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Agile projects & Lazy Contracts

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How does agile project management deals with the most widely used type of contracts?
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Agile projects & Lazy Contracts

  1. 1. Agile Projects – Lazy Contracts Emanuele Passera PMP, Prince2 , PMI-ACP 03 February 2018
  2. 2. Highly Specialized Assets High Value for Few People
  3. 3. Highly Specialized Assets High Value for Few People Technological Monopoly
  4. 4. Highly Specialized Assets High Value for Few People Technological Monopoly Deadlock
  5. 5. Highly Specialized Assets High Value for Few People Technological Monopoly Deadlock Opportunistic Behaviors
  6. 6. To Avoid This We Sign Contracts To Align Customer/Supplier Objectives
  7. 7. To Avoid This We Sign Contracts Which Too Often Embody Our Fears, Not Our Hopes To Align Customer/Supplier Objectives
  8. 8. Just 2 Kinds of Contracts Fixed Price Time & Material
  9. 9. “Fixed Price” Effort Revenues Profit ✘ Risk on Supplier ✘ Indifference ✘ Competitive
  10. 10. “Fixed Price” Effort Revenues Profit Quality ✘ Risk on Supplier ✘ Indifference ✘ Competitive Customer Will Suffer Too
  11. 11. “Fixed Price” Effort Revenues Profit Quality ✘ Risk on Supplier ✘ Indifference ✘ Competitive Customer Will Suffer Too You Are Trading a Deterministic Variable With an Aleatory One. Technological Debt
  12. 12. “Fixed Price” …But I Know the Cost
  13. 13. “Fixed Price” …But I Know the Cost A Pumped Up Cost if You Are Lucky
  14. 14. “Fixed Price” …But I feel safe
  15. 15. “Fixed Price” …But I feel safe Would You Contract Your Surgery on a Fixed Price Term?
  16. 16. “Fixed Price” …But We Can Issue Call for Bids
  17. 17. “Fixed Price” …But We Can Issue Call for Bids …Selecting The More Desperate Supplier…
  18. 18. “Fixed Price” …But We Can Issue Call for Bids …Selecting The More Desperate Supplier… …And Being Locked in Wearying T&M Maintenance Contracts
  19. 19. “T&M” Effort ✘ Risk on Customer ✘ Indifference ✘ Competitive
  20. 20. “T&M” Effort Quality ✘ Risk on Customer ✘ Indifference ✘ Competitive Project will fail sooner or later T&M Contracts created a career: The Controller
  21. 21. What is Waiting For You at the End of the Journey
  22. 22. Why We Do This to Our Projects?
  23. 23. Why We Do This to Our Projects? ✘ Lawyers Are Trained to Focus on Failures ✘ Lawyers Protect Customers, Not Projects ✘ Law Builds Upon Tradition ✘ Well-Known Contracts Lead to Predictable Outcomes in Court
  24. 24. Why We Do This to Our Projects? ✘ Lawyers Are Trained to Focus on Failures ✘ Lawyers Protect Customers, Not Projects ✘ Law Builds Upon Tradition ✘ Well-Known Contracts Lead to Predictable Outcomes in Court There Are Better Ways
  25. 25. 1. Share The Risk Do Not Transfer It Risk Should be Handled by Who is More Apt to Manage it
  26. 26. 2. Build a Bridge of Trust Skin in the Game
  27. 27. 3. Have Lawyers in the Team No Silos Optimization
  28. 28. 4. Constrained Freedom Do Not Sign Bottlenecks
  29. 29. 5. Talk About Value Not About Costs
  30. 30. A Small Step Forward ✘ Money for Nothing & Change for Free ✘ It Requires Customer High Engagement “Fixed Price”
  31. 31. A Small Step Forward ✘ Money for Nothing & Change for Free ✘ It Requires Customer High Engagement ✘ Split in Phases ✘ No Big Upfront Estimation ✘ Need to Have a MMF at Each Phase “Fixed Price”
  32. 32. A Small Step Forward ✘ Money for Nothing & Change for Free ✘ It Requires Customer High Engagement ✘ Split in Phases ✘ No Big Upfront Estimation ✘ Need to Have a MMF at Each Phase ✘ No Exit Penalty ✘ Skin in the Game = Trust “Fixed Price”
  33. 33. A Small Step Forward ✘ Cost Ceiling ✘ Balance the Risk for the Customer ✘ It Reverts Back to Fixed Price “T&M”
  34. 34. A Small Step Forward ✘ Cost Ceiling ✘ Balance the Risk for the Customer ✘ It Reverts Back to Fixed Price ✘ Split in Phases ✘ Efficient Costs Control ✘ Need to Have a MMF at Each Phase “T&M”
  35. 35. A Small Step Forward ✘ Cost Ceiling ✘ Balance the Risk for the Customer ✘ It Reverts Back to Fixed Price ✘ Split in Phases ✘ Efficient Costs Control ✘ Need to Have a MMF at Each Phase ✘ No Exit Penalty ✘ Skin in the Game = Trust “T&M”
  36. 36. A Small Step Forward ✘ Man/Hours Cost Variance (Bonus/Penalty) ✘ Even if it Changes the Math, Not the Approach “T&M”
  37. 37. A Small Step Forward ✘ Man/Hours Cost Variance (Bonus/Penalty) ✘ Even if it Changes the Math, Not the Approach ✘ Fixed Profit ✘ Efficient Costs Control ✘ It Requires Access to the Supplier Cost Structure “T&M”
  38. 38. A Small Step Forward ✘ Man/Hours Cost Variance (Bonus/Penalty) ✘ Even if it Changes the Math, Not the Approach ✘ Fixed Profit ✘ Efficient Costs Control ✘ It Requires Access to the Supplier Cost Structure ✘ Percentual Risk Sharing ✘ Efficient Risk Sharing “T&M”
  39. 39. Share the Risk Skin in The Game Constrained Freedom Talk About Value No Silos Optimization
  40. 40. A Step Forward …But Another One…
  41. 41. Toward Ex-Post?
  42. 42. 1. A Tale of “Fixed Price”
  43. 43. 2. A Tale of (Good) “T&M”
  44. 44. 3. A Tale of (Bad) “T&M”
  45. 45. …But in the End…
  46. 46. TRUST All Comes Down to It
  47. 47. thanks! Any Questions? passera.emanuele@gmail.com www.emanuelepassera.com www.pmcrumbs.com

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