Reflections and examples of agile fixed-price contracts
Miquel FebrerExecutive for Transformation Management and International Business| GFT GroupSant Cugat Del Vallès, Ct, Spain
Several clients want to have IT agile projects with fixed-price contracts. This is an obvious complex combination and I would like to understand reflections and examples of people that have a deep experience about this. I also have thoughts and experience, but not extremely successful yet! Saving Changes...
Miquel FebrerExecutive for Transformation Management and International Business| GFT GroupSant Cugat Del Vallès, Ct, Spain
Thanks, Stéphane. Yes, in many projects we have an FSD and then a SoW per quarter. That SoW is what we sometimes fix-price. However, even this is difficult: as you say, because you need a fixed scope. The more answers I see, the more I confirm that I need to concentrate in convincing clients that Agile and fix-price are not friends.
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1 reply by Stéphane Parent
Jan 14, 2022 8:56 AM
Stéphane Parent
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What you have to convince your clients, Miquel, is that the amount of value, not scope, will be fixed.
The project team can deliver a value of x story points in an iteration or in a release. You can fix that value and explain to the client that what is valuable to them might and should change during the iteration or the release.
Saving Changes...
Miquel FebrerExecutive for Transformation Management and International Business| GFT GroupSant Cugat Del Vallès, Ct, Spain
I found this article by Gaurav Mevawala that explains the topic rather well. He suggests to fix-price the SIZE as opposed to the SCOPE in the triangle: scope, time, cost. I like the way he explains it. Somehow, I realize that this is something that I have also done: when the client insists in a fixed price, convince her/him that a fixed-capacity contract is the max we can do.
The default fixed price contracts are fixed price/fixed scope (FPFS). Given that scope is the one thing in adaptive approaches that is not fixed, FPFS does not make sense. What does make sense, is a contract that allows for multiple statement of works (SOW) with each SOW having a fixed scope. That would mean each SOW would be tied to a number of iterations or releases. Of course, the contract and SOW should both allow for the SOW backlog to be modifiable, understanding that lower priorities could be pushed out to a future SOW. You can then opt for your "fixed" scope SOW to be time & material or fixed price.
Fixed price makes sense with well clear scope and, but for agile project especially for smaller one may increase costs and also for bigger one may restrict the work.
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1 reply by Stéphane Parent
Jan 14, 2022 9:02 AM
Stéphane Parent
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I would suggest, Awadalsaid, if you have a "well clear scope" that you should be using Waterfall, not Agile. Agile makes sense when the scope is not well understood or bound.
Saving Changes...
Stéphane ParentSelf Employed / Semi-retired| Leader MakerPrince Edward Island, Canada
Jan 14, 2022 1:20 AM
Replying to Miquel Febrer
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Thanks, Stéphane. Yes, in many projects we have an FSD and then a SoW per quarter. That SoW is what we sometimes fix-price. However, even this is difficult: as you say, because you need a fixed scope. The more answers I see, the more I confirm that I need to concentrate in convincing clients that Agile and fix-price are not friends.
What you have to convince your clients, Miquel, is that the amount of value, not scope, will be fixed.
The project team can deliver a value of x story points in an iteration or in a release. You can fix that value and explain to the client that what is valuable to them might and should change during the iteration or the release. Saving Changes...
Stéphane ParentSelf Employed / Semi-retired| Leader MakerPrince Edward Island, Canada
Jan 14, 2022 8:36 AM
Replying to AWADALSAID TARA
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Fixed price makes sense with well clear scope and, but for agile project especially for smaller one may increase costs and also for bigger one may restrict the work.
I would suggest, Awadalsaid, if you have a "well clear scope" that you should be using Waterfall, not Agile. Agile makes sense when the scope is not well understood or bound. Saving Changes...
Marek RudnickiPMO, Program Management, Project Management, Business Development| FreelancerPoland
I know it will sound a bit academic, but Fixed Price is a billing method and Agile is a delivery method.
Now to practice.
If You propose a number of sprints with the constant team. Your price is just no of sprints x price of Team for a sprint. (it even does not have to be the same team all the sprints)
You would not believe it worked for many customers I worked with.
They wanted a Fixed Price. Here is a fixed price for 8 sprints. Voila.
Of course, the devil lies with the payment schedule.
Or You asking for Fixed Scope and Agile. This is a different creature. Saving Changes...
Miquel FebrerExecutive for Transformation Management and International Business| GFT GroupSant Cugat Del Vallès, Ct, Spain
Thanks, Marek. I like the concept of fixing the number of sprints and their price. I tended to solve it with a fixed-capacity, which is similar but closer to time&materials. Saving Changes...
