Leiden Institute of Advanced Computer Science            System’s Development and Project            Management –         ...
Leiden Institute of Advanced Computer ScienceOutsourcing  Benefits:                                          Remaining ris...
Leiden Institute of Advanced Computer ScienceOutsourcing (cont‘d)  !   Management plan incl. risk management  !   Contract...
Leiden Institute of Advanced Computer ScienceOffshore outsourcing  !   Communication     !    Language     !    Problem of...
Leiden Institute of Advanced Computer ScienceAcquiring software from external supplier  This could be:  !   A bespoke syst...
Leiden Institute of Advanced Computer SciencePayment methods  !   Time and materials contracts  !   Fixed price contracts ...
Leiden Institute of Advanced Computer ScienceTime and materials contracts  Advantages to customer  !   Easy to change requ...
Leiden Institute of Advanced Computer ScienceTime and materials contracts (cont’d)  Disadvantages  !   Customer liability ...
Leiden Institute of Advanced Computer ScienceFixed price contracts  Advantages to customer  !   Known expenditure  !   Sup...
Leiden Institute of Advanced Computer ScienceFixed price contracts (cont’d)  Disadvantages  !   Supplier will increase pri...
Leiden Institute of Advanced Computer ScienceFixed price per unit delivered                         D esign	          Impl...
Leiden Institute of Advanced Computer ScienceFixed price/unit example  !   Estimated system size 2,600 FPs  !   Price    !...
Leiden Institute of Advanced Computer ScienceFixed price/unit contracts  Advantages for customer  !   Customer understandi...
Leiden Institute of Advanced Computer ScienceFixed price/unit contracts (cont’d)  Disadvantages  !   Difficulties with sof...
Leiden Institute of Advanced Computer ScienceThe tendering process  !   Open tendering    !    Any supplier can bid in res...
Leiden Institute of Advanced Computer ScienceThe tendering process (cont’d)  !   Restricted tendering process     !    Bid...
Leiden Institute of Advanced Computer ScienceStages in contract placement Requirements analysis                     Evalua...
Leiden Institute of Advanced Computer ScienceRequirements document  !   Introduction  !   Description of existing system a...
Leiden Institute of Advanced Computer ScienceRequirements document (cont’d)  !   Requirements will include     !    Functi...
Leiden Institute of Advanced Computer ScienceEvaluation plan  !   How are proposals to be evaluated?  !   Methods could in...
Leiden Institute of Advanced Computer ScienceEvaluation plan (cont’d)  !   Need to assess value for money for each      de...
Leiden Institute of Advanced Computer ScienceInvitation to tender (ITT)  !   Note that bidder is making an offer in      r...
Leiden Institute of Advanced Computer ScienceMemoranda of agreement (MoA)  !   Customer asks for technical proposals  !   ...
Leiden Institute of Advanced Computer ScienceEvaluation of proposals  !   Management considerations:    !    Vendor abilit...
Leiden Institute of Advanced Computer ScienceEvaluation of proposals (cont‘d)  !   Technical considerations:     !    Eval...
Leiden Institute of Advanced Computer ScienceHow would you evaluate the following?  !   Usability of an existing package  ...
Leiden Institute of Advanced Computer ScienceTypical contract terms  !   Definitions  !   Form of agreement          !    ...
Leiden Institute of Advanced Computer ScienceContract management  !   Contracts should include agreement about      how cu...
Leiden Institute of Advanced Computer Science                       This is the End !                            Thank you...
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SDPM - Lecture 10 - Contract management

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SDPM - Lecture 10 - Contract management

  1. 1. Leiden Institute of Advanced Computer Science System’s Development and Project Management – Contract management Prof. Dr. Thomas Bäck 1
  2. 2. Leiden Institute of Advanced Computer ScienceOutsourcing Benefits: Remaining risks: !   Potential time reduction !   Outside transfer of !   Cost savings – expertise economies of scale !   Loss of control over !   Risk reduction future development !   External expertise: !   Compromise of !  Specialized developers confidential information !  Library of resuable code !   Loss of progress visibility and control 2
  3. 3. Leiden Institute of Advanced Computer ScienceOutsourcing (cont‘d) !   Management plan incl. risk management !   Contract management !   Regular vendor communications !   Count on using some of your own technical resources !   Be leery of unstable requirements !   Retain sufficient control to pull work back in- house if needed !   Avoid double standards 3
  4. 4. Leiden Institute of Advanced Computer ScienceOffshore outsourcing !   Communication !  Language !  Problem of lines and bandwidth !   Time differences !   Travel time and expenses !   Characteristics of vendors’ country !  Copyrights/patents/intellectual property laws 4
  5. 5. Leiden Institute of Advanced Computer ScienceAcquiring software from external supplier This could be: !   A bespoke system - created specially for the customer !   Off-the-shelf - bought ‘as is’ !   Customized off-the-shelf (COTS) - a core system is customized to meet needs of a particular customer 5
  6. 6. Leiden Institute of Advanced Computer SciencePayment methods !   Time and materials contracts !   Fixed price contracts !   Fixed price per delivered unit Note difference between goods and services Often license to use software is bought rather than the software itself 6
  7. 7. Leiden Institute of Advanced Computer ScienceTime and materials contracts Advantages to customer !   Easy to change requirements !   Lack of price pressure can assist product quality !   Preliminary estimate of overall cost 7
  8. 8. Leiden Institute of Advanced Computer ScienceTime and materials contracts (cont’d) Disadvantages !   Customer liability - the customer absorbs all the risk associated with poorly defined or changing requirements !   Lack of incentive for supplier to be cost- effective 8
  9. 9. Leiden Institute of Advanced Computer ScienceFixed price contracts Advantages to customer !   Known expenditure !   Supplier motivated to be cost-effective 9
  10. 10. Leiden Institute of Advanced Computer ScienceFixed price contracts (cont’d) Disadvantages !   Supplier will increase price to meet contingencies !   Difficult to modify requirements !   Upward pressure on the cost of changes !   Threat to system quality 10
  11. 11. Leiden Institute of Advanced Computer ScienceFixed price per unit delivered D esign   Implementation   FP  count   Total  cost/FP   cost/FP   cost/FP   to  2,000   $242   $725   $967   2,001-­‐  2,500   $255   $764   $1,019   2,501-­‐3,000   $265   $793   $1,058   3,001-­‐3,500   $274   $820   $1,094   3,501-­‐4,000   $284   $850   $1,134   11
  12. 12. Leiden Institute of Advanced Computer ScienceFixed price/unit example !   Estimated system size 2,600 FPs !   Price !  2000 FPs x $967 plus !  500 FPs x $1,019 plus !  100 FPs x $1,058 !  i.e. $2,549,300 !   What would be charged for 3,200 FPs? 12
  13. 13. Leiden Institute of Advanced Computer ScienceFixed price/unit contracts Advantages for customer !   Customer understanding of how price is calculated !   Comparability between different pricing schedules !   Emerging functionality can be accounted for !   Supplier incentive to be cost-effective !   Life cycle range 13
  14. 14. Leiden Institute of Advanced Computer ScienceFixed price/unit contracts (cont’d) Disadvantages !   Difficulties with software size measurement - may need independent FP counter !   Changing (as opposed to new) requirements: how do you charge? 14
  15. 15. Leiden Institute of Advanced Computer ScienceThe tendering process !   Open tendering !  Any supplier can bid in response to the invitation to tender !  All tenders must be evaluated in the same way !  Government bodies may have to do this by local/ international law, e.g. GATT (UNO, General Agreement on Tariffs and Trade) 15
  16. 16. Leiden Institute of Advanced Computer ScienceThe tendering process (cont’d) !   Restricted tendering process !  Bids only from those specifically invited !  Can reduce suppliers being considered at any stage !   Negotiated procedure !  Negotiate with one supplier, e.g. for extensions to software already supplied 16
  17. 17. Leiden Institute of Advanced Computer ScienceStages in contract placement Requirements analysis Evaluation plan Invitation to tender Evaluation of proposals 17
  18. 18. Leiden Institute of Advanced Computer ScienceRequirements document !   Introduction !   Description of existing system and current environment !   Future strategy or plans !   System requirements !  Mandatory/desirable features !   Deadlines !   Additional information required from bidders 18
  19. 19. Leiden Institute of Advanced Computer ScienceRequirements document (cont’d) !   Requirements will include !  Functions in software, with necessary inputs and outputs !  Standards to be adhered to !  Other applications with which software is to be compatible !  Quality requirements, e.g. response times 19
  20. 20. Leiden Institute of Advanced Computer ScienceEvaluation plan !   How are proposals to be evaluated? !   Methods could include: !  Reading proposals !  Interviews !  Demonstrations !  Site visits !  Practical tests 20
  21. 21. Leiden Institute of Advanced Computer ScienceEvaluation plan (cont’d) !   Need to assess value for money for each desirable feature !   Example: !  Feeder file saves data input !  4 hours a month saved !  Cost of data entry clerk £20 an hour !  System to be used for 4 year !  If cost of feature £1,000, would it be worth it? 21
  22. 22. Leiden Institute of Advanced Computer ScienceInvitation to tender (ITT) !   Note that bidder is making an offer in response to ITT !   Acceptance of offer creates a contract !   Customer may need further information !   Problem of different technical solutions to the same problem 22
  23. 23. Leiden Institute of Advanced Computer ScienceMemoranda of agreement (MoA) !   Customer asks for technical proposals !   Technical proposals are examined and discussed !   Agreed technical solution in MoA !   Tenders are then requested from suppliers based in MoA !   Tenders judged on price !   Fee could be paid for technical proposals by customer 23
  24. 24. Leiden Institute of Advanced Computer ScienceEvaluation of proposals !   Management considerations: !  Vendor ability to meet budget and schedule commitments !  Project management capabilities !  Confidentiality issues, e.g. serving competitors !  Supply of product support 24
  25. 25. Leiden Institute of Advanced Computer ScienceEvaluation of proposals (cont‘d) !   Technical considerations: !  Evaluation of software-development capability !  Expertise in application area and implementation environment !  Support of further enhancements !   General considerations: !  Financial stability !  Contract development as primary line of business 25
  26. 26. Leiden Institute of Advanced Computer ScienceHow would you evaluate the following? !   Usability of an existing package !   Usability of an application yet to be built !   Maintenance costs of hardware !   Time taken to respond to requests for software support !   Training 26
  27. 27. Leiden Institute of Advanced Computer ScienceTypical contract terms !   Definitions !   Form of agreement !  Sale/lease/license !   Goods and services to be supplied !   Environment – defining responsibilities !   Customer commitments !   Standards and acceptance procedures !   Timetable !   Price and payment method 27
  28. 28. Leiden Institute of Advanced Computer ScienceContract management !   Contracts should include agreement about how customer/supplier relationship is to be managed, e.g. !  Decision points - could be linked to payment !  Quality reviews !  Changes to requirements 28
  29. 29. Leiden Institute of Advanced Computer Science This is the End ! Thank you ! 29

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