Agile contracts : creating and managing successful projects with scrum

A methodologically sophisticated, comprehensive approach to applying the Agile fixed-price contract to IT projects while maximizing customer and supplier relationships

"Interesting and necessary for IT managers and IT lawyers."
--Walter J. Jaburek, Dipl.-Ing., Dr. iur., Dr. techn.

Approximately 50 percent of software developers use Scrum, an iterative and incremental development method for managing software projects and product or application development, in their work. The benefit of Scrum and other Agile methods is that they can address shifts in a large project that traditional managerial methods cannot.

Written by pioneers and leaders in the field of Agile and Scrum, Agile Contracts is the only book dedicated exclusively to the legal, procurement, and project management considerations of Agile contracts. Providing templates, a toolbox, and examples of Agile fixed-price contracts, the book presents an alternative option to fixed-price, time-based, and supply-based contracts--reducing the risk for both the supplier and the customer with a contract that offers the possibility of flux and flexible scenarios as a project progresses.

Agile Contracts features in-depth chapter coverage of:

The Agile Manifesto of 2001 Agility from the perspective of procurement and the software provider The problems with traditional fixed-price contracts and time material contracts What the Agile fixed-price contract is and how it is set up Tendering based on the Agile fixed-price contract How to negotiate an Agile fixed-price contract Special guidelines for the legal framework of an Agile fixed-price contract Adaptable Scope System The Black Swan scenario Contracts and procedures for the featured methodologies

Especially applicable within highly structured business organizations, Agile Contracts is a must-read for project managers, agile practitioners, procurement representatives, and IT lawyers.

Author Notes

Andreas Opelt is Vice President for Sales, Product Marketing, and Partner Management at Infonova.
Boris Gloger is ranked worldwide among the pioneers of Scrum. He continues to develop practices and set training standards internationally.
Wolfgang Pfarl is a trained lawyer and is responsible for the IT procurement at the Austrian Post.
Ralf Mittermayr is a partner at BearingPoint and focuses on conceptual design and delivery of complex software solutions to the banking, telecommunications, and supply industries.

Preface	p. ix
Acknowledgments	p. xiii
1 Agility: What Is That?	p. 1
1.1 The Agile Manifesto of 2001	p. 6
1.2 Agile Development Based on Scrum	p. 11
1.2.1 The Principles of Organization	p. 14
1.2.2 The Process Model	p. 14
1.2.3 Estimation in Scrum	p. 19
1.3 Agility from the Perspective of Procurement	p. 23
1.4 Agility from the Perspective of the Software Provider	p. 25
1.5 The 12 Principles of Agile Software Development	p. 26
1.6 Summary	p. 32
2 The Missing Piece of the Puzzle	p. 33
2.1 The Problems with Traditional Fixed-Price Contracts	p. 37
2.2 The Problems with Time and Materials Contracts	p. 43
2.3 Something New: The Agile Fixed-Price Contract	p. 44
2.4 Summary	p. 45
3 What Is an Agile Fixed-Price Contract?	p. 47
3.1 Existing Approaches	p. 48
3.2 The Agile Fixed-Price Contract	p. 49
3.2.1 How Is an Agile Fixed-Price Contract Set Up?	p. 50
3.3 Summary	p. 71
4 Sample of an Agile Fixed-Price Contract	p. 73
Preamble	p. 74
§1 Definitions and Clarifications of Terms	p. 75
§2 Contract Scope and Hierarchy of Documents	p. 78
§3 Usage Rights	p. 79
§4 Transparency and "Open Books"	p. 79
§5 Acceptance	p. 80
§6 Obligation of Both Parties to Co-Operate	p. 81
§7 Client's Obligations	p. 84
§8 Escalation to the Steering Board and the Independent Experts	p. 84
§9 Project Period	p. 85
§10 Warranty, Compensation, and Indemnification	p. 86
§11 Limitation of Liability	p. 86
§12 Contractor's Compensation	p. 87
§13 Force Majeure	p. 87
§14 Secrecy	p. 87
§15 Severability Clause	p. 88
§16 Place of Performance, Jurisdiction, and Applicable Law	p. 88
Appendix A Commercial Agreements	p. 88
Prices	p. 88
Commercial Approach to the Project	p. 90
Payment Milestones	p. 92
Appendix B Technical Scope and Process	p. 92
Requirements: Backlog and Vision	p. 92
Process for Development and Approval	p. 93
Changes to the Contract (Exchange for Free)	p. 95
Deliverables and Services	p. 97
Mechanism to Calculate Costs of Future User Stories	p. 98
Appendix C 12 Principles of Cooperation	p. 101
Appendix D Quality Standards-Definition of Done	p. 107
5 Tendering Based on an Agile Fixed-Price Contract	p. 109
5.1 Appropriate Tender Content for an Agile Fixed-Price Contract	p. 112
5.2 Requirements for Tendering and Selection	p. 116
5.2.1 Competition	p. 116
5.2.2 Comparability and Transparency	p. 119
5.3 Tendering Steps with a Focus on Agile Fixed Price	p. 122
5.3.1 Internal Goal Setting and Coordination	p. 123
5.3.2 Preparation for the Invitation to Tender	p. 124
5.3.3 Tender	p. 126
5.3.4 Awarding of the Tender	p. 130
5.3.5 Price Optimization Options	p. 132
5.3.6 Project and Contract Management	p. 134
5.3.7 Effort Inherent in the Tendering Process	p. 134
5.4 Summary	p. 134
6 Special Requirements for the Legal Framework of an Agile Fixed-Price Contract	p. 137
6.1 Adaptable System for Scope	p. 139
6.2 Warranty and Damages	p. 140
6.3 Schedule and Milestones	p. 141
6.4 Path of Escalation	p. 142
6.5 Obligations	p. 143
6.6 Summary	p. 143
7 Guideline for the Negotiation of an Agile Fixed-Price Contract	p. 145
7.1 Objectives of the Client	p. 147
7.2 Objectives of the Contractor	p. 148
7.3 Objectives and Bonus Payouts of the People Involved	p. 149
7.4 Strategy for the Project and the Negotiation	p. 151
7.5 Tactics for the Negotiation	p. 152
7.6 Price Determination	p. 155
7.7 Conclusion of the Negotiation and Project Steering	p. 155
7.8 Conclusions	p. 156
8 Advantages and Disadvantages of Agile Fixed-Price Contracts	p. 157
8.1 Detailed Analysis of the Pros and Cons	p. 158
8.1.1 Budget Security	p. 159
8.1.2 Requirement Flexibility	p. 159
8.1.3 Detailed Requirements	p. 160
8.1.4 Negotiating Costs	p. 160
8.1.5 Estimate Security	p. 160
8.1.6 Quality Risk	p. 160
8.1.7 Price Elevation Tendency	p. 161
8.1.8 Probability of Winning a Project Tender	p. 161
8.1.9 Cost Risk	p. 161
8.1.10 Security to Deliver a Project as a Whole	p. 161
8.1.11 Acceptance Efforts	p. 174
8.1.12 Pricing Transparency	p. 174
8.1.13 Progress Transparency	p. 174
8.1.14 Permanent Regulation	p. 174
8.1.15 Securing the Investment	p. 174
8.2 Summary and Overview	p. 182
8.3 Conclusions	p. 184
9 Toolbox for Agile Fixed-Price Contracts	p. 185
9.1 Stimulating Interest Before the Negotiation	p. 186
9.2 Identifying Issues of the Other Party	p. 189
9.3 Establishing Common Language and Experiences	p. 189
9.4 Feature Shoot-out	p. 191
9.5 The Black Swan Scenario	p. 192
9.6 Workshop on Contract Setup	p. 192
9.7 Reports and Metrics	p. 196
9.7.1 KISS Backlog View	p. 196
9.7.2 Focus: There Is a Single Goal!	p. 197
10 Practical Examples	p. 199
10.1 Example 1: Software Integration in a Migration Project	p. 200
10.1.1 Initial Situation	p. 200
10.1.2 Contract and Procedure for Traditional Methodologies	p. 202
10.1.3 Contract and Procedure for Agile Methodologies	p. 213
10.1.4 Contract for Example 1	p. 222
10.2 Example 2: Creating a Software Product	p. 240
10.2.1 Initial Situation	p. 241
10.2.2 Contract and Procedure for a Traditional Fixed-Price Contract	p. 241
10.2.3 Contract and Procedure for a Time and Materials Contract	p. 253
10.2.4 Contract and Procedure for an Agile Fixed-Price Contract	p. 261
10.2.5 Conclusions	p. 268
Appendix: Questions and Answers	p. 271
References	p. 275
Index	p. 279

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Author Notes

Table of Contents