Agile Contracts (Part 2)

PMI Southern Alberta Chapter

Mike Griffiths is a consultant and trainer who help organizations improve performance through shared leadership, agility and (un)common sense. He maintains the blog LeadingAnswers.com.

In Part 1, we looked at full agile contract models with examples from the DSDM Consortium, the CoActivate community and Jeff Sutherland. In this instalment we will examine the building blocks of agile contracts to craft your own—one tailored to your project and organizational needs.

Agile contracts were the subject of a great paper and presentation by Jesse Fewell at last year’s PMI Global Congress conference in Washington, D.C. Jesse outlined some of the dangers of pure fixed price, time & materials and cost plus contracts, going on to recommend the following agile contract building blocks.

Graduated Fix Price
Thorup and Jensen (2009) introduced the idea of Graduated Fix Price contracts, which share some of the risk reward for schedule variance. They suggest using different hourly rates based on early, on-time or late delivery. For example:

Project Completion

Graduated Rate

Total Fee

Finish Early

$115 / hour

$93,000

Finish On Time

$100 / hour

$100,000

Finish Late

 $90 / hour

$112,000

So if the supplier delivers on time, they get paid for …

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"The golden rule is that there are no golden rules."

- George Bernard Shaw

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