Larger projects involving several countries / continents require costs and revenues to be managed across multiple currencies. The following currencies are needed to create a capital project or external proposal cost estimate with global reach:

• The bid or customer currency = the currency in which the prospect or customer wants to view costs and prices
• The group or company currency = the currency used internally by your business unit which is leading the proposal or delivery effort. The entire project cost and revenue can be viewed in this group or company currency
• The individual site/business unit or local currency = the currency used by each delivery organization working on the project, based on where that site or department is situated and how it reports financials locally. For example if you have a subsidiary in the UK doing a portion of the work, the local currency for their portion is GBP when the group or company currency is USD
• Individual transaction or source currency such as historical pricing documents like purchase orders from suppliers in other countries, or resources whose labor rate uses a different currency to local or company currency, or simply the currency which is used to maintain cost / price tables used in your project estimate.

For example if you are pricing a material using a purchase order from the UK, on a portion of the work or WBS delivered locally out of France, for a customer in Canada, when the business unit leading the bid is in the US then customer currency is CAD, company currency is USD, local currency is EUR and source transaction currency is GBP.

In order to manage your proposal across these numerous currencies it is necessary to maintain exchange rates, accessable from both the SETUP and CLIENT tabs.

1. The group or company currency is set automatically based on the primary business unit leading your proposal selected in the SET-UP tab. It is not changeable from here; if it looks wrong check the primary business unit in the SET-UP tab
2. Select the currency you wish your customer to view your bid in. You can scroll up and down the list, type in part of the description or type in the ISO-standard currency code to search for it
   • The most common currencies (USD, EUR, GBP) always appear at the top so don't search for them alphabetically
   • If currency is maintained on the customer record it will default (this is however rare)
3. Click the "Edit Exchange Rates" link to view or edit the exchange rates or conversion factors from source to company, and from company to customer, currency

After clicking the link to "Edit Exchange Rates" you will see the popup shown below. It is essentially a list of conversion factors from source to local to company to customer currencies. Rates are derived from SAP's exchange rates by default with the option to over-ride them manually, or by applying a fixed conservative "buffer %".

Notes:

1. Once rates are defined in this popup they are "frozen" for the remainder of this specific project. This is important to prevent cost and margin "creep" on a day by day basis after the project costs and margins have been approved by management
   • If any currency exchanges are not defined then the standard SAP rates will be used, which can vary from day to day resulting in small fluctuations in local, company and customer currency values. To avoid this add any missing currencies in this popup
2. The exchange rate "buffer %" is designed to accommodate unplanned fluctuations in exchange rates between now and the project start or contract award date. Exchange rate fluctuations post-award should be managed through effective use of currency hedges or currency insurance policies. The exchange rate buffer % works as follows:
   • It increases the cost in the customer's currency as compared to the same company currency amount, to make the bid look less competitive
   • It increases the cost in the company currency as compared to the source currency amount, to again make the bid look less competitive
3. You can actually have multiple exchange rate types in iPE, which is essentially a reference to the table, list or index you are using for specific conversions. SAP allows currency exchange rates to be maintained for multiple rate types. For example you can have:
   • One exchange rate type when converting from source to local currency values (e.g. the 'current rate')
   • Another exchange rate type when converting from local to company or group currency values (e.g. the 'yearly rate')
   • Yet another rate type when converting from company to customer currency values (e.g. 'external rate')
   • These rates types are assigned to the project or proposal type by your implementation consultant, and they are optional. If you do not maintain special rate types for your proposal or project type, then the leading company's exchange rate type is used
4. When exchange rates are changed part-way through a project cost estimate the costs are not re-evaluated unless you click on the Update Rates button explained below.

For example if a source document cost is 1000 GBP based on today's exchange rate of 1.26 USD to 1 GBP the company currency amount would be 1260 USD. Adding a 2% buffer increases this cost to $1285.20.  If the customer's currency is CAD then based on today's exchange rate of 1 USD to 1.3 CAD, $1285.20 equates to 1670.76 CAD. With the same 2% buffer the CAD bid amount comes to 1704.18 CAD. The buffer was in effect applied twice.

• Buffers cannot be applied to the same currency pair twice. For example, if the source transaction was in Canadian CAD and the company currency was USD, converting this to a customer currency of CAD would give the original cost again not original cost + buffer % twice over.

A more complex example involves two exchange rate types. For example the same source document is again 1000 GBP and the local currency is EUR; based on a local exchange rate type conversion ratio of 1 GBP to 1.18 EUR the source document cost in local currency is 1180 EUR. Then assume based on the group-level exchange rate type the conversion ratio of 1 EUR = 1.13 USD, so now the total cost in company currency is $1333.40. This is based on two exchange rate types but no buffer %.

• This can lead to strange-but-true results for example if the source currency is 500 USD, the local currency is EUR with local exchange rate of 1 EUR = 1.124 USD now the local currency amount is 444.84 EUR. Based on the group-level exchange rate type conversion ratio of 1 EUR = 1.13 USD (as opposed to 1 EUR = 1.124 USD for local exchanges) the total cost in company currency is now $502.67, some $2.67 higher than the source document amount even though source and company amounts are in the same currency = USD.

Clicking on the "Edit Exchange Rates" link above gives the popup shown below:

1. The external customer and group or company currency codes are displayed again. You can change the customer's currency from this popup
2. Enter an exchange rate date which is used anytime rates are automatically updated from SAP to get the current rate, or technically the exchange rate set-up in SAP valid on the exchange rate date. It is recommended to enter either the RFX receipt or the response due date here:
   • Since exchange rates are frozen for this proposal it does not matter if the exchange rate date is before or after you generate your cost estimate
3. Optionally enter or click the up/down arrows to specify a currency buffer. Exchange rates from source to company currency (rows 1-4) and exchange rates from company to customer currency (the last row) are increased by the % input when rates are updated from SAP
4. Click the + button to add a new rate and select the "from" currency. The "to" currency is always the company currency with the exception of the last row which is "from" company currency "to" the customer's currency and appears automatically
5. If you wish to adopt the rate from SAP then leave "Rate Type" as "SAP exchange rates" or a similar SAP rate-type. Rates will be set automatically based on the SAP rate valid as of the exchange rate date plus the buffer %. You can still manually edit SAP sourced rates in iPE, so only use the 'manual negotiated rate' when the rate is set manually from the outset
6. Click "Update Rates" button to incorporate rate changes into your cost model and/or reset the SAP exchange rates based on the latest information from SAP, as shown and explained below.

Notes:

1. If the conversion is in reverse e.g. from GBP to USD then the rate is the inverse e.g. 1 / 0.6325 or 1.5810
2. If the rate from say GBP to USD is missing but there is a rate from GBP to EUR and then from EUR to USD then these two rates that were found are multiplied together to create a composite rate

If you are editing the exchange rates on a project or proposal estimate which has already been started, then you will need to potentially update existing costs to reflect the new rates.  This is done by clicking on the 'Update Rates' button and select the best option from the menu (shown above):

1. Reset any manually adjusted rates to the current (as of the exchange rate date top right) rates from SAP. If you made so many changes you lost track then this might be a good way to clean things up and start over. You still need to select the second or third menu options to incorporate these rate changes into the project cost estimate
2. Update any costs or revenues which are in the currency you just changed, to reflect the new exchange rates. Other cost model updates (such as formula) are not performed, and updating cost/revenue due to rate changes button takes only a few minutes
3. Update the entire cost model or 'force an update' which recalculates all the detailed estimates costs considering not just exchange rate changes but other cost input changes not covered in menu option #2  above, such as labor or indirect cost rate sheet updates,  additional historical PO's, and changes to formula inputs. This takes quick a few minutes and therefore happens in the background.