Kharkiv PMDay 2017 autumn Андрій Просов "Fixed Price Agile Projects: Challenges for Project Manager"

1. Fixed Price Agile Projects:
Challenges for a Project
Manager
Andrey Prosov
Kharkiv PM Day, Sep-23 2017

2. About me
• Senior Project Manager in Insoft Global
• 10+ experience in R&D and Project
Management
• PhD
• Certified Scrum Master
• ISTQB Certification
https://www.linkedin.com/in/andrey-prosov-b458b743/
prosov@gmail.com

3. Agenda
• Fixed price vs Agile mindset
• Reasons for Fixed Price Agile Projects
• Client expectations vs Team feelings
• Challenges for a Project Manager
• How to address a Fixed Price Agile Project?
• Conclusions

4. Like a Marriage?

5. Fixed Price Contract
• The PMBOK® Guide, Fifth Edition (PMI, 2013), defines
Fixed Price Contract as “a type of fixed price contract
where the buyer pays the seller a set amount (as
defined by the contract), regardless of the seller's
costs.”
• Expectations that in addition to the fixed price, the
project will also:
•complete a fixed scope, and
•do so within a fixed schedule.

6. Agile Manifesto
processes and tools
Individuals and
interactions
over
following a plan
Responding to
change
over
www.agilemanifesto.org
comprehensive
documentation
Working software over
contract negotiation
Customer
collaboration
over

7. Agile Approach

8. Fixed Price Agile Projects Mindset
• The good -- Most Agile projects are fixed price per iteration, by
nature. You have a fixed team (Scrum team) to deliver some
feature (sprint backlog) within a fixed time (sprint).
• The bad -- Usually when people say "fixed price," they mean
fixing all parameters, i.e., price, time, and scope. This can create
huge confusion and conflicts later unless specified.
• The ugly -- The contract is signed with fixed price, scope, and
time, with Agile in mind. The team is asked to deliver what is
committed to the customer as per the contract. The team
overworks and delivers the product, but by compromising on
quality.

9. Traditional vs Agile

10. When you may face Fixed Price Agile Project
• New client – a low level of trust
• Limited budget of client
• Tender with State owned company
• Client wants Agile and wants to reduce his risks
• Fixed Price Agile Is a Sales Technique
• IT company just needs this contract
“Agile software development fits nicely with fixed price contracts”
Jurgen Appelo

11. Changing requirements is a fact of life

12. Key wrong assumptions in fixing the scope
• The more detail we include in the scope definition up front,
the better we understand each other
• Well-defined scope will prevent changes
• A fixed scope is needed to better estimate price and time
“Assumptions are made and most assumptions are
wrong.”
Albert Einstein

13. Client expectations
•Fixed-price contracts are the highest risk to the supplier
and the lowest risk to the client
•But if a project fails, will a
customer happy?

14. Team feelings
OR

15. How Project Manager sees Fixed Price Agile Project

16. Challenges Of Project Management Under
Fixed price Agile Contracts
• Correct estimation of fixed-price Agile projects
• Misalignment between classical functional requirements and
User Stories
• Difficulty in handling change requests typical for agile projects
with fixed budget
• Differences between document-oriented and communication-
oriented practices
• Complexity of embedding specific agile projects into traditional
(waterfall) customer environments
• Tracking implemented scope and spent budget

17. Usual Challenges Of Project Management
• People are not perfect
• Communication causes
gaps and conflicts
• Processes are not perfect
• Processes not
implemented properly

18. Unexpected issues
• Client or his team members may
skip the (daily) meetings
• Product Owner is busy with other
projects
• A client may not provide approval
for written specifications for a long
time
• Change of Architect in the middle
of a project

19. How to address a Fixed Price Agile Project?

20. How to address a Fixed Price Agile Project?
• Define your scope
• Educate your project team and client
• Develop a work breakdown structure (WBS)
• Use a project schedule
• Estimate with an actual project team
• Manage to scope
• Manage change requests
• Hold regular internal project reviews
• Obtain acceptance

21. Define Project Scope
• Work with your client to develop the project scope,
objectives, and deliverables
• Ensure that your scope of work, basis of estimate, or
equivalent contract document defines clearly
• Do not to leave a subject to interpretation
• Gather User stories
• Definition of Done
• The scope of testing and acceptance criteria
• The pursuit of perfection is expensive; don’t let your
fixed price lead to enhanced definitions of quality,
“since it’s free.”

22. Educate your project team and client
• Do not be arrogant if your Client has less knowledge about Agile/Scrum
• Do not to teach a Client
• Make a demo how your team works in Fixed Price Agile project conditions
• Project Charter
• Educate your Product Owner
• Time to review/approve deliverables
• Change Management Process

23. Develop a work breakdown structure (WBS)
• Be focused on the work required to complete
the deliverables
• Be honest with a Client if something goes
wrong as per WBS
• See as the individual components as the
totality of the work
• Represent an increasingly detailed definition
of the project work
• Planned in advance next activities (access to
Infrastructure, approved design documents,
etc)

24. Use a project schedule
• Estimate the durations for each of the
activities identified in the WBS and
sequencing the activities in a logical
order
• The level of detail is driven by the size,
complexity, and risk of the project
• The level of details should be
balanced

25. Estimate With Actual Project Team
•Experts and Real team
•Estimations and Commitments

26. Manage to scope
• Be sure that there are only necessary
activities in your plan
• Work is performed within the scope of
work per the contract requirements
• Change order approved by the client
in a contract modification

27. Hold regular internal project reviews – Manage
Communications
• Regular reviews
• Dayi sync up meetings
• Meeting minutes MUST have
been created and published
• Involve Client into
Retrospectives and ask him for
feedback

28. Change Request or not a Change Request

29. Manage Change Requests
• The initial requirements do not contain sufficient detail or clarity
• Requirements change due to new information about the needs of
the project (better ideas occur as work progresses)
• “Change requests” vs “Exchange requests”
• Do not make medium and big changes without charging a client
• Make simple change without charging a client
• It’s better to expand terms than increase a team
• Any change in scope has to be documented in a change order, and
funded as provided for in the overall contract.

30. Obtain Acceptance
• Acceptance of your deliverables
• Clearly define the criteria if the
client has not
• The scope of testing must be
undoubtedly defined and
acceptance criteria specified
• Be very clear on your
responsibilities after delivery.

31. Additional Lessons
• Project Charter
• RACI Matrix
• Developers may work directly with
Client functional personnel on a daily
basis
• Face-to-Face communication (working
on Client’s site, trips)
• Slip from Scrum approach to Kanban
(a sense of sprints (rhyme) is lost)

32. Conclusions
• Fixed price Agile projects exist
• When the price is fixed, change
management is your only tool for
staying out of the red.
• Risk or and Opportunity
• Agile projects for a fixed price? Yes,
you can!

33. Sources
• https://project-management-knowledge.com/definitions/f/fixed-price-contract/
• Fewell, J. (2011). Fixed price agile projects: making the impossible possible. Paper
presented at PMI® Global Congress 2011—North America, Dallas, TX. Newtown Square,
PA: Project Management Institute.
• Jurgen Appelo https://dzone.com/articles/fixed-price-contracts-agile-pr
• Martin Fowler https://martinfowler.com/bliki/FixedPrice.html
• https://www.pmi.org/learning/library/firm-fixed-price-agile-projects-6231
• https://www.pmi.org/learning/library/challenges-fixed-price-contracts-9640
• https://www.cleveroad.com/blog/time-and-material-vs-fixed-price--hot-discussion-of-
the-best-pricing-model
• https://www.infoq.com/articles/project-manager-role
• http://blog.trifork.com/2013/08/22/lessons-learned-how-to-do-scrum-in-a-fixed-price-
project/