Agile Contracts (Part 2)

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.

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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:

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

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