Agile Contracts: Money for Nothing and Your Change for Free

A team was working on the Open Plans Agile Contract Project in 2008. The following general principles were agreed upon.

We mutually agree on working together, and thereby build trust in each others expertise.Customer Participation in Scrum Team:
The Customer is expected to be active in the project. The role of the Customer includes the following:1. Prioritize features by business value and have them implemented in order of maximum value
2. Mutually agreed estimates for all work items. The official representatives of both parties need to agree. This needs to be noted in a signed addendum to the contract for each change.
3. Participate in each Sprint planning meeting by discussing the selected features with Company team, including answering questions to provide clarification to the team.
4. Participate in writing the conditions of satisfaction for each feature, so the team and client have a shared definition of when a feature is done. These conditions should be completed as part of a user story before any code is written.
5. Participate in each Sprint review meeting, and provide timely feedback both for both work-in-progress and completed work.

***To company: Things to ensure are defined in the contract:

* Total value of the contract
* Rates for time and materials billing
* Scope of the contract

Clause: Early Termination (Money for Nothing)
The Customer may terminate the contract at the end of any Sprint. The standard metric for termination is when the Customer perceives the cost of continuing the project is higher than the additional value received. The Customer will pay Company 20% of the remaining contract value to exercise early termination.

Company commits to delivering 80% of the project scope as high quality by the agreed upon delivery date. High quality is defined by the agreed upon Definition of Done.

This clause can only be enacted if the Customer maintains Participation in the Team Scrum during the project.

In the event that both parties cannot mutually agree on work item estimates or that the Customer does not maintain participation in the Scrum Team, the contract shall revert to a time and materials billing.

Clause: Change For Free
If the Customer maintains Participation in Scrum Team during the entire project, Customer shall be able to make changes to the Scope without incurring any additional cost if total Scope of contracted work is not changed. New features may be added for free at Sprint boundaries if items of equal scope are removed from the contract.

Clause: Guarantee of Work

Jens Ostergaard: 80% of the functionality of high quality is guaranteed at the fixed price. The 80% of high quality means that you deliver according to your definition of DONE (which is an agreement between customer and supplier on a feature level).

Jeff Sutherland: Vendor assumes the risk of late delivery.
Jens: As to sharing the risk, if you have a confident team who have done this several times you could do what Jeff says. I would however be cautious starting this with a new company, and have some kind of risk sharing. Remember we are in this together and do the best we can. Customer knows what they want built, supplier knows how to get there, and both parties need to recognize that we have to work together.