Agile Contracting

Challenges in Agile Contracting

• Agile projects have flexible scope, making contract definition difficult.
• Traditional contracts have fixed scope, whereas Agile contracts focus on fixed time and cost.
• Contract acceptance criteria become complex due to changing scope.
• Agile emphasizes customer collaboration over contract negotiation.

Types of Agile Contracts

1. Money for Nothing

In this model, if a project is completed before all planned features are delivered, the contract can be ended early. The vendor keeps the agreed payment, and the client stops further development to save costs.

Example: If a contract was for 20 features but only 15 were necessary, the project can be stopped early.

2. Change for Free

This allows clients to swap one feature for another without changing the total number of features. This supports Agile’s iterative nature.

Example: Replacing Feature 10 with a new Feature X at no extra cost.

3. Graduated Fixed Price Contract

This contract rewards early completion and penalizes delays.

Example:

• Finish early: $20/hour
• Finish on time: $18/hour
• Finish late: $15/hour

4. Fixed Price Per Work Package

Each work package or feature has a fixed price, allowing better cost estimation and control.

Example:

• Feature A: $2000
• Feature B: $3000

Conclusion

Agile contracts focus on collaboration, flexibility, and value delivery rather than rigid agreements. Combining different contract models can help manage risk and maintain agility.