Time and Materials with Variable Scope and a Cost Ceiling

For customers that aren’t used to working with Scrum, this might feel like a leap of faith, because they don’t know exactly what they will get in advance. But I believe this is a fairly pragmatic approach. Enabling the Team and Product Owner to make decisions about the product increases the likelihood of building the right product.

Desired Benefit: Enable decision making within the project while maintaining control over the costs.

Structure: Same as Time and Materials except a cost ceiling limits the financial risk of the customer.

Scope: Same as a Fixed Price, Fixed Scope project.

Decision-Making: Much more likely to be in the Scrum team, because decisions are made during the project about what functionality shall be included.

Risks: The budget will expire without achieving the necessary business value for the customer. Customer won’t get everything they ask for.

Relationship: Cooperative. The combination of limited budget and variable scope focuses both customer and vendor on achieving the desired business value within the available budget.

Tip: From experience, I would say this contract form mixes well with Scrum. The customer has control over each individual sprint. A constructive relationship means that even if problems develop on the way, the emotions are right to come to a mutually agreeable solution.