By Neeraj Garg

Introduction

Oracle E-Business Suite Projects applications have provided Standard Costing for labor transactions for some time. However, other important approaches to costing have not been supported out of the box, such as costing using effective rates, HR rates, or payroll actuals. To address these approaches, Oracle Projects provided three client extensions that could be used to replace Oracle’s standard capabilities.

Now, in Oracle Projects Release 12.2, Oracle has provided several enhancements that go beyond Standard Costing. These enhancements, which offer more options and greater flexibility, give companies new tools to help ensure that their costing approach fits their business and gives them a clear view of the labor component of project costs.

The Traditional Approach

The Oracle Projects Standard Costing for labor transactions uses job or employee-based rates defined in Oracle Projects tables. However, this does not meet the specific needs of some companies and situations. For example, it does not support the following.

• • Costing using effective rates: This is typically used to address the cost of labor transactions for exempt employees. For example, under the Standard Costing approach, all hours (including overtime) are costed at the standard rate. This may result in the overstatement of project costs because exempt employees do not get paid extra for overtime work.

• • Costing using HR rates: Standard Costing in Oracle Projects requires users to set up rates by job or employee with Oracle Projects Rate schedules. Therefore, if a company is already using Oracle HR and holding employee rate information, that information cannot be reused in Standard Costing. That is, companies cannot use HR rates directly to cost labor charges to a project.

• Costing using actual payroll information: The distribution of actual payroll costs to project labor transactions is an industry-standard in various industries, such as construction, where companies typically work with small margins. Without this ability, variations between Standard Costing calculations and actual costs may be greater than project profits.

Because such costing requirements could not be met with Standard Costing, Oracle Projects has traditionally provided three Client Extensions that companies could use to address a broader range of needs: These extensions are:

1. 1. Labor Costing Extension can be used to override or replace the costing algorithm provided by Oracle. It allows users to implement any business logic they choose for cost-labor transactions.

1. 1. Labor Overtime Extension can determine overtime transactions and then classify and cost them based on the appropriate overtime rules.

1. Related Item Extension allows users to create separate “related” transactions for different labor-cost components to gain visibility for reporting or billing purposes.

Understanding the Enhancements

The new enhancements in Oracle Projects Release 12.2 allow companies to address various costing requirements without using these extensions. There are three key enhancements:

1. Total Time Costing
2. Costing Using HR Rates, and
3. Costing Using Payroll Actuals.

These elements are discussed in subsequent blog articles.