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Scrum and fix priced contracts

posted Oct 5, 2011, 5:13 AM by Marcel Baumann
Often I am asked if it is possible to use Scrum approach in the context of fix price contracts. The answer is a sounding yes. Experience in projects show that you need to differentiate your definition of fix price contracts. Different customers have different needs. Below you find different contract models to guaranty customer satisfaction.

The approach is always the same. The requirements of the product are reformulated as user stories and each story is estimated. The unit of estimation is story points. The estimation is used to write down the fix price and the costs for each story and the associated requirements. During the realization the progress report and cost tracking is done against these stories. The release burn down chart shows the progress and the estimated release date.

   Classic Fix Price
 bbv Scrum Fix Price
 bbv Scrum Flexible Fix Price
 bbv Scrum Premium Fix Price
 Change Management
 No changes are possible without contractual renegotiation of costs and timelines through a change management board
 Exchange of non implemented stories always possible with new or modified stories
 Exchange of non implemented stories always possible with new or modified stories  Exchange of non implemented stories always possible with new or modified stories
Priority Management
 Not possible except as part of the initial fix price contract
At any time
 At any time
 At any time
 Controlling
  •  Not before completion of the project and the delivery of the release
  • Burn down chart for each sprint and each release
  • Burn down chart for each sprint
  • Potentially shippable product is delivered at the end of each sprint
  • Burn down chart for each sprint and each release
  • Potentially shippable product is delivered at the end of each sprint
  • Velocity and sprint report is delivered to provide forecast
  • Risk management of identified risks in implemented stories and new stories
  • Product release is provided at the completion of each release based on the release planning defined in the contract
 Early Completion of Project
 No  No  Yes, but no product release is delivered
 Yes, the last delivered product release is available for deployment on customer infrastructure
 Requirement Engineering
 Requirement engineering is performed by customer before definition of fix price contract
 Requirement engineering is performed by customer before definition of fix price contract  Requirement engineering is performed by customer, the Scrum team reviews the stories
 Requirement engineering is performed together with the customer to optimize ROI
 Constraints
  • Requirements are available at high quality and are frozen during the fix price
  • Requirement are available at high quality
  • Customer defines product manager for change management
  • Responsible attend review meeting at the end of each sprint and planning meeting at the beginning of each sprint
  • Requirement are available at high quality
  • Customer defines product manager for change management
  • Responsible attend review meeting at the end of each sprint and planning meeting at the beginning of each sprint
  • Installable software is available at anytime for feedback
  • Requirement are available at high quality
  • Customer defines product manager for change management
  • Responsible attend review meeting at the end of each sprint and planning meeting at the beginning of each sprint
  • Responsible grooms with the team the product backlog and defines the acceptance criteria
  • Installable software is available at anytime for feedback
  • Product release is delivered as scheduled and deployed on customer infrastructure

The above table shows how Scrum, and iterative incremental development can be realized in fix price contracts.

Estimation is easier if the requirement document of the customer provides the key use cases of the application to develop. The requirements are associated with the use cases before starting the estimation of each story and requirement.
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