Saturday, January 16, 2016

Agile Contracts

In the kind of agile projects I am typically involved in there are usually multiple companies working at the same project. External consultants, external developers, outsourced infrastructure, 3rd party software and/or component suppliers, and so on.

As a customer or supplier of services at the beginning of a project you know better then to work with just a verbal agreement. There is just too much at stake for both parties. Although the Agile Manifesto values customer collaboration above contracts, contracts are necessary when working with external suppliers. A contract is just a set of written playing rules. The right rules increase the chance of success for both parties. The wrong rules make working successfully together more difficult.

I typically work as a consultant for large companies, and there are often standard conditions that must be accepted to do business with them. These conditions are seldom fair, so a reasonable project outcome depends heavily on a good relationship between customer and supplier and avoiding recourse to the contract of law. Cause when you have to, typically both parties do not get what they want. This is the case with Waterfall projects, but even more so for  Agile projects. This because typical existing contract types within large companies are not suitable for agile projects, do not incentive the supplier to do its best/fastest work or try to put all risk at the supplier.

So what kind of contract models are there that would be more suitable for Agile projects? This is something we will discuss during the next Scrum Breakfast Club. The questions we will try to answer there  is "Agile Contracting: How can contracts become enablers of great collaboration?"

This topic is not new for the host of the SBC, Peter Stevens. Already in 2009 he presented at the Scrum Gathering in Munich "Ten contract forms for your next agile project". The ten forms he discusses are:

1. The "Sprint Contract"
2. Fixed Price / Fixed Scope
3. Time and Materials
4. Time and Materials with Fixed Scope and a Cost Ceiling
5. Time and Materials with Variable Scope and Cost Ceiling
6. Phased Development
7. Bonus / Penalty Clauses
8. Fixed Profit
9. “Money for Nothing, Changes for Free”
10. Joint Ventures

For each form Peter discusses structure, scope changes, risk and customer/supplier relationship. I can really advise you to have a look at it and think about this before you structure or sign your next contract.

Posted on Saturday, January 16, 2016 by Henrico Dolfing