Presented in Agile 30 meetup on 15-07-2017

1. Agile Contracts
15-07-2017

2. Contract
 What is a Contract?
 Do we Really Need it?

3. Real Life Contracts
Mangalyam tantunanena mama jeevana hetuna:
kanthe badhnami subhage twam jeeva saradam satam
“O my bride, the source of all my spiritual riches, I tie this auspicious thread around your throat,
which (shall be) the foundation and source of my life (hence forth). I bless that you may live for
hundred years. (And by this, I am blessed too as I pledge to be your partner in life)”

4. Agile Manifesto
 Customer Collaboration over contract negotiation

5. Triple Constraint
 Projects must be delivered within cost
 Projects must be delivered on time
 Projects must meet the agreed scope
 Projects must also meet customer quality requirements

6. Agile Principles
 Our highest priority is to satisfy the customer
through early and continuous delivery of
valuable software
 Deliver working software frequently, from a
couple of weeks to a couple of months, with a
preference to the shorter timescale

7. Fixed Price Contracts
 FPFS :Time and Cost are Fixed(Sometimes Scope
also)
 All the scopes are defined initially
 Extra payment for the changes
 Disadvantages
Sellers may try to cut the scope to deliver the
projects on time and within budget
Quality is not guaranteed for the customer
Risk to the Seller

8. Fixed Price Contracts
 Fixed Price Incentive Fee (FPIF)
 If project ends sooner, an additional amount is paid to
the seller
 Fixed Price Award Fee (FPAF)
 If performance exceeds the expectations, an additional
amount is rewarded to the seller
 Fixed Price Economic Price Adjustment (FPEPA)
 The fixed price can be re-determined depending on the
market pricing rate

9. Fixed Price Contracts
 Fixed Price per Iteration
 Requirements defined and agreed-on before the iteration
 Highly flexible or no predefined requirements
 Supplier has to give the clear estimates
 Scope changes is a risk
 Transparency, frequent deliveries can win customers
confidence
 Fixed Price per unit of work
 Feature Points, Story points
 This approach is not quite common

10. Cost Reimbursable Contracts
 Suitable for the projects without clear scope
 Payment as per the agreed time frame
 This model is rarely adapted
 Disadvantages
 Payment to be done as per the agreed timeline
 Supplier can raise unlimited amount
 Always beneficial for the supplier

11. Cost Reimbursable Contracts
 Cost Plus Fee (CPF)
 Agreed total cost for the seller plus a percentage of fee
over cost
 Cost Plus Fixed Fee (CPFF)
 Agreed fixed amount (for supplier)
 Cost incurred on the project is reimbursed on top of this
 Cost Plus Incentive Fee (CPIF)
 A performance-based extra amount will be paid

12. Time and Material
 Scope not detailed initially
 Cost based on Hourly/Man Days
 Anytime Scope changes
 Customer decides the End date of the contracts

13. Progressive Contracts
Variable Price Variable Scope Progressive Contracts
 Flexible contracts
 Suitable for Agile projects
 Define the cost per iteration but not scope
 Termination can occur at any time
 Based on the relationship, the projects can continue
indefinitely

14. Target Cost Contracts
 Share a % of profit of the target cost
 Supplier to bear the overrun cost if not met the expectation
 Target cost is clearly communicated
 Target cost can be set for the entire project or for the
particular unit
 Client needs to have a clear knowledge to accurately measure
the target cost

15. Profit Sharing Contracts
 Share an agreed % of benefits of the profit
 Motivates the supplier
ODC based Contracts