Fees and penalties

Contract fees and penalties are used to incentivize the contractor. The terms and conditions can be agreed upon with the contractor as part of the contract. You can define fees and penalties for all the contract types. Four types of fees and penalty are available: Fixed Fee, Award Fee, Incentive Fee, and Penalty. When you transfer the fee or penalty line to Invoicing, the Fee Type data is also transferred. You can define a period of validity for a fee line. You can add multiple fee and penalty lines to a contract line.

Fees and penalties are defined as part of the contract line data and must be linked to the revenue code. You can define a period of validity for a fee line. This allows the user to define a classification in both Project and the integration to financials. You can define default revenue codes for fees and penalties in the Project Parameters (tppdm0100s000) session. You can add multiple fee and penalty lines to a contract line.

You can close the project or the contract even though the fee amount and the invoice amount are not same because the invoiced amount can be lower than the fee amount or even zero (not earned by the contractor because of lack of performance).

The application considers the fees and penalties to calculate revenues. Only the Fixed Fee type is considered for revenue recognition.

The fee amount must not exceed the funded amount specified for the contract. The application allows you to approve the fees only if the funds are available for the contract. You cannot settle the advance amount using fee invoices. The funded amount of the contract cannot be increased based on the penalties.

Note:

For penalties, invoice with a negative amount or credit note is generated.
For fees and penalties, the holdback functionality is not applicable.

Invoicing

Fees result in invoices while penalties result in credit notes. The invoicing method is defaulted from the contract line data. However, you can change the invoicing method. You can close the project or the contract even though the fee amount and the invoice amount are not same because the invoiced amount can be lower than the fee amount or even zero (not earned by the contractor because of lack of performance). You can manually create the revenue transactions for fees and penalties using the invoice type, Fees and Penalties in the Revenues (tpppc3101s000) session.

If you post an invoice related to fees and penalties in Invoicing:

The revenue transactions for fees and penalties are updated in the Revenue Transactions (tpppc3505m000) session.
The Invoice Date and Invoice Document are updated on the fee or penalty line.

The expected or planned revenues for Fixed Fee are displayed in the performance measurement graphs and revenue analysis graphs, if the Planned Revenues check box is selected in:

The Performance Measurement using EVM (tppss0702m000) session.
The Display Financial Analysis (tppss0701m000) session.

If you cancel a billable line related to the fee or penalty in Invoicing, the Transferred to Invoicing check box for the fee or penalty line is cleared in the Fees and Penalties (tppin0180m000) session.

Note:

The application considers the invoice type, Fees and Penalties (only approved or Fixed Fee) when you update the cash forecast data for the projects that are not closed if the Project Contracts check box is selected in the Update Cash Forecast (tfcmg3210m000) session.
If the fee is linked to a contract line with the status Canceled or to a project with the status Closed, you cannot update the cash forecast data for the fee.