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This is not included in the steps of MW - I would recommend that during the upgrade you set your environment manually for each step that requires you to use the app login. After the upgrade is complete point your bashrc file to the new R12 environment files.
During the upgrade you will be required to set your environment for the apps tier, the forms tier, the web tier and the database tier so it would be best if you set these on login during the upgrade to avoid being in the incorrect environment during the upgrade steps.