By Applaudo Studios

2021-11-11

Tags

Commercial

When fixed-price projects meet Agile

Here’s how fixed-price projects can be Agile.

With Agile gaining pace in software development, more and more companies are questioning the utility of fixed-price contracts. 

The Agile approach involves a frequent re-evaluation of development tools and the alignment of features with business needs. Given this constantly changing process, it may seem impossible for anything to be “fixed“. Yet, in reality, many businesses that work with software development companies are still striving to work with a fixed budget, scope, and time for their projects. In this sense, how make agile and fixed-price projects work together?  

Can fixed-price projects be Agile?

Fixed-price projects can indeed be agile. It is generally assumed that fixed-price projects and Agile do not match since Agile requires flexibility in terms of the work to be performed (scope changes), while fixed projects already have the 3 fixed components (cost, scope, and time). Still, both work very well. In fact, Agile can be an asset for fixed-price projects given that the cost and date are fixed but the scope is subject to variation. In this sense, the load, therefore, falls on the team to ensure that requirements are prioritized and organized appropriately.  

Pros and cons of fixed-price projects

Fixed-price projects pros:  

  • Fixed price: Once the contract is signed, the client is aware of the budget. Contractors are not allowed to overcharge without prior notification. 
  • Strict deadlines: When the client knows what features he/she wants in an application, software developers are able to elaborate a clear plan and set deadlines. As a result, everyone is clear about what work is to be done at any given time. 
  • Anticipation: Monitoring the status of software deployment and predicting whether the work will be completed on time is possible when everything has been thoroughly discussed and planned in advance.  

Fixed-price projects cons: 

  • Strict terms: Strict terms: After the project has started, any modification can hit the project so hard that a contract change would have to be made, either to add a new feature or to make a trade-off with another feature that is no longer a priority. If the ultimate goal of the project is not present for these decisions, it can lead to decision latency and impact time and cost. With fixed-price projects, the approval of new features takes much longer and can paralyze the entire development process. 
  • Complex planning: A fixed-price project demands exhaustive planning. Developers have to go through every detail and every step along with potential pitfalls. 
  • Poor communication: There is always a risk that miscommunication may lead to delivering a product that does not quite meet the customer’s needs. These misunderstandings often happen due to unclear project specifications. It can also be caused by a lack of follow-up on the project, particularly when software developers require further acknowledgment or information about the tasks to be performed. 
  • Excessive focus on going under budget rather than achieving business value or customer satisfaction with the project execution. This will depend on the organization’s business goals. 

Conclusions

Fixed-price Agile projects face the challenge of avoiding changes in the 3 components of scope, time, and cost. Here are some tips that may be helpful when dealing with fixed-price agile projects:  

  1. There is a difference between a proposal and a project, and it’s important to know it so you have a clear understanding of how to reduce risk on each.  
  1. Have a clear idea of what is meant by ” done” for each deliverable.  
  1. Work with your software development partner to establish project success standards that are not limited to the simple accomplishment of the workload.  
  1. Keep in mind the possibility that there may be a contract modification in order to allow changes in scope, always under the initial budget and timing constraints. Leaders must be highly skilled in decision-making to avoid any delay that may impact costs. If a change needs to be done, then change the plan but not the goal, and do it fast. 
  1. Always budget a percentage of money to address needed new features or any other changes. That would show the true colors of Agile if you are already aware that there will be unplanned changes. 

We’re Agile experts

At Applaudo Studios, we leverage agile practices and frameworks to deliver high-value business capabilities. We act as subject matter experts to introduce or enhance agile practices in the development of each project. How about we start with a discovery session? 


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