Key concepts in subcontracting

Applies To: Project Operations for resource/non-stocked based scenarios, Lite deployment - deal to proforma invoicing

The article explains some key concepts that you should be aware of before you start to use the subcontracting functionality in Microsoft Dynamics 365 Project Operations.

Contracting unit on the subcontract

The contracting unit represents the division or practice that owns the delivery of the eventual project. The contracting unit is also the division that enters into the contract relationship with the vendor.

Purchase currency

In Project Operations, the purchase currency is the currency that the subcontract is created in. It's also the currency that subcontractor costs on a project are recorded in. The purchase currency can differ from the project currency, and the project currency can, in turn, differ from the sales currency.

Billing methods on subcontract lines

For projects, there are typically fixed-fee and consumption-based contracting models. Project Operations supports these billing methods in the sales and purchase contexts. For a purchase, billing methods work in the following way:

• Time and Material – When a subcontract line uses the Time and Material billing method, the cost of time is recorded on the project as subcontractors work on that project and record time. These cost transactions from subcontractors are then matched with the line items on vendor invoices. In this model, project managers who use Project Operations can match and verify vendor invoice lines with subcontractor time that is recorded and approved. After the verification is completed, previous cost actuals that were recorded after approval are reversed, and new cost actuals that are based on the vendor invoice are created on the project.

• Fixed Price – In this fixed-fee contracting model, vendor invoices are based on fixed milestones. However, subcontractor resources can also report time. The time is then reviewed and approved by the project manager. When it's approved, Project Operations creates temporary cost actuals on the project. After the vendor sends an invoice for a milestone, the project manager can match previously recorded cost actuals against the milestone. When the verification is completed, the cost actuals are reversed, and the milestone-based cost is recorded.

  Important

  Fixed Price subcontracts are currently not supported for resource/non-stocked based scenarios in Project Operations.

Project price lists on subcontracts

Project price lists are price lists that are used to setup purchase prices for time, expense, and other project-related components. There can be multiple prices lists, each of which can have its own date-effective subcontract in Project Operations. Project Operations doesn't support overlapping effective dates on project price lists for a subcontract.

Transaction classes on subcontracts

Project Operations supports four types of transaction classes:

• Time
• Expense
• Material
• Fee

Purchase costs can be estimated and incurred only on Time, Expense, and Material transaction classes. Fee is a revenue-only transaction class and isn't available in the content of purchasing.

Purchase pricing dimensions

Pricing dimensions let you decide what attributes are used for purchase price setup and defaulting on time transactions. In relation to purchasing, Project Operations supports only fixed dimension sets for purchase price setup and defaulting. For purchase price setup and defaulting on subcontract lines and subcontract time transactions, the attributes are Role and Bookable Resource.