NKIn our March 12 webinar presentation, Agile Contracts, by N.K. Shrivastava we covered many of the essentials for creating and using Agile contracts.   This summary provides an overview of the key take-aways, but you’ll want to view the webinar recording available on demand to get more detailed examples.

If you’re new to Agile or missed our other webinars, see our other recaps for more about Agile and Scrum: Agile Estimating and Planning Best Practices and BA Guide to Essential Agile Techniques.

What is a Contract?

There are three things needed for a procurement relationship:

  • Buyer
  • Seller
  • Contract

The contract defines the relationship between buyer and seller and what each will receive as part of the deal.   The contract accomplishes several important tasks: (1) setting the rules of engagement, (2) sharing risks so that neither side takes on too little or too much, and (3) building trust between buyer and seller.

Benefits of Agile Contracts

  • The customer gets immediate and constant value
  • Developers form self-motivating teams
  • Both sides agree on:
    • Fixed cost and time
    • Flexible scope
    • Collaboration

What needs to be in an Agile contract?

There are 4 critical success factors for an Agile contract: (1) flexibility, (2) commitment, (3) risk sharing, and (4) defined checkpoints.

1. Flexibility

In order to be successful, an Agile contract must allow for flexibility, both in scope and process.  The scope should be flexible enough to empower the team to work on high priority backlog items.   In addition teams should have some flexibility with the process including the ability to define the length of sprints and the number of story points to be delivered.

2. Commitment

In addition to flexibility, both sides must also make several key commitments.  First and perhaps most importantly, the customer and team need to commit to collaboration.   In addition, there must also commit to a mechanism for prioritizing the backlog.  A third commitment is to attend ceremonies including the release planning, sprint review, daily scrums, and sprint retrospectives.   It’s important for stakeholders and customers to attend some of these ceremonies, so the contract should describe commitments to attend major ceremonies.   Finally, both sides should commit to adhere to and own the roles and responsibilities of the customer and team.

3. Risk sharing

Both parties must share the risks of economic / price fluctuations, overruns in cost or time, and other unforeseen circumstances.

4. Defined checkpoints

The Agile contract should define checkpoints related to sprints.  Is the spring review satisfactory?  Is the customer satisfied with the work done?  Who will define “done?”    In addition, the contract should define checkpoints related to releases.  Does the customer want more sprints or is this enough?

Types and Examples of Contracts – watch the recording for examples!  

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