Tried to give a heads-up on some popular contracts models and how that could be applied to agile world. Intention is only to generate curiosity and further research.

1. Agile Series by Nishanth
introducing
Agile Contracts

2. Agile Contracts
• Time and Material (T&M)
• Fixed Price Fixed Scope (FPFS)
• Fixed Price per Unit of Work
• Target Cost

3. Time and Material Contracts
• Simplest of all types – pay per work as it gets done
• Applies for fixed as well as flexi scope projects
• Flow of useful software in one direction and money in the
other direction
• Requires the customer to trust the vendor/supplier
• Start with a few trial iterations before proceeding further
– Shared risks
– Build trust
– Usable functionality early
• Variations
– Capped T&M per iteration/per release
– Capped T&M with adjustment (shared pain/gain pricing)

4. Fixed Price Fixed Scope (FPFS) Contracts
• Collaborate early with customer to identify
– Needs
– Wishes
– Priorities
• Initial release planning (or IPBR) to identify these
• Collaborate with customers to alter scope after each
iteration/release, if required
• Apply best possible due diligence with experienced people to
reduce risks
• No change in requirements allowed, only new features can come in
later
• Ability to replace requirements with new ones
• Ability to change the order of implementation

5. Fixed Price per Unit of Work (UoW)
• Related to running, tested software features
• Unlike traditional development, UoW adheres
to agile principle of “Working software is the
primary measure of progress”
• Variations
– Price per story point
– Price per function point – preferred as certified FP
auditors are available
• Points defined in terms of business value

6. Target Cost Contracts
• Followed by Toyota
• At stage 1, Customer and supplier identify, analyse and
estimate all possible requirements
• Estimate cost of change or scope increase during
project
• Establish target cost from the above 2 steps
• Calculate target profit from target cost
• If outcome is under budget then share the gain
• If over budget, both pays penalty to each other
• Share of pain/gain inline with ratio of the companies
– Larger the company, larger the share of pain/gain

7. Thanks!
Exciting new transitions