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Collaborative Agile Contracts

Wednesday, June 03, 2009 10:15:49 AM (Romance Standard Time, UTC+01:00)
Recently peterstev reported on, 10 Contracts for your next Agile Software Project.

In BestBrains we now have experience from two commercial projects using a new kind of agile contract.

We want to create contracts where risk is shared fairly between customer and supplier and where likewise benefit is shared fairly. Based on our experiences we have arrived at a contract model that has proven to achieve this result. We call this the collaborative agile contract.

The main mechanism of the contract is to delay some of the payment until a certain criteria has been reached. We do not use a date as this criteria which otherwise seems to be common. Rather we want a criteria that tells when we have a situation where the customer is getting value from the software. There is generally a mutual interest of arriving at this situation as quickly as possible. Effectiveness and creativity from the supplier will be rewarded. And the customer will be careful when deciding what features are needed in order to reach that goal.

The contract defines the following elements:
  • Scope described loosely in a few paragraphs, a kind of vision statement
  • An hourly price, that is 10-50% below what is normal for pure time-and-material
  • A set of milestones, which will lead to payment of a fixed amount. The simple criteria that tells that a given milestone has been reached, is whether the software is deployed in production.
  • A development process following agile practices
  • A suggested time frame for the overall project and for each milestone

We are going to report on our experiences at Agile 2009, but don't hestitate to comment on this blog entry or contact Lars Thorup to learn more about agile contracting.
agile kontrakter

By Lars Thorup

Posted in Agile | contract | management |Comments [3]     

Wednesday, June 03, 2009 11:33:45 AM (Romance Standard Time, UTC+01:00)
Lars,
for the unlike (as I am) that will not be in Chicago, would you like to write more on this topic?
Also an example of contract would be appreciated.
Thank you for sharing,
PierG
http://pierg.wordpress.com
PierG
Wednesday, June 03, 2009 5:25:43 PM (Romance Standard Time, UTC+01:00)
Lars,
as per your request ... I'd like to see the contract and having the chance to ask specific questions.
Regards,
PierG
http://pierg.wordpress.com
PierG
Sunday, June 07, 2009 9:03:51 PM (Romance Standard Time, UTC+01:00)
For legal reasons I cannot show a complete contract. However let me show you the collaborative agile contract elements from our most recent contract with a large Danish energy corporation.

[Note: I use fictional numbers, as we cannot reveal actual numbers here.]

Scope for 6 areas of functionality described loosely by the customer on a total of two pages with illustrations.

Development process described by the supplier: weekly iterations with requirements, estimation, prioritization, development, delivery, testing, feedback.

Price per hour of 500 DKK, which is 50% below normal time-and-material rate.

Delivery, split into 6 milestones, where each milestone is associated with the delivery of one area of functionality, each of which can be developed separately. Each milestone is associated with a payment amount corresponding to the relative size of the milestone against the total, as determined by a rough estimate. The total rough estimate for the 6 milestones in this case is 2400 hours and the sum of the payment amounts associated with the milestones are 1,200,000 DKK corresponding to half of the total project price if the estimate holds.

A milestone is considered reached, when the customer deploys the software associated with that milestone. In this case the software is considered to be in production when the supplier is no longer allowed to delete data from the database.

A suggested time frame of 9 months.
Lars Thorup
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