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Topics: Cost Management, Procurement Management, Risk Management
What type of contract is most appropriate?
What type of contract is best suited for adaptive approach projects:
- From the supplier perspective?
- From the customer perspective?
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Assuming that by adaptive you mean a set of incremental iterations, I would say a fixed time/fixed price would work quite well for the supplier. The contract would basically provide a set number of resources for a set time and they would work through the backlog according to the priority set by the customer.

For the customer, they would likely prefer something that doesn't set the time. If I was the customer and I find more work and features during the contract, I may not want to simply push down the less important stuff out of the project backlog. A time and material contract would likely give me the flexibility of adding teams or iterations.

What's interesting is that this is typically backwards to what is best suited for predictive projects.
It's somewhat dependent on the type of project. A project with a goal of improving something or reducing costs might be well suited to a cost plus incentive contract, to incentivize the supplier to set aggressive targets. A project without a set period of time might be suited to a cost plus fee type contract to protect the supplier from cost overrun.
I would prefer a cost-plus fee type of contract. An initial part of the contract could be on a fixed price. That should be good for both parties, a win-win contract.

There is one type of contract that may apply in some industries. I don't recall the name. Basically, each party agree on a full-price and the saved amount is split between all parties. I'm not sure how that could be applied if the scope is not clear at the start. The interesting part is that all benefit from any cost saving that can be found during execution.

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