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The Dr. Evil method of offsetting project risks…

March 27, 2014

Evil

“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. “

The solution?

“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:
http://agileingov.com/2014/03/26/new-act-iac-paper-is-a-great-read

 

Brian

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From → Agile Governance

2 Comments
  1. Jackie permalink

    Brian, what is your view on a framework agreement vs a ‘flexible’ contract. Both would need strict governance. Whilst framework agreements have been in place for quite sometime, what would be different to enable a ‘flexible’ contract that the Cabinet Office would be happy with (assuming a gov’t contract).

    As well, Agile is also about changing working behaviours – as you make mention of. Without leadership, none of this would occur. Number one risk in any flexible or agile approach is lack of leadership and key stakeholder involvement. What would Dr Evil (UK version) say about that?

    PS – I think it would also depend on the size of the ‘world’ you wish to dominate! 🙂

    A few thoughts,
    Jackie

  2. Dr Evil would approve of framework contracts I think, because they tend to set service deliverables in stone,and thereby give a false sense of security. The London Metropolitan Police were folloiwng Dr Evil’s procurement principles when they agreed this contract to pay £100 for a service company to change a lightbulb:
    See here:
    http://bit.ly/lightbulbs-police

    Brian

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