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Agile Contracts Creating and Managing Successful Projects with Scrum

by: Opelt, Andreas; Gloger, Boris; Pfarl, Wolfgang; Mittermayr, Ralf

Agile Contracts Creating and Managing Successful Projects with Scrum

by: Opelt, Andreas; Gloger, Boris; Pfarl, Wolfgang; Mittermayr, Ralf

ISBN 13:
9781118630945
ISBN 10:
1118630947
Edition: 1st
Format: Paperback
Copyright: 05/13/2013
Publisher: Wiley

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Summary

In the contract development process as in any development process, clients, customers, and managers have a vested interest in meeting time, budget, and performance requirements. The authors have developed an agile contract which reduces the risk for the supplier and the customer. Agile Contracts compares and contrasts the new, agile contract with existing fixed-price or time-and-material contracts and demonstrates how Agile/Scrum can be applied to the contract negotiation process.

Author Biography

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 ix

Acknowledgments xiii

1. Agility: What Is That? 1

1.1 The Agile Manifesto of 2001 / 6

1.2 Agile Development Based on Scrum / 11

1.2.1 The Principles of Organization / 14

1.2.2 The Process Model / 14

1.2.3 Estimation in Scrum / 19

1.3 Agility from the Perspective of Procurement / 23

1.4 Agility from the Perspective of the Software Provider / 25

1.5 The 12 Principles of Agile Software Development / 26

1.6 Summary / 32

2. The Missing Piece of the Puzzle 33

2.1 The Problems with Traditional Fixed-Price Contracts / 37

2.2 The Problems with Time and Materials Contracts / 43

2.3 Something New: The Agile Fixed-Price Contract / 44

2.4 Summary / 45

3. What Is an Agile Fixed-Price Contract? 47

3.1 Existing Approaches / 48

3.2 The Agile Fixed-Price Contract / 49

3.2.1 How Is an Agile Fixed-Price Contract Set Up? / 50

3.3 Summary / 71

4. Sample of an Agile Fixed-Price Contract 73

Preamble / 74

§1 Defi nitions and Clarifi cations of Terms / 75

§2 Contract Scope and Hierarchy of Documents / 78

§3 Usage Rights / 79

§4 Transparency and “Open Books” / 79

§5 Acceptance / 80

§6 Obligation of Both Parties to Co-Operate / 81

§7 Client’s Obligations / 84

§8 Escalation to the Steering Board and the Independent Experts / 84

§9 Project Period / 85

§10 Warranty, Compensation, and Indemnifi cation / 86

§11 Limitation of Liability / 86

§12 Contractor’s Compensation / 87

§13 Force Majeure / 87

§14 Secrecy / 87

§15 Severability Clause / 88

§16 Place of Performance, Jurisdiction, and Applicable Law / 88

Appendix A: Commercial Agreements / 88

Prices / 88

Commercial Approach to the Project / 90

Payment Milestones / 92

Appendix B: Technical Scope and Process / 92

Requirements: Backlog and Vision / 92

Process for Development and Approval / 93

Changes to the Contract (Exchange for Free) / 95

Deliverables and Services / 97

Mechanism to Calculate Costs of Future User Stories / 98

Appendix C: 12 Principles of Cooperation / 101

Appendix D: Quality Standards—Definition of Done / 107

5. Tendering Based on an Agile Fixed-Price Contract 109

5.1 Appropriate Tender Content for an Agile Fixed-Price Contract / 112

5.2 Requirements for Tendering and Selection / 116

5.2.1 Competition / 116

5.2.2 Comparability and Transparency / 119

5.3 Tendering Steps with a Focus on Agile Fixed Price / 122

5.3.1 Internal Goal Setting and Coordination / 123

5.3.2 Preparation for the Invitation to Tender / 124

5.3.3 Tender / 126

5.3.4 Awarding of the Tender / 130

5.3.5 Price Optimization Options / 132

5.3.6 Project and Contract Management / 134

5.3.7 Effort Inherent in the Tendering Process / 134

5.4 Summary / 134

6. Special Requirements for the Legal Framework of an Agile Fixed-Price Contract 137

6.1 Adaptable System for Scope / 139

6.2 Warranty and Damages / 140

6.3 Schedule and Milestones / 141

6.4 Path of Escalation / 142

6.5 Obligations / 143

6.6 Summary / 143

7. Guideline for the Negotiation of an Agile Fixed-Price Contract 145

7.1 Objectives of the Client / 147

7.2 Objectives of the Contractor / 148

7.3 Objectives and Bonus Payouts of the People Involved / 149

7.4 Strategy for the Project and the Negotiation / 151

7.5 Tactics for the Negotiation / 152

7.6 Price Determination / 155

7.7 Conclusion of the Negotiation and Project Steering / 155

7.8 Conclusions / 156

8. Advantages and Disadvantages of Agile Fixed-Price Contracts 157

8.1 Detailed Analysis of the Pros and Cons / 158

8.1.1 Budget Security / 159

8.1.2 Requirement Flexibility / 159

8.1.3 Detailed Requirements / 160

8.1.4 Negotiating Costs / 160

8.1.5 Estimate Security / 160

8.1.6 Quality Risk / 160

8.1.7 Price Elevation Tendency / 161

8.1.8 Probability of Winning a Project Tender / 161

8.1.9 Cost Risk / 161

8.1.10 Security to Deliver a Project as a Whole / 161

8.1.11 Acceptance Efforts / 174

8.1.12 Pricing Transparency / 174

8.1.13 Progress Transparency / 174

8.1.14 Permanent Regulation / 174

8.1.15 Securing the Investment / 174

8.2 Summary and Overview / 182

8.3 Conclusions / 184

9. Toolbox for Agile Fixed-Price Contracts 185

9.1 Stimulating Interest Before the Negotiation / 186

9.2 Identifying Issues of the Other Party / 189

9.3 Establishing Common Language and Experiences / 189

9.4 Feature Shoot-out / 191

9.5 The Black Swan Scenario / 192

9.6 Workshop on Contract Setup / 192

9.7 Reports and Metrics / 196

9.7.1 KISS Backlog View / 196

9.7.2 Focus: There Is a Single Goal! / 197

10. Practical Examples 199

10.1 Example 1: Software Integration in a Migration Project / 200

10.1.1 Initial Situation / 200

10.1.2 Contract and Procedure for Traditional Methodologies / 202

10.1.3 Contract and Procedure for Agile Methodologies / 213

10.1.4 Contract for Example 1 / 222

10.2 Example 2: Creating a Software Product / 240

10.2.1 Initial Situation / 241

10.2.2 Contract and Procedure for a Traditional Fixed-Price Contract / 241

10.2.3 Contract and Procedure for a Time and Materials Contract / 253

10.2.4 Contract and Procedure for an Agile Fixed-Price Contract / 261

10.2.5 Conclusions / 268

Appendix: Questions and Answers 271

References 275

Index 279

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