Loading AI tools
Contractual model for information technology projects From Wikipedia, the free encyclopedia
The Agile fixed price is a contractual model agreed upon by suppliers and customers of IT projects that develop software using Agile methods. The model introduces an initial test phase after which budget, due date, and the way of steering the scope within the framework is agreed upon.
This differs from traditional fixed-price contracts in that fixed-price contracts usually require a detailed and exact description of the subject matter of the contract in advance. Fixed price contracts aim at minimizing the potential risk caused by unpredictable, later changes. In contrast, Agile fixed price contracts simply require a broad description of the entire project instead of a detailed one.[1]
In Agile contracts, the supplier and the customer collaboratively define their common assumptions regarding business value, implementation risks, expenses (effort), and costs. Based on these assumptions, they agree on an indicative fixed price scope, which is not yet contractually binding. This is followed by the test phase (checkpoint phase), where the actual implementation begins. At the end of this phase, both parties compare the empirical findings with their initial assumptions. Together, they then decide on the implementation of the entire project and establish the conditions under which changes are permitted.
Further aspects of an Agile contract are risk share (both parties divide the additional expenses for unexpected changes equally amongst themselves) or the option of either party leaving the contract at any stage (exit points).
Capped T&M contracts work in the sense of traditional T&M contracts. However, there is an upper limit to how much customers will have to pay. In this way, suppliers benefit with early time-frame changes while customers only have to pay up until the capped cost limit is reached.[2]
In target cost contracts, parties involved with the contracts agree on a final price during negotiation. These contracts allow cost savings for both parties if contracts run below budget, but also allows both parties to be faced with additional costs if contracts run above budget.
Incremental Delivery Contracts allow customers to review contracts at designated points in the contract life cycle. These points are negotiated into contracts and allow customers to make changes, continue, or terminate the project.
The Agile fixed price is a contract framework most suitable for complex IT projects, where scope, progress and costs are difficult to determine in advance. For standard projects, which have already taken place in the same or a similar way in the past, the test phase and the assessment of the project progress may be skipped. In order for this contractual model to be successful, the supplier and customer should collaborate closely throughout the entire length of the project. Furthermore, a certain amount of mutual trust is imperative in order to be able to agree on the budget, expenses and range of features. It is also advisable to ensure that the broad requirements (epics) listed at the beginning of the project are turned into smaller, more detailed requirements (user stories) as soon as possible. Otherwise, the potential for uncertainty and its connected risks rises.[4]
Seamless Wikipedia browsing. On steroids.
Every time you click a link to Wikipedia, Wiktionary or Wikiquote in your browser's search results, it will show the modern Wikiwand interface.
Wikiwand extension is a five stars, simple, with minimum permission required to keep your browsing private, safe and transparent.