Value-Driven Delivery - Part 4
Like in many traditional projects, there may be times when a team needs to contract work out to a vendor. While certain aspects of the contracting process are unlikely to change, the agile methodology calls on a shared value approach between both parties, reflected in its stated principle: customer collaboration over contract negotiation. The development team and customers work together to develop the product. However, where agile is more responsive to change, contracts are not so accommodating. Contracts are typically non-adjustable and elicit restrictions based on the initial offer and consideration. Therefore, agile teams must carefully consider a vendor and weigh the benefits of utilizing the agile methodology, especially if training is required. The contract would define the scope of work and the specific terms, and the type of contract used influences project risk. Some of the most common types of arrangements used in agile projects are as follows:
Incremental Delivery Contract
This contract includes examination points at routine intervals. It helps the customer or stakeholders make determinations regarding product development occasionally throughout the project at each examination point. The customer can either accept the result of the product, decide to stop the development of the product or request product modifications.
Joint Venture Contract
This arrangement is generally used when two or more groups partner to conduct the work of a project. The groups involved in the project will gain some Return on Investment because the groups will share the gains or usefulness generated.
Development in Phases Contract
After release completion, this arrangement makes funding available each month or quarter. It gives incentive to both buyer and supplier and ensures that the financial risk for the customer is limited to that particular period since unsuccessful releases are not funded.
Incentive and Penalty Contract
These arrangements are based on the agreement that the supplier will be rewarded with a financial incentive if the project’s products are delivered on time but incur financial penalties if the delivery is late.
