Skip to main content

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.



You can get the whole book now, or you can read it a chapter at a time as I publish it here under the label ten contracts. To download the e-book or pre-order the physical book visit https://saat-network.ch/ten

Comments

Popular posts from this blog

Sample Definition of Done

Why does Scrum have a Definition of Done? Simple, everyone involved in the project needs to know and understand what Done means. Furthermore, Done should be really done, as in, 'there is nothing stopping us from earning value with this function, except maybe the go-ahead from the Product Owner. Consider the alternative:
Project Manager: Is this function done?
Developer: Yes
Project Manager: So we can ship it?
Developer: Well, No. It needs to be tested, and I need to write some documentation, but the code works, really. I tested it... (pause) ...on my machine. What's wrong with this exchange? To the developer and to the project manager, "done" means something rather different. To the developer in this case, done means: "I don't have to work on this piece of code any more (unless the tester tells me something is wrong)." The project leader is looking for a statement that the code is ready to ship.

At its most basic level, a definition of Done creates a sh…

Explaining Story Points to Management

During the February Scrum Breakfast in Zurich, the question arised, "How do I explain Story Points to Management?" A good question, and in all honesty, developers can be an even more critical audience than managers.

Traditional estimates attempt to answer the question, "how long will it take to develop X?" I could ask you a similar question, "How long does it take to get the nearest train station?

The answer, measured in time, depends on two things, the distance and the speed. Depending on whether I plan to go by car, by foot, by bicycle or (my personal favorite for short distances) trottinette, the answer can vary dramatically. So it is with software development. The productivity of a developer can vary dramatically, both as a function of innate ability and whether the task at hand plays to his strong points, so the time to produce a piece of software can vary dramatically. But the complexity of the problem doesn't depend on the person solving it, just …

Money for Nothing, Changes for Free

“Money for Nothing, Changes for Free” encourages both customers and suppliers to focus on value.

A key advantage of Scrum projects is that at least once per sprint you have something that could be shipped and no work in progress. You can change direction every sprint, and you can reevaluate whether the project is a good investment or if your money could be better spent elsewhere. Abrupt cancellation is risky for the supplier.

While the concept of an early-exit penalty is not new, Jeff Sutherland gave it a unique allure with his allusion to the Dire Straits hit.
Desired Benefit Incentivize both customers and suppliers to focus on functionality that provides genuine value.
Structure This works with Agile software projects because there is little or no work in progress. After each Sprint, functionality is either complete or not started. Work is basically on a Time and Materials basis with a cost target, often with the intention that the project should not use up the entire project budge…