ScaleWithAgile Newsletter #001

In this week’ edition, we take a look at Agile Contracts, Crafting Agreements for Agile Projects.

Scrummaging Around the World

Here is what is going our prominent news and tweets.

• Are product and project managers really all that different? Link
• Crafting Customer-Centric Roadmaps: A Jobs-to-be-Done Approach to Roadmap Planning and Better Backlog Grooming. Link
• 5 Signs Your One-on-Ones Aren’t Working. Link
• Rookie Mistakes Scrum Masters Make. Link
• Adaptability is a key component of any successful organization. It’s important not to confuse product-level adaptability with organizational adaptability. Link

Agile Contracts: Crafting Agreements for Agile Projects

I recently completed my PMP exam from PMI, which placed a great emphasis on project contracts. From Time & Material to Fixed Price contracts, in return for accepting the rigidity of agreements in traditional waterfall projects you gained in the comfort of greater predictability and contained costs. Agile projects are flexible and iterative in nature where we don’t know all the requirements up front, but did you know that you can still craft agreements that will keep the finance department and your stakeholders at ease? This article explores the essentials of crafting Agile contracts, ensuring they support the fluidity and collaborative spirit of Agile methodologies.

Understanding Agile Contracts

Agile contracts are agreements that do not bind toward predetermined outcomes but rather emphasize flexibility, collaboration, and continuous value delivery, through a collaborative framework not just within the agile team but its stakeholders, vendors, and so forth. When we look to craft an agile agreement, we seek flexibility to enable us to pivot as new insights and requirements are discovered, and collaboration to continue to deliver value to customer throughout the project.

In agile projects, customers pursue the following objectives with contracts, 1) Setting a roadmap, 2) Minimize risks, and 3) have legal certainty,according to Roland Wanner.

Contracts should actually clearly define something that has been agreed upon and that has to be adhered to later and thus provide security. For agile projects, however, a contract must make it possible to develop software functions that are only partially known when the contract is signed, are still unknown or change during project execution. This makes contract design much more demanding.

Let’s try to apply traditional contract types of fixed price or time and material to an agile project.

A fixed price contract is a type of agreement where the contractor agrees to deliver a specified scope of work for a predetermined price. This contract is based on a clear, detailed scope of work that outlines all deliverables, timelines, and quality standards. As you can see off the bat this doesn’t align well with an incremental non-predictive project type like Agile.

A time and materials (T&M) contract is an agreement where the client pays the contractor based on the actual time spent and materials used to complete the project. This type of contract is often used when the project scope is not well-defined and can evolve over time. This approach provides the client with significant flexibility, enabling them to discover the best design for the software throughout the project, although it places the majority of the financial risks on their shoulders.

Both types of contracts are cost-oriented according to Roland Wanner and not outcome-oriented.

Types of Agile Contracts

Now let’s look at three types of contracts more suited for agile.

• Fixed Price per Sprint: a take on time and material, this type of contract sees sprints as their own contained committed deliverable mini-projects where the client agrees to pay a fixed amount for each sprint. This provides some predictability in costs while maintaining the flexibility to adjust the scope within each sprint cycle.
• Incremental Delivery Contracts: This model focuses on delivering work in increments. Payments are tied to the completion of specific deliverables or milestones. This approach ensures that the client receives tangible value at regular intervals.
• Outcome-based Contracts: This model is structured around achieving specific outcomes or delivering particular value. They align with Agile’s focus on delivering customer value and allow for flexibility in how the outcomes are achieved.

Alexa Alfonso in Make Agile Contracts Work For Your Teams & Clients talks about a type of contract her firm employs in consulting work, called Duration and Price Contract, which determines project costs based on the time team members spend on the project rather than a fixed list of deliverables. This method allows for ongoing negotiation of scope and prioritizes customer collaboration over rigid contract terms.

Crafting Agile Contracts

Clearly defining the project objectives and desired outcomes is crucial, helping set expectations and provides a basis for measuring success.

Next, ensure sprints, user stories, and backlogs are incorporated into the contract to ensure the contract reflects the iterative and incremental nature of Agile projects.

Finally, Afile contracts should include strategies for managing risks. This can involve shared risk approaches where both parties jointly handle uncertainties and challenges that arise during the project.

Conclusion

Agile contracts are pivotal in fostering a successful Agile project environment. By focusing on flexibility, collaboration, and continuous improvement, these contracts can help navigate the uncertainties of Agile projects while ensuring clear agreements between all parties. Crafting an effective Agile contract requires a deep understanding of Agile principles and a commitment to maintaining open communication and trust throughout the project lifecycle.

Events

• PMI: Want to connect with your peers and build a stronger future for yourself, your work, and your world? Join us at PMI Global Summit 2024 in Los Angeles. Link

Looking to Get Some Agile Training?

On the lookout to upgrade you your team’s agile skills? Looking for help on transforming your team into a truly Agile value-delivery machine? Reach out to ScaleWithAgile for a free no-obligation chat, to find out more. We offer virtual and in-person Scrum and Agile training seminars, as well as personalized consulting and coaching for developers, scrum masters, product owners, and leaders. Click here to take then next step.

Listen up

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On a Lighter Note

Thanks to Comic Agile

Until next time, keep on delivering Value !