IT projects have the tendency to take longer and to be more expensive. As a reaction, the business is demanding more control by requiring fixed price or fixed price and date contracts. But even fixed price contracts show the same tendency--running out of budget and delivering late. The question is, why?
This article investigates the reasons behind why IT projects tend to overrun and which mitigating actions can be applied. It is my personal belief that it’s not the contract form but the governance applied that is making the difference in projects delivering on time and within budget.
What are the consequences of a fixed price contract?
As soon as two parties agree to have a contract with a fixed price, the focus is no longer aimed at one objective, the delivery of the product. The contract describes the product to be delivered and the price to be paid, but one party ensures it remains in budget whilst the other looks at the product in terms of functionality, timely delivery and (last but not least) quality. The business or requesting party is requiring a product, whereby the management parameters of scope, delivery date, quality and resourcing are handed over. The supplier is managing the budget, and thus indirectly the Devil’s Quadrant, with the intent of delivering a product limited by the price.
The moment additional requirements emerge there is
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