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Coupa Success Portal

Total Contract Value (TCV)

Introduction

A worker's estimated Total Contract Value (TCV) - a projection of the total spend allocated to the worker during their contract period - is a key indicator in helping managers make decisions around budgeting, allocation of resources, and more. Coupa Release 30 includes improvements to the way TCV is initially calculated - and how it is updated to dynamically reflect changes to a worker's contract status - improving the reliability of a key indicator driving decision making.

How it works

How TCV is Calculated

When creating a new Contingent Worker (CW) or issuing a Requisition for new candidates, you are asked to choose one of four options to estimate TCV, so you can understand how much a particular worker will cost over the course of their lifecycle. After you create the CW or Requisition, the option you selected is used to generate the initial TCV estimation associated with the candidate and/or Contingent Worker (CW). The same calculation method you chose is also used anytime a change to a CW's status requires TCV to be updated, unless you explicitly specify a different method when taking actions such as entering a new rate change or contract extension.

tcv-calc-options.png

The exact phrasing used to describe each method could differ slightly from what is in this document, depending on your specific CCW configuration.

About each method of calculating TCV

Depending on the option you choose, estimated TCV is calculated as follows:

  • Use Start and End date, assuming 40 hours per week (or the number of hours customary in your region) + anticipated OT/DT: The default option.
    • TCV is calculated using the total number of workers (or candidates), the customary number of hours per work week (40 in the U.S., for example), the estimated assignment length (based on the start/end dates), and your anticipated Overtime (OT) and/or Double Time (DT) hours.
      • The number of hours per week comes from your Localization settings (where rules might differ in specific locations) or, secondarily, your Timesheet settings. If not defined in either place, 40 is used.
      • Values entered for anticipated OT/DT are only factored into TCV if you allow OT and/or DT company-wide, or in specific locations per Localization settings. 
        • OT/DT can also be calculated differently based on work locations, for purposes of determining TCV. If OT/DT multipliers are defined in your Localization settings, they will be used. Secondarily, calculation is based on your company-wide Rate Multiplier settings.
  • Use total estimated hours for the entire contract: The ideal option if you are not sure about the total number of hours per week.
    • TCV is calculated using the total number of workers (or candidates), your estimated number of hours and the estimated assignment length (based on the start/end dates).
      • In the case of a rate change in mid-contract, a new TCV is generated by recalculating the estimated hours remaining, at the new rate.
  • Use Start and End date, assuming fewer than 40 hours per week (or the number of hours customary in your region) + anticipated OT/DT: The ideal option for part-time assignments. 
    • TCV is calculated using the the total number of workers (or candidates), the estimated number of hours per work week, the estimated assignment length (based on the start/end dates) and anticipated OT and/or DT hours.
  • No calculation needed: When creating the CW or requisition, or entering a new contract extension, you can choose to manually enter an estimated contract value. Nothing is calculated automatically.

The first three options listed above let you capture anticipated Expenses as well, however expenses only factor into the calculations if you've enabled the following under Configuration & Settings > Client Settings > System Settings:

tcv-expense-setting.png

Actions that trigger an updated TCV

Taking the following actions on a requisition, candidate or CW will result in an updated TCV:

  • Create Requisition (Regular, Identified, and Quick Pick)
  • Edit Requisition (Regular, Identified, and Quick Pick)
  • Offer to Hire
  • Mass Offer to Hire
  • Extend Offer
  • Mass Extend Offer
  • Issue Work Order - Did not generate a new TCV prior to Release 30
  • Edit Work Order - Did not generate a new TCV prior to Release 30
  • Confirm CW - Did not generate a new TCV prior to Release 30
  • Mass Confirm CWs - Did not generate a new TCV prior to Release 30
  • Bulk Confirm CWs - Did not generate a new TCV prior to Release 30
  • Enter Extension
  • Mass Enter Extension
  • Enter Rate Change
  • Mass Enter Rate Change
  • Enter Termination
  • Bulk Termination
  • Update CW
  • Mass Update CWs
  • Bulk Update CWs
  • Create CW (Requisition, SOW, and Direct Fill)
  • Upload CW (Requisition and SOW)

Examples

Issue an Offer to Hire

The TCV calculated when creating a requisition is carried over when issuing an Offer to Hire. To verify, check the Rates tab and look for Estimated Contract Value prior to submitting the offer. Changing the start/end dates or number of hours per week when issuing an offer will automatically recalculate the TCV.

tcv-in-req.png

Enter an Extension

When submitting a rate change or contract extension for a worker, you can change the way TCV is estimated for that worker, going forward. The calculation method you originally chose is carried over as the default selection.

tcv-extension2.png

Update a Contingent Worker

When clicking Update CW Info and making changes that affect TCV (such as increasing a bill rate) you are notified of the new TCV amount that will result if you save your updates, allowing you to decide whether or not to continue. If changes don't affect TCV, there is no notification.  

tcv-in-updatecw.png

 

Timesheets

As a worker's hours are submitted in a weekly timesheet, the remaining TCV as well as the spend for a specific period is displayed. If the number of hours submitted causes the overall spend on a worker to approach the estimated TCV (according to your settings), a warning displays. The warning is informational only; you are not prevented from submitting/approving additional hours.

To configure when you are notified/warned that spend is approaching estimated TCV, navigate to Configuration and Settings > Client Settings > System Settings. When your spend on the worker reaches the percentage (that you enter) of estimated TCV, you will receive the notification.

tcv-warning-setting1.png

You can choose which is counted against TCV: spend from the approved hours, or from the overall timesheet spend submitted in your invoices. Navigate to Configuration & Settings > Client Settings > System Settings. Under the setting: TCV Timesheet or Invoice-Based, you can select Timesheet, Invoice or None.

Estimated TCV does not factor in taxes, MSP/VMS fees, Ad hoc batch items, or expenses (Expenses can be included; see the Note in the About Each Method of Calculating TCV section above). 

FAQ

How is TCV calculated after a rate change in the case of an hourly bill rate? A monthly bill rate?

Hourly Rates: TCV is calculated using the old bill rate up until the day before the effective date of the new rate. The new rate is used to calculate TCV for the rest of the contract period after that. 

Monthly rates: For purposes of calculating TCV, a rate change takes effect the month after it happens. For example, if a rate change is approved on May 15th, TCV is calculated using the old bill rate for prior months through the end of May. The new bill rate is used for all of June, and all subsequent months through the end of the contract.

 

In the case of a monthly bill rate, how is TCV calculated for a partial month? For example if an original contract ends Oct 31st and is extended to Nov 15th?

The partial month is treated like a full month. In cases where a contract is extended into any part of a month - even if it's only one day - TCV applies the monthly bill rate to that entire month. In the example above, if the monthly bill rate is $5,000 USD, then TCV for November is $5,000 USD. It works this way for original contracts, extensions and rate changes.

 

If there is a rate change during a contract period during which a worker submitted more OT hours (or expenses) than originally planned, is the extra OT/expenses factored into the updated TCV?

No, the originally planned OT and expense amounts are used in the recalculation. Actual expenses do not factor into the TCV calculation.

 

When entering a Rate Change, can the method of calculating TCV be changed?

No, the method used to calculate TCV cannot change during a contract period.

 

How is TCV calculated on a Requisition that includes multiple openings with different start dates?

TCV is calculated based on the start/end dates defined in the requisition. TCV for each individual worker is later calculated based on the individual worker's start/end dates.

 

Is TCV calculated in the currency of the Work Location and then converted to USD, or vice-versa?

TCV is calculated in the currency defined in the requisition, then converted to USD if necessary.

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