Agile Contracts


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Tried to give a heads-up on some popular contracts models and how that could be applied to agile world. Intention is only to generate curiosity and further research.

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  • This presentation tries to impart very basic information about some popular models of contracts.This presentation may contain materials that are procured from external sources.Please reach out to me in case you find any material that is been used infringes upon someone’s copyrights.
  • A lot of this we will learn though games .
  • Agile Contracts

    1. 1. Agile Series by NishanthintroducingAgile Contracts
    2. 2. Agile Contracts• Time and Material (T&M)• Fixed Price Fixed Scope (FPFS)• Fixed Price per Unit of Work• Target Cost
    3. 3. Time and Material Contracts• Simplest of all types – pay per work as it gets done• Applies for fixed as well as flexi scope projects• Flow of useful software in one direction and money in theother direction• Requires the customer to trust the vendor/supplier• Start with a few trial iterations before proceeding further– Shared risks– Build trust– Usable functionality early• Variations– Capped T&M per iteration/per release– Capped T&M with adjustment (shared pain/gain pricing)
    4. 4. Fixed Price Fixed Scope (FPFS) Contracts• Collaborate early with customer to identify– Needs– Wishes– Priorities• Initial release planning (or IPBR) to identify these• Collaborate with customers to alter scope after eachiteration/release, if required• Apply best possible due diligence with experienced people toreduce risks• No change in requirements allowed, only new features can come inlater• Ability to replace requirements with new ones• Ability to change the order of implementation
    5. 5. Fixed Price per Unit of Work (UoW)• Related to running, tested software features• Unlike traditional development, UoW adheresto agile principle of “Working software is theprimary measure of progress”• Variations– Price per story point– Price per function point – preferred as certified FPauditors are available• Points defined in terms of business value
    6. 6. Target Cost Contracts• Followed by Toyota• At stage 1, Customer and supplier identify, analyse andestimate all possible requirements• Estimate cost of change or scope increase duringproject• Establish target cost from the above 2 steps• Calculate target profit from target cost• If outcome is under budget then share the gain• If over budget, both pays penalty to each other• Share of pain/gain inline with ratio of the companies– Larger the company, larger the share of pain/gain
    7. 7. Thanks!Exciting new transitions