CHOW #10- Is fixed price agile project an oxymoron?

Rekha is a seasoned project manager in a large services firm. She has executed a few projects successfully using Agile/Scrum processes. She has also transitioned from Doing Agile to Being Agile after the execution of the last project.

She has been tasked to complete the third phase of the project for ‘eTransferNow’ in a fixed price contract model to avoid the risk of over running the budget. She had a high level understanding of the vision and features that the third phase of the project. This is a very strategic project and its important to keep the stakeholder in the client comfortable. At the same time, the challenge of executing an agile project in a fixed price seemed like a conundrum for Rekha. She has always executed Agile projects in a T&M contract structure only.

Assume that you are in the shoes of Rekha, what would you do? Assume that 70% of the team members involved in the first two phases of the project along with the Technical lead are continuing the third phase also.


Agile follows the inverted pyramid approach with timeline and quality are fixed.  With the price fixed, the main lever to use is to contain the scope of delivery. Once the financial constraint is set, more often than not it gets down the defining the scope to the last ’T’ and thus defeating the purpose of following the agile development process. The famous Tamil saying of ‘Soodu Kanda Poonai’ which talks of taking extra precautions based on experience. In the agile context, fixing the price is not the right way to deal with the contract as with the price many old practices also comes hand-in-hand.

The solution to such a predicament is to in two stages. First stage is prior to the contract negotiations and second during the project execution. Have an agreement on what a story point is with a few examples. With the high level features that need to be implemented have a conversation of # of story points.

Using the past velocity, create the staffing and release plan. For example, if we needed 2 members to deliver 20 story points in 2 weeks, this can be the basis to arrive at the staffing, release plan and hence the financial cost to deliver.

During the contract negotiation, have an agreement based on the number of story points that would be delivered under the high level features. In case the price is higher, the number of story points need to reduced accordingly. During Execution Iteration 0 should be spent in creating high level functional stories within each feature. This would turn to become the Master Story List (MSL)

Master story list forms the baseline for the delivery/iteration plan. All other processes of scrum planning, demo, story grooming should follow the same model.

During the backlog grooming when additional details presents additional scope, then diligence needs to be paid by the Client Point of Contact (CPOC) and the Iteration manager (IM) to prioritise and take the appropriate action. With this solution the following are apparent Financial constraint projects can follow a pure agile project. Additional diligence needs to be paid to the MSL by the client team and service provider.

It is very important not to fall in the oft traveled path of creating upfront documentation, design and hence the waterfall model to satisfy contractual obligations.

Contract writing is an art and should be drawn out with a clear understanding of the end goal.

What do you think?

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