Agile Contracts (Part 1)

Mike Griffiths is an experienced project manager, author and consultant who works for PMI as a subject matter expert. Before joining PMI, Mike consulted and managed innovation and technology projects throughout Europe, North and South America for 30+ years. He was co-lead for the PMBOK Guide—Seventh Edition, lead for the Agile Practice Guide, and contributor to the PMI-ACP and PMP exam content outlines. Outside of PMI, Mike maintains the websites www.LeadingAnswers.com about leading teams and www.PMillustrated.com, which teaches project management for visual learners.

  Agile   Applications Delivery   Information Technology   Procurement Management   Scope Management  

Agile methods deliver many benefits in terms of their flexibility to cope with changing requirements and priorities. However, this adaptability and reluctance to be tied down on scope can create contract problems when trying to form supplier agreements or outsource work. While the agile manifesto’s “customer collaboration over contract negotiation” is a noble sentiment to work by, when it comes to getting the legal department’s signoff they may be less impressed.

Fortunately, these issues are not new and lots of smart people have been working on agile contracts ever since the term “agile” was coined 10 years ago--and in fact before that. Back in 1994, the first edition of the DSDM manual presented the inverted triangle model shown below:

(Later the second triangle was renamed from “timeboxed” to “agile”, but the concept is the same.) Agile projects prefer to fix resources and time (key components of cost) and vary functionality to achieve the highest priority, best quality system possible rather than fix the functionality and potentially run out of time or money (or worse, produce a low quality product).

This notion of varying functionality does not sit well with many people. They want a price for the whole system, not some random subset of the easy parts; they also want a written contract to hold …

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