Completed Freeway. Amount: $300,000.00. There are two kinds of Milestone pay items - Recurring Milestones and Non-Recurring
Milestones.
o Recurring Milestones can only be used with Line Types which have a value basis of Quantity. Let’s consider the example of procurement of a
complex item such as an F16 Aircraft. The Recurring Milestone can represent an event such as ‘Complete & Install Landing Gear’ that needs to be
completed for the product or service ordered. Hence, these recurring Milestones have a quantity associated with them which is the same as the line
quantity. In our example each F16 Aircraft will need Landing Gear and so if 10 Aircraft are being purchased, Landing Gears need to be installed for all
10 Aircraft.
o Non-recurring Milestones can be used with Fixed Price Services and Fixed Price Temp Labor Lines for procurement of a service such as
‘Remodeling the Conference Room’. The Milestone represents an event such as ‘Tear Down of the Existing Conference Room’ that needs to be
completed as a part of the service. This type of Milestone does not recur and needs to be completed just once.
 Rate: This pay item is based on a ‘Rate’ of work completion. Payments for these can be claimed as units of work are completed. Example: Installation of 200
lamp posts @ $1000.00/lamp post
 Lumpsum: This pay item is based on a ‘Lump Sum’ amount allocated to a portion of work against which payments can be released based on the stage of
completion. Unlike ‘Milestone’ pay items, contractors can report partial progress against ‘Lump Sum’ pay items and request payments. Example: Excavation of
Site. Amount: $200,000.00.
The types of pay items that can be used on the Contract depend on the PO Line the pay items are associated with. The follow ing Lines Types are
supported w ith this feature:
 Goods: With this Line Type, only Milestone Pay Items can be used.
 Fixed Price Services: With this Line Type, all three pay items can be used – Rate, Lumpsum and Milestone
 Fixed Price Temp Labor: Again, all three pay items can be used – Rate, Lumpsum and Milestone.
Note:Rate Based Temp Labor, Amount-based Services and Outside Processing Line Types are not supported w ith this feature.
Progress Payments can be treated as either Delivery payments i.e. payment for actual w orkdone or progress made on the Contract, or they can
be treated as a formof Contract Financing as is typicalin certain industries. The type of progress payments is decided on the Document Style by
the status of the flag ‘Treat Progress Payments as Financing’. When progress payments are considered a formof contract financing, these
payments are automatically recouped frompayments due at delivery based on the recoupment rates specified in the contract. For more details
about the recoupment functionality please refer to the Oracle PayablesUser Guide.
Advances and Recoupment
In order to provide w orking capitalto smaller contractors, buying organizations may often pay advances to these contractors right after contract
signing, before any w orkor product delivery has been performed.
With this release, buying organizations can negotiate and finalize the terms of such advances, and ensure compliance to those terms. In order to
define an Advance on the Contract the Document Style for the Contract should allow the use of Advances. Advancesare defined on the PO Line
as an amount and can be claimed by the Contractor using Prepayment Invoices before any w orkhas been done on the Contract. The Contractor
can create and submit these Prepayment Invoices through the Oracle iSupplier Portal. Requests for advances submitted by the Contractor are
verified against the advance limits set forth in the contract. These advance payments are automatically recouped fromprogress invoices, based
on the recoupment rates specified in the contract.
Recoupment is the process of recovering previousfinancing payments froma current delivery payment billed on a Standard Invoice. All Financing
Payments made to the Contractor need to be liquidated or “recouped”.
The Recoupment Rate attribute appears on the PO Line if the Document Style either enables the use of Advances or the ‘Treat Progress
Payments as Financing’ flag is enabled. The buyer can then define a Recoupment Rate on the PO Line w hich willbe applied to Standard Invoices
billed to the Line or Pay Items of the Contract for deliveries made by the Contractor.
The Progress Payment Rate is used primarily on Cost Reimbursement Contracts and represents the rate at w hich costs incurred by the
Contractor can be reimbursed by the buying organization. This term is captured on the Contract for offline use by the Contractor in determining the
billable amount for w orkdone on the Contract. It is not used for any computation on the Contract or any of its transaction documents like Work
Confirmations or Invoices. The Progress Payment Rate attribute appears on the PO Line if the Document Styles has the flag ‘Treat Progress
Payments as Financing’ enabled.
Track Progress Based on a Schedule
Oracle’s Complex Work feature provides a streamlined process forContractorsto report progress and request payments using either a Work
Confirmation Request or an Invoice, each of w hich can then be electronically routed for approval.
Organizations can leverage the flexibility of Oracle Approvals Management to conf igure their business approvalprocessesforWorkConfirmation
Requests and Invoices. Please refer to the Oracle Approvals Management Engine User Guide for more details about this feature.

3. The feature allow s online negotiation on the amount of w orkeligible for payment through multiple rounds of resubmissions of the w ork
confirmation request till both parties are in agreement and the request is approved. The contractor can report progress and request progress
payments in the multiple w ays.
Contractor Submits a Work Confirmation
The Contractor can create and submit a Work Confirmation Request in Oracle iSupplier Portal. The Contractor w illneed to specify a Work
Confirmation Number, Period of Performance and the Requested Quantity or Amount. Other details like Draw ings or Certificates can be provided
as Attachments for each WorkConfirmation Line. Please refer to the Oracle iSupplier PortalUsers Guide formore information on this feature.
Project Manager Submits a Work Confirmation Requestin iProcurement
The Project Manager can create a Work Confirmation request on behalf of the Contractor in iProcurement using the ‘Create Work Confirmation’
action available on the Purchase Order view page.
Buyer/ContractAdministrator Creates a Work Confirmationon behalfof the Supplier
The Buyer can create and submit a Work Confirmation on behalf of the Supplier. This can be done using either the ‘Create Work Confirmation’
action on the Contract Update page as show n below or using the iSupplier Portal Internal View . Please refer to the Oracle iSupplierPortal Users
Guide for more information on creating a WorkConfirmation.
Release Progress Payments
The Contractor can request payment for the w orkthat has been completed on the Progress Payment Schedule. These payments are billed using
a Standard Invoice and can be used to recoup Contract Financing based on the Recoupment Rate specified on the Contract. Also Retainage can
be applied to these Progress Payments.
Contract Financing
In certain industries, Progress Payments are treated as a form of Contract Financing. This can be configured on the Document Style using the flag
‘Treat Progress Payments as Financing’.
As w orkprogresses, Contract Financing can be released by the buying organization. These Progress Payments are billed using a Prepayment
Invoice and are tracked on the Contract as an Amount Financed on the respective Pay Item and its Distribution. No retainage c an be applied to
these progress payments.
At the completion of the Contract, a final Standard Invoice can be submitted by the Contractor for the delivery of goods and services specified on
the contract. The buying organization can process this finalInvoice for payment and recoup all previously released Contract Financing.
Progress payments can be released using methods such as Self-Billing and Contractor Submits an Invoice.
Self-Billing (Evaluated ReceiptSettlement)
The buying organization can use Evaluated Receipt Settlement to create Invoices fromprocessed WorkConfirmations. If the Contract and the
Supplier Site are setup w ith the Pay on Receipt flag set to ‘Receipt’, then the Pay on Receipt AutoInvoice Program can generate Invoices for both
Contract Financing as w ellas Delivery Payments automatically.
Contractor Submits an Invoice (2-way match)
The Contractor can report progress and request payment using an Invoice if the Pay Items of the Contract have been setup as a 2-w ay match.
Please note that the payment request is processed as a Standard Invoice for Progress Payments, and as a Prepayment Invoice if these Progress
Payments are a formof Contract Financing. Please refer to the Oracle PayablesUser Guide formore information on the Invoicing features.
Contractor Submits an Invoice (3-way match)
If the Pay Items of the Contract have been setup as a 3-w ay match, the Contractor can submit an Invoice to request for Payments after the Work
Confirmation has been approved and processed. Please note that the payment request is processed as a Standard Invoice for Progress
Payments, and as a Prepayment Invoice if these Progress Payments are a form of Contract Financing. Please refer to the Oracle PayablesUser
Guide for more information on the Invoicing features.
Retainage and Retainage Release
Retainage represents fundswithheld frompayment to ensure that the contractor finishes workas agreed. The buying organization releases these
funds only after verifying that the contractor has fulfilled all contractualobligations. Retainage is also called “retention” or “contractualw ithholds”.
With Oracle’s Complex Work feature, contract administrator can negotiate retainage terms w ith the contractor and capture these as part of the
contract. These terms include Retainage Rate and Maximum Retainage Amount.
Retainage Rate

4. The Retainage Rate determines the percentage of the amount requested that w illbe w ithheld before releasing payments to the contractor. This
attribute appears on the PO Line if the Document Styles enables the use of Retainage. The Retainage Rate specified on the PO Line is applied to
all Standard Invoices billed to the Pay Items of the respective Line. Based on the Retainage Rate, a certain percentage of the Standard Invoice
Amount is w ith-held as a Retained Amount.
Maximum Retainage Amount
The Maximum Retainage Amount defines maximum amount of Retainage that can be w ithheld on a Contract Line. The Maximum Retainage
Amount attribute appears on the PO Line if the Document Style enables the use of Retainage. Every time Retainage is w ithheld on an Invoice, the
application checks that the total retained amount does not exceed this value.
Retainage Release
At the end of the project the contractor can submit a Retainage Release Invoice for release of retainage w ithheld on the Contract. If the
contractualclauses or other conditions governing the release of the retainage are met, the buyer can release the retainage amount applicable.
Retainage Release Invoices can also be used for recoupment of financing payments.
 The application will not allow you to release more than the retained amount
 You cannot Finally Close a contract that has an outstanding retainage balance
Please refer to the Oracle PayablesUser Guide for more information on the Invoicing features.
Complex Work Procurement Business Flow
Since complex w orkprocurement requires integration betw een severalOracle Applications it is beneficialto know the role that Oracle Purchasing
takes in the process. The following diagramillustrates how the various roles and products intersect.
Oracle Purchasing

5. The role that Oracle Purchasing plays is primarily in the authoring and monitoring a portion of the flow .
Refer to these topics for details:
 Authoring Purchase Orders, Oracle Purchasing Users Guide
 Finding Purchase Orders, Oracle Purchasing Users Guide
In addition, the purchase order styles that dictate w hich of the complex w orkprocurement attributes are available are created in Oracle
Purchasing. See: Defining Document Styles, Oracle Purchasing Users Guide
Some PurchasingUsage Considerations:
 Available Line Types: Goods (Purchase Basis of Goods, Value Basis of Quantity)–Only Milestone Pay Items supported, Fixed Price Services–Rate, Lumpsum
and Milestone Pay Items supported, Fixed Price Temp Labor–Rate, Lumpsum and Milestone Pay Items supported, Rate Based Temp Labor is not supported,
Amount-Based Services is not supported.
 Destination Types: Only Expense Destination Types are allowed (not Inventory, Shop Floor), Inventorized Items are supported with Expense Destination
Types only.
 Advances: Available only with Progress Payments, Paid with ‘Prepayment’ Invoices only, Can be recouped on ‘Standard’ Invoices only if ‘ Prepayment’
Invoice is paid (not billed!).
 Retainage: Available only with Progress Payments, Retainage withheld on Standard Invoices only, Released using a ‘Retainage Release’ Invoice only.
 Non-Financed PO’s: Pay Items need to sum up to the Line, Recoupment Rate should be high enough to liquidate the Advance (if any).
 Financed PO’s: Line has its own Delivery Schedule, Pay Items are financed, can be billed only using ‘Prepayment’ Invoices, Pay Items + Advances need to be
less than the Line Amount, Recoupment Rate should be high enough to liquidate Advances + Pay Items amount, Accrue at Receipt not supported for Financed
Pay Items.
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Oracle Services Procurement offers enhanced functionality over standard Oracle Purchasing in areas such as:
I. Expanded service purchase order line types
II. Ability to transact and track complex service transactions, such as milestone billing progress payments and work
confirmation
III. Transact advance payments
IV. Ability to apply retainage to complex services
V. Ability to track services deliverables
VI. Integration with the Buyers Work Center in Oracle Purchasing
VII. Create contracts for services with complex payment terms through integration with Procurement Contracts
VIII. Integration with Oracle iProcurement, Oracle Purchasing, and Oracle Projects
IX. Transact Contingent Labor through integration with Oracle Time and Labor (OTL) and iSupplier Portal
A. Setup:
1. Whensetupcomplex PO,inthe DocumentStyle,Document Types shouldShow bydefault:StandardPO,
Contract Purchase Agreement,BlanketPurchase Agreementwillbe optional.
Commoditiesshouldshow bydefault:GoodsandServices,butTempLaborisoptional.
2. Value Basisline types:
a. FixedPrice (Mandatorydata: Description –Category – Price – NeedbyDate,but cannot enterItem,
QuantityandUnit). It works for all Pay Items.For example:Cleaningservicestobe procuredata
fixedcostof $200; hence noquantityinvolvedinthe POline.
b. Quantity will workforMilestone PayItemonly.
c. Amount isnot available forComplex Orders.
3. Seeded Line Types(MissingValuesBasisis Rate):
a. ConsultingServices,AmountBased, Expense Items (Value BasisisAmount,Purchase BasisisServices) –
No PayItemavailable inComplex PO.
b. FixedPrice Services (Value BasisisFixedPrice,Purchase BasisisServices) –All PayItemsare available.

6. c. FixedPrice Services - Temp Labor (Value Basis isFixedPrice,PurchaseBasisis TempLabor) – All Pay
Itemsare available.
d. Goods,InventoryItem, ConsultingServices- Quantity(Value BasisisQuantity,Purchase BasisisGoods)
– Milestone PayItemonlyavailable.
Note: Rate-Based Temp LaborLine Type is unavailableon theComplex PO.This line type is used exclusively
forbilling laborhoursat a certain rate fora Job that hasbeen defined by HR). Oracle hasa specific process
fortemporary labor(also referred to asContingentorContractorLabor),which usesintegrated functionality
between the iProcurement,Purchasing,OTL,and ProjectsModules.
Complex Paymentsshouldshow bydefault:Advantages,Retainages,and ProgressPaymentsor Pay Items
(theyare called Schedule/Shipments forStandardPO) containsthe following:
a. Milestone (Example,payconstructioncompanybasedonstagescompleted/milestoneinsteadof
completionof the whole project).Milestone PayItemsmustbe fullycompletedbefore payment
can be requestedbythe contractorbysubmittingaWork Confirmation,Unlike the otherPayItems.
Milestone Attributes:NoUOM,No Qty, ONLYUnit Price.
b. Lump-sum(whenpaymentamountisa fixedamountbasedonthe percentage of workcompleted.
It isrequiredwhenthe organizationneedstomake progresspaymentbasedonthe percentage of
workcompletedata giventime. IsonlyavailableforLine TypeswithaFixedPrice value basis.
Partial progressispossible inWorkconfirmation.Lump-SumAttributes:NoUOM,No Qty, ONLY
UnitPrice.
For example:AnorderbeingplacedwithaPaintingcompanytopaintthe whole office buildingof
the PurchasingOrganizationandprogresspaymentwill be made on25%, 50%, 75% and100%
completion.)
c. Rate (whenpaymentamountispro-ratedbasedonthe percentage of workcompleted).Isalsoonly
available forLine TypeswithaFixedPrice value basis. Partial progressispossibleinWork
confirmation.Rate Attributes:Available UOM,Qty & UnitPrice.
B. Functionality:
4. Complex POhas twotabs (Lines&Pay Itemswhichneedsthe value andneedbydate).
5. Advantages,Recoups &Retainagescanbe defined fromactionsicon at HeaderLevel
6. Availabilityof the ProgressPayments/PayItems forselectioninbuyerworkcenterdepends onLine Type
and documentstyle setup.
7. FixedPrice value basis (inLine Types) will have all typesof payitemsforselection.
8. Quantity value basis (inLine Types) will have onlyMilestone payitemsforselection.
9. It isreceivedthough workconfirmations andnotthroughstandardPO Receiptsprocess.
10. Partial completionof Milestone payitemsisnotallowedwhile creatingworkconfirmationbutthe same is
allowedforLump-sumandRate payitems.
11. Pay itemstabas standard,isdisplayedinRFQ,QuotationsandPO.,butnotPR (non-catalogwasusedinthe
examples)!
12. ProgressPayment canbe made usingmilestone type complexpurchase orders.
13. Retainage (Similartobankguarantee) andadvancedpayment canbe handledusingcomplex purchase
orders.
14. Work Confirmations canbe createdusingOracle iProcurement,iSupplierorBuyerWork Centre. Itact as a
receiptforthe servicesandPayItemssubmitted.
15. Work Confirmation Approval mechanismusesOracle Approval ManagementEngine (AME).
16. Pay onreceiptfunctionalitycanbe leveragedif the ContractandSupplierSite have the PayonReceiptflag
setto 'Receipt'.Thisallowsthe AutoInvoice Programtoautomaticallygenerate InvoicesforbothContract
FinancingandDeliveryPayments.
17. Limitation:There is currentlynooptiontocreate a standardreceiptforComplex POsorutilize Inventory
DestinationTypes.AlthoughthisisloggedasanEnhancementRequestwithOracle,thisfunctionalitymay

7. not be changedinthe nearfuture.If a businessrequirementexiststoinventorygoodsthatare purchased
withmilestonepaymentfunctionalityorrequire progresspayments,thiswill likelyrequire anenhancement
to the system.
18. Example,see belowimage inSupplierQuote (same appliesinRFQ),lineiscircledthen3pay itemswere
created: