The Dr. Evil method of offsetting project risks…
“I have a fixed price contract in place to deliver the project – what could go wrong?”
– The Dr. Evil method of offsetting project risks
You have a tank of piranha fish ready to deal with suppliers that fail to please you.
So why not use a Fixed Price contract to ensure delivery? OK – maybe your specification is flawed, but at least you can torture the supplier if they fail. It may make you feel better, but will this approach really help you achieve your plans for World domination?
Dr. Evil’s recommendation to use fixed price contracts does not reduce the risk of project failure – it only increases it.
A new paper from the American Council for Technology-Industry Advisory Council (ACT-IAC) explains why:
“From an Agile perspective, Fixed Price contracts are problematic because they typically require the declaration of most project requirements upfront. Fixed Price scope contracts do not accommodate evolving and emergent requirements management and do not allow flexibility to easily prioritize and assign requirements to releases as needed. Furthermore, any change in requirements on a typical Fixed Price contract can result in expensive contract modifications and overly burdensome administrative and performance management. Therefore, Fixed Price scope contracts are not preferred for Agile projects. “
“Use (flexible) Contracts. With the rapidly changing nature of the initial releases of projects (flexible) or Level Of Effort (LOE) … contract types can allow (you) the flexibility to meet the needs of Agile delivery. To help attain more predictable performance … an emerging practice in … adoption of Agile IT is to declare a sprint zero, phase zero, or even a pilot wherein administrative hurdles are overcome and norms of team behaviors are established that enable the routine delivery of software.”
ht to Scott Suhy of Greenline Systems for alerting me to the ACT-IAC paper.
Scott’s blog is highly recommended – it is here: