Agile2008GH Agile Contracts

8/8/2019 Agile2008GH Agile Contracts

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Distributed Agile Teams and

Alternative Contractual Forms

- What Works Best?

Greg Hutchings

August 6, 2008

[email protected]


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Distributed Agile Teams and Contractual Forms

About the author

Greg Hutchings

I live in Paris and work for Valtech,proposing, negotiating, managing andliving with large distributed agile projects.

I travel often to Bangalore and withinEurope. I am originally from the SF Bay

area, where I was a client partner forThoughtWorks, after spending years insoftware product development.

Ive been involved with software teamssince the early 80s, and have been using

Agile and XP practices with teams formallysince 2003 and informally since the early90s.


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Session outline

Distributed Agile Teams and Alternative Contractual Forms What works best?

Building and supporting contracts to engage large distributed Agile teams (30 min)

In-depth Case Studies (30 min)

Fixed-bid, T&M and pay for production contract alternatives (20 min)

Discussion (10 min)


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Building and supporting contracts

Importance of the proposal

Selecting and defining methods

Types and structures of agile contracts

Planning Releases, Iterations and Communication

Client and Vendor Roles and Responsabilities

Team organisation and roles

Estimating functional and non-functional scope

Alternative units for measuring software production

Acceptance testing

Warranties / Reversability


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Distributed Agile proposal process

Interest in doing distributed agile development is usually related to cost savings, ortime to market and enhanced capacity, and may focus on rates

Most new large company clients I talk to have already have had an offshore

experience, often not very positive or with mixed results, and have some fear

Quality, productivity, schedule and budget control are all key issues for a client

Methodology, included Agile, is often of increased importance for a client whenworking with an offshore vendor, and can help to address fears and concerns

It is better to introduce offshore and onshore delivery staff early with acollaborative approach, and to absolutely involve the delivery team in estimatesand client relationship building.

After an understanding of the clients needs is obtained high level scope, timeframe and budget, and specific constraints, a proposal is prepared

After the proposal is presented, reviewed, revised and agreed in concept, thecontractual development process begins


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Types and structures of typical agile contracts

Types and structures

Time and materials

Fixed bid: could be fixed capacity and/or fixed scope and/or fixed schedule

Fixed cost per unit of work (Story point, UCP, Function point, etc.)

Structures

Pre-contract: verbal understanding, hand shake, email, letter of intent

Simple contract for professional services no scope defined, rates and budget

Simple contract for software development scope defined, total cost, timingassumptions defined with terms and conditions to protect vendor and client

Hybrid contract often a phase 1 (T&M or fixed bid) to define release backlog and

high level estimates, assumptions and to produce a phase 2 fixed bid for delivery

Fixed cost per unit of work. E.G. Valtech Software on Demand

Building the contract collaboratively

As with software, avoiding BDUF for contracts is a good practice. Iterate!

MSA with SOWs is preferable if a longer term relationship is anticipated

Maybe be best to meet and develop contract (from a template) together


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Planning Releases, Iterations and Communication

In addition to the type and structure, the contract will need to define the term of theengagement; it is useful to describe, plan for and gain commitment to events

Although we probably dont have enough precision in our estimates, yet, the client

probably does have a budget in mind. After all, they are talking to you as a vendoror IT team which likely follows a budget exercise of the previous year.

Based on a very rough sense of the work to be done, a capacity plan with a numberof iterations and a ramp-up in team size can be used to model what level of effortthe budget might cover.

Especially for distributed agile projects, in the contractual discussion it is veryuseful to review a release plan of a number of iterations, and to discuss the needfor face to face communication at iteration boundaries. For distributed projects weoften use a Sprint of 4 weeks, in part due to higher travel costs.

A product or release backlog (high level requirements) is often shown as an exhibit.If the contract form is fixed bid, fixed scope, in order to protect client and vendoreither estimates involving development spikes on representative requirements orterms that permit substitution of or variance in scope are important.


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Key events in a distributed agile Iteration

Day 2 Day 4 Day 5 Day 6 Day 7 Day 8 Day 9 Day 10

Iteration

Planning Meeting

Requirements

Workshop

Prep Build Build Build Build Build Build

Day 1

Week 1 Week 2Day 3

Development

Deployment of

previous iteration

DesignWorkshop

EstW

orkshop

Development

Development of test cases

Support Deployment

Development of test

cases

UAT UAT

Day 11 Day 12 Day 13 Day 14 Day 15 Day 16 Day 17 Day 18 Day 19

Build Build Build Build Build Build Build Build Build Package Package

Week 3 Week 4 (Week -1)Day 20

Next Iteration Planning

Retro-

spectiveDemo

Development

Testing Testing Prior Iteration

Preparation of UAT Env Validate Env

During a distributed agile contract negotiation, I discuss the events in a sprintand which should involve face to face discussion.


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Distributed Agile Events roles and conditions

Above is a sample description of some of the events in a distributed agile project.

By discussing in the proposal and engaging via the contract the commitment of clientand vendor to communicate regularly face to face, the budget for travel and thecommitment of key staff to the project can be planned.

Meeting /

Session Type

Facilitating

Role Attendees Locale

Session

Length Pre-Condition Post-Condition

Input Responsible Role Output Responsible Role

Release

Planning

Meeting

EM

EM, PO, FM,

PM, Arch, all

BAs, Tech Lead

France 1 day

Project is initiated,

key participants

are on board

A backlog of high

level requirementsis prioritized to

permit planning of

the iterations,

overall release and

major milestones

High level

functional andtechnical

requirements,

schedule and

budget contraints

PO, BAs, Arch,

EM coaching

Release Backlog,

known definition of

project success

EM, PM, PO

Iteration

PreparationPM

PO, FM, PM,

Arch, all BAs,

Tech Lead

France 20 days

Demo of previous

iteration is

complete

Enough

information is

available for

finalizing priorities

for the iteration

and agreement to

scope of iteration.

Previous iteration

scope "Done"

status for each

scenario taken up

PO, BAs, Arch,

EM coaching

High level

scenariosPM, FM, BAs

Iteration

Planning

Meeting

PM

PO, EM, FM,

PM, Arch, BAs,

Tech Lead, Devs

India 4 HoursHigh level

scenarios

Enough

information is

available for

preparing

Requirements

Overview

High level

scenariosFM, BAs

Proritized

requirement

backlog with

desired scope for

the iteration.

BA + Customer

Inputs Needed for the Session Session Output


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Client and Vendor Roles and Responsibilities

An agile contract should clearly state what is expected of each party, and ofspecific roles: who must do what, when, and sometimes how and where.

Normally the client must approve budget, approve requirements and approve

acceptance of delivered software, at a minimum, but it is nearly critical that theyparticipate in release and iteration planning, retrospectives and as product ownerusing the Scrum role metaphor, be available daily, even at a distance, to clarifyrequirements.

These responsabilities need to be time-boxed, and particularly in the case of a fixed

bid agreement, it is advisable and mutually beneficial to define the consequencesof being late.

These may include transferring risk back from vendor to client (e.g. convert to timeand materials, assume capacity was consumed but wasted, etc.) or from client tovendor (e.g. a quality or scope debt was incurred by the vendor for not delivering)

In this section of a contract an escalation procedure should also be defined so thatthe team does not become blocked prior to, during or after an iteration

Executive sponsors / stakeholders should be defined, in the contract or exhibit.


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Roles and Organization Chart

Product Owner(Owns Initiative budget)

Domain experts

Technical Lead

Senior Developers

Release Management

Infrastructure

Agile Offshore Coach

France

Feature Manager

France

Executive Steering CommitteeExecutive Steering Committee

Transversal CommitteeTransversal Committee

Operational CommitteeOperational Committee

Development Team

Program DirectorFrance

Project Manager

Tech Lead / CSMIndia

Client (typical)

The larger the Clients delivery involvement is, the less likely that theterms of a distributed agile contract can be fixed bid, and the more

likely that enablement will be the top priority.


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Estimating functional and non-functional scope

In all Agile projects, estimation is very important, and is necessary to plan releases anditerations

Estimation units of a team often need to be translated into terms meaningful to the client

The clients units of measure vary, from story points, ideal days, actual days, use case points,

function points, use cases, stories, large functional specifications, a system sufficient toreplace the existing, etc.

Contractually, if the contract is not time and materials, something other than time must bedelivered and measurable in order to justify payment, and for distributed agile contracts themore easily and exactly the units can be measured and verified, the more clear communicationwill be and generally the better the relationship

Clearly, it is very important to define What is done with acceptance tests and to include thesewith requirements when doing detailed estimates

Others in this conference, including Mike Cohn in his session yesterday, have treated thissubject in great detail, so I will stay high level

The main point to make for distributed agile contracts is that you should define the unit ofmeasure in a manner that is clearly described and understood in the agreement, and can bemanaged, with incremental acceptance. We have found Use Cases, UCP and function points to

be useful measures in this regard.

Teams often forget to include estimates in what ever units they are using for non-functionalrequirements in fixed bid contracts or sometimes, even to adequately define theserequirements.


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Acceptance Testing

Agile contracts or their associated proposals should define what acceptance tests are, whowrites them, validates them, performs them, where, and when.

I often contractually suggest that the client participate in the definition of the acceptance testsduring the preparation of stories or use cases, and that they be discussed and validatedconsensually in the requirements workshop

Acceptance of the delivery of an iteration is specified contractually to be associated with thepassage of the scopes related acceptance tests, and in a fixed bid contract or a pay forproduction contract, this acceptance is often associated with the release of a payment.

A KPI I recommend tracking is the % of functional tests automated, and I prefer to state in thecontract that feature delivery acceptance is assumed within a short period of time (eg 10 days) ifautomated acceptance tests pass and there is no indication by the client or team of other

reasons not to accept the delivery UAT is usually, at least with our clients, a separate phase of time that includes some additional

risk in terms of time and budget, but which is absolutely necessary. We invite clientrepresentatives to iteration end demos and provide access to the project dashboard to reducethis risk.

Customer visits to the offshore development site can be coordinated with demos andacceptance testing of the most recent iterations delivery if planned appropriately, and this

practice greatly increases the offshore teams satisfaction level and the clients confidence andtrust in the offshore team.

In distributed agile projects, the importance of comprehensive and automated functional andnon-functional testing is critically important to serve as an objective indicator of project qualityand progress. Tools such as Rally Dev, Version 1 and others provide information radiators tokeep client and vendor in sync, and their usage is often stipulated in our contracts.


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Warranties and Reversability

Most vendor attorneys generally advise limiting the warranties provided by thevendor in many important ways

However, clients wish to be reassured that the vendor is engaged and committed

and aligned with the clients business needs. These terms vary from country to country, and I have found warranties to be

stronger in Europe than in the US in many cases. A common European standard isto guarantee that a custom app will be free of major or blocking defects for a periodof 3 months after delivery to production, and most often provides correction

services at no charge. There may be penalty clauses for the vendor in the event ofmajor defects that require liability insurance to be purchased.

Reversability clauses deal with the event that the Client decides to switch vendorsor in-source the applications continued development or maintenance, by providingfor a knowledge transfer process supported by the vendor for a certain period and

with specific measures for completeness.

Reversability clauses in a distributed agile team may require travel and/ortranslation services, so an appropriate budget should be defined and costed intothe contract at the time of its negociation.


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Case Studies

Case 1 : Employment agency application

Distributed Agile project

Fixed bid converts to bid per iteration

Organisation and contract evolves and adapts

Case 2 : eBusiness Catalog, eCommerce and POS

Agile contract evolution in large distributed agileprogram

Large distributed agile project

Several interesting contractual forms

Organisation also evolves and adapts, learning together


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Case 1 : Employment agency application

Fixed bid -> bid per iteration

Refactoring and port of a large temporary employment agency application

Rewrite in Java of a large Forte application, identical feature set and human interface

The distributed agile project was staffed with a relatively offshore team and smaller local team

Project size : 6 500 person days

Duration : 24 months

Application to manage employment agency candidates (1000 agencies with > 5000 users)

Acceptance criteria : Quality metrics Basis for invoicing : Acceptance of the iteration

Project Results :

Exceeded initial fixed bid budget by 3 iterations

2% defects beginning at the UAT (14000 functional test cases)

Piloted September 2007 and went to production December 2007

Fixed Bid

June 2005 December 2005 June 2007 August 2007

Bid per iteration / incremental acceptance UAT

Re-Negotiation


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Case 1: Employment Agency Application

How did this contract affect the team?

The initial contract was bid for a fixed fee, with fixed scope, and though a desired time framewas agreed, there was no penalty for late delivery

The onshore team was initially the sole point of contact with the client. They developed closerapport, negotiated the contract, provided estimates and built the requirements andarchitecture. The client wished to communicate in french and did not have face to face contactwith the offshore team.

The offshore team was not involved in validating the onshore architects estimates, and did notfeel committed to the estimates, the contract or to the client

Strained relations developed between the onshore and offshore teams, internally, andeventually with the client as quality expectations were not met. The client seemedunreasonable.

A blow-up occurred when the quality level was consistently not acceptable.

The parties met, including representatives from offshore, addressed some technical issuesrelated to human interface requirements, and renegotiated the budget and contract to permit re-estimation and budget fixing by iteration

The now more collaborative and integrated team went on to successfully deliver the application.


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Agile contract evolution in large distributed agile program

Project was to implement an integrated multi-channel eCommerce solution with a new POS in 220 stores

Progressively replace features of 7 legacy apps with a custom Java / WebSphere Commerce Server solution

Distributed agile program began in France and shifted over time to large distributed team

Project size : 15 000 person days. Duration: 3 years

4 contractual modes :

V1.C Product Catalog, fixed bid, fixed scope but no time boxing and 8 month delay!

V1.S - Sales (Point of sale) with integrated Catalog and eCommerce site T & M with bonus /penalty.

V2 - Evolved Catalog and Sales for full production roll out pay per productivity with velocity assumption

V3 - Time and materials support agreement, capped budget, prioritized backlog

Fixed bid duo-shore agile

Jan 2005 December 2005 June 2006

Time and materials with KPI strong offshore T&M UAT

Negotiation

Change project management, France -> India Rebalance French/India team and roles Create direct India/customer communication Quality and productivity indicators put in place

V1.C

POC

Dec. 2006

V1.S

Negotiation

V1.C delivered V1.S negotiated, POC begun Revamped process, ramped team


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Agile Contract Evolution

BIG ramp up, T&M +/-

Janvier 2007 June 2007 June 2008

Pay per UCP, Rising Velocity assumption

Negotiation

Fine-tuned process for integration Established UCP cost and budget Forecast velocity and acceleration

V1.S V2

T & M with a cap

NegotiationNegotiation

T & M with + / - Established PD budget Productivity & Quality

With trust established, returned to asimple time and materials mode forsupport of deployment and production

V3


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the T&M contract with bonus / penalty clause was in response to client demand for fixed bid andvendor concern about estimation risk and acceptance speed.

This contract form had an effect on the team of very strong motivation to deliver completed use cases(use cases which passed their functional acceptance tests), but sustainable pace was not maintained.Morale was none-the-less very high.

During this period, January March 2007, the team ramped up from 18 to 90+ members, from 1 to 4delivery locations.

The team earned the 5% productivity bonus by delivering 99,5% of Use Cases, but had a 2.5% penalty forquality based on integration tests

The planned 2.5 month UAT and Beta test period was extended to 3.5 months, and a larger team thanplanned was maintained.

During the release retrospective workshop we determined to broaden integration testing and define

collections of use cases that together delivered potentially shippable increments and real customervalue, and focus on ways to increase efficiency and production. We also agreed to discontinue thebonus / penalty clause.

Quality Productivity

Person DayIn-BudgetVariance

DefectRate andSeverity

KPI

-5%-5%-5%5% Penalty

-5%-2.5%0Neutral

0+2.5%+5%5% Bonus

5%Penalty

2.5%Penalty

OKQualityProductivity

V1.S


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Keep it simple?

A part of the contract on bonus / penalties we decided to discontinue

70% 80% 90% 95% 100%

-5% -2,5% 0% 2,5% 5%70% 80% 90% 95% 100%-5% -2,5% 0% 2,5% 5%

Infrieur ou gal

V1 Feature Complete (V1 F)

Bonus / Malus au 15/6/2007V1 Acceptance (V1 A)Bonus / Malus au 31/3/2007

Formule de calcul : ((UC A / (UC A+UC Raf)) x UC Init)

V1A = (UC Init)

V1.S


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The client was ultimately satisified with the teams delivery in V1.S, but felt thatproductivity could be improved.

We agreed and together defined a budget for feature development estimated in Use Case

Points (UCP).

After substantial debate on whether velocity could be predicted, for commercial reasonsand based on some thin research on theoretical UCP productivity, a new contract wasagreed.

The contract stipulated that we would bill the client for UCP delivered, and in effect, over a

six month period, (6 four week iterations), deliver to the client a UCP productivity perperson that corresponded to the research.

The total UCP (plus some) engaged by this contract were delivered, but only after 9iterations. The team became more efficient but not as much as predicted.

Substantial collaboration was necessary between client, business analyst, technical leads

and project management to permit planning and accepting the UCP for each iteration

This ultimately resulted in a high trust relationship and the contractual eventuallyevolved again, into Time and materials.

The project was deemed a success and also a substantial learning experience.

V2


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New contractual forms to consider?

- Valtech has introduced Software on Demand


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What did the manifesto say about contracts?

Manifesto for Agile Software Development

We are uncovering better ways of developing

software by doing it and helping others do it.

Through this work we have come to value:

Individuals and interactions over processes and tools

Working software over comprehensive documentation

Customer collaboration over contract negotiationResponding to change over following a plan

That is, while there is value in the items on

the right, we value the items on the left more.

2001 http://agilemanifesto.org


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Questions and Discussion?


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Thanks!

Greg Hutchings

E-mail [email protected] directe +33 (0)1 53 57 73 56Mobile +33 (0)6 87 25 00 58

Greg Hutchings

E-mail [email protected] directe +33 (0)1 53 57 73 56Mobile +33 (0)6 87 25 00 58

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Agile2008GH Agile Contracts