purchase agreement

A purchase agreement is a contract that commits an organization to buy a specified quantity or amount by using multiple purchase orders over time. In exchange for this commitment, the buyer receives special prices and discounts. The purchase agreement can apply to a specific quantity of a product, a specific currency amount of a product, or a specific currency amount of the products in a procurement category. The prices and discounts of the purchase agreement override the prices and discounts that are specified in any trade agreements that exist.

In the Purchase agreements form, you can create, apply, and follow up on purchase agreements that exist between your organization and your vendors. For example, after you create a purchase agreement, you can order directly from it.

Every purchase agreement has a validity period that is defined by the person who creates the purchase agreement. The delivery date of a purchase must be in the effective dates of the validity period.

By default, a purchase agreement is on hold. You must change the status of the purchase agreement to Effective before you can create a purchase order for the purchase agreement.

Commitment types

Each line in a purchase agreement is a commitment to buy something. You can use lines from multiple purchase orders to fulfill the commitment. There are four types of commitments:

Product quantity commitment – You purchase a specific quantity of a product.

Product value commitment – You purchase a specific currency amount of a product.

Product category value commitment – You purchase a specific currency amount in a procurement category. The amount can be for a catalog item or a non-catalog item.

Value commitment – You purchase a specific currency amount of any product or in any procurement category.

ImportantImportant

The commitment type, which only specifies whether the purchase agreement is based on a value or a quantity, differs from the commitment document that is used by public sector entities in France. For more information about commitment documents, see (FRA) About commitments (Public sector).

Pricing terms for purchase agreements

Pricing terms can vary, depending on the type of commitment. The pricing terms from purchase agreements override any other pricing terms that are set up for trade agreements.

The following table describes the price-related fields that are affected by each commitment type. Fields that contain Yes can be updated on an order line.

Commitment type	Unit price	Price unit	Discount percent	Cash discount amount
Product quantity commitment	Yes	Yes	Yes	Yes
Product value commitment			Yes
Product category value commitment			Yes
Value commitment			Yes

Policies for purchase agreements

The following policies affect the way that the link between a purchase agreement commitment and the corresponding purchase order lines works:

Max is enforced – The total quantity or amount for all order lines cannot exceed the quantity or amount that is specified on the related commitment.

Price and discount is fixed – The price on an order line and the price on the related commitment cannot differ. If the price is changed on the order line, the link to the commitment is broken. If the link is broken, the order line does not contribute to the fulfillment of the commitment.

Minimum release amount and Maximum release amount – If an amount is specified, a message is displayed if you make any change to an order line that causes the order line to be different from the related commitment.

Fulfillment calculations for purchase agreements

The Fulfillment tab on the Line details FastTab in the Purchase agreements form displays fulfillment quantities and amounts.

In the Fulfillment area, you can view the total quantities and amounts for all order lines that are linked to the specified purchase agreement. You can also view the remaining amount or quantity that is required to fulfill the commitment.

In the Agreement area, you can view the quantities and amounts from the specified purchase agreement. These quantities and amounts are the total quantities and amounts that were committed.