Setting up Contract Types

The Contract Types Setup window provides the following functions:

• To establish contract types to predetermine how the total contract amount will be distributed automatically into equipment, material, labor, subcontractor, and other costs by percent when a new maintenance contract or contract quote is created.
• To enter estimated and forecast labor costs so the system will calculate maintenance contract profitability and compile the results in a labor load schedule report.
• To assign a service level to a contract type so the system will calculate and track response times on service calls.

Accessing Contract Types

1. Select Microsoft Dynamics GP > Tools > Setup > Service Management > Lookup Setup > Maintenance > Contract Types.
2. Enter a Contract Type and Description. An example of a contract type name could be PM with the contract description of Preventive Maintenance.
3. If you're using the service level agreements module, complete the service level-related fields.
4. In the Contract Coverage scrolling window, you can enter an extensive description of the contract's coverage. Your description can be viewed on all contracts of this type.
5. Select Save.

Projecting Costs Using Contract Types

You can use the contract type to determine how the total maintenance contract amount is divided among your five cost categories. Capturing this information makes profitability planning and labor loading possible, and is necessary for determining the markup percentages in the Maintenance Contract Quote module.

1. Select Microsoft Dynamics GP > Tools > Setup > Service Management > Lookup Setup > Maintenance > Contract Types.
2. Select the Costs button.
3. Enter the cost percent of the total contract amount in the first line for each category: Equipment, Material, Labor, Subcontractor, and Other.
   Remember the percentage amounts for each category provided in the example above for use later in this discussion. It is recommended that you make the percentages in the five categories add up to 100% so the costs of a new contract are automatically calculated in the Contract Breakdown window when a new maintenance contract is created. The Contract Amount Breakdown window is updated accordingly when a maintenance contract is created using the contract type.
4. Enter a percent in the Available to Spend Percent fields.
   The amount in the Available to Spend Percent field of each of the five categories is a portion of the percentage of the contract amount. This is a percent of a percentage. The second percentage amount is your estimate of how much each category costs you for the contract type. One hundred minus the percentage amount is considered the margin for the cost category. The second percentage is used to determine the Available to Spend Hours in the Labor Load Schedule report. The second percentage is also used to determine the billing amount for the Maintenance Contract Quote module. One hundred minus the percentage amount appears in the Margin column in the Contract Quote window.
5. Enter a percentage in the Labor Available to Spend Percent field.
   The actual dollars available to spend on labor for this contract type is calculated using the following equation: Available to spend amount x Available to spend percent = Actual available to spend amount $50,000 x 60% = $30,000
6. Enter the average labor cost per hour for this type of contract in the Standard Labor Cost/Hour field as a dollar amount. This amount is used to calculate the available to spend hours in the Labor Load Schedule report as shown in the following equation. Actual available to spend dollars / Standard labor cost per hour = Available to spend hours
   In our example, $25 was entered for the standard labor cost per hour. Therefore, the available to spend hours equals 1,200 hours as shown in the following equation. $30,000 / $25 = 1,200
7. As an option, you may add a labor adjustment percentage for overhead recovery such as travel, entertainment, cell phone, and vehicle expenses in the Labor Adjustment for T & E field. You may select to leave this line blank. This amount is added to the labor available to spend percent when calculating available to spend hours.