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How to Design an Agile Contract

How to Design an Agile Contract

Three people in an office shaking hands in a meeting in a modern office with big glass windows, and a blue banner across the bottom that reads "Designing an Agile Contract" in large white letters.

Last Updated August 6, 2016

One of the benefits of incorporating the Agile approach into a typical contract is it allows contract managers to write contracts focused on quality and flexibility. Traditionally, contracts are written in a way so that they punish vendors for not delivering the terms of the contract. This article highlights a few distinct features of Agile contracts to assist in the drafting process.

Learn client priorities – The Agile approach is meant to incorporate and be responsive to client demands as much as possible. When drafting an Agile contract, it is important to understand the client’s highest priorities for deliverables. This way, the most significant work can be done first, allowing the client to get a working prototype as soon as possible and give input for future developments accordingly.

Allow changes – Agile generally works well when clients feel they have room to communicate with the development team throughout the duration of the project. If a contract is written to allow input at the early stages, but not allow room for changes after the project is underway, Agile is not being used to its potential. Instead, it may be worth considering a contract clause that allows clients to give feedback at multiple points for free.

Describe deliverables in terms of structure – In an Agile project, it is common for the final deliverables to vary somewhat from what the client initially envisioned. This happens as projects are delivered in functioning parts. A client may decide that certain features are not as important as expected, for example, and introduce new ideas accordingly. Agile contracts should define deliverables in terms of the envisioned overall structure of the final project.

Define the project end point – Agile projects tend to evolve over time, as new ideas are incorporated and old ideas are typically discarded. Without a clear sense of a stopping point, these projects can carry on longer than anticipated, bringing excess costs to clients. To avoid this situation, Agile contracts should include a “definition of done” clause. Keeping in mind the fact that project parameters may change, this clause should be as detailed as possible. That said, the “definition of done” clause, like other contract clauses, should allow for habitual client feedback.

Transparency is key – Agile is about being open and collaborative. When writing the contract, include clauses that let clients know how often they will be informed of project progress. In order for clients to give useful feedback, they need to have a sense of where the project is, what steps have been taken to get there and what costs have been accrued to that point.

Leave some room for updates – It is also important to not create a contract that defines everything at the outset. Agile contracts are typically more open than traditional commercial contracts. As long as the structure is defined and clients are encouraged to get involved, the project should generally proceed smoothly.

While this list is not exclusive, it should give a sense of the distinct features of an Agile contract. Agile contracts should be written with the flexibility inherent in the Agile methodology in mind. By allowing as much input and room for changes as possible, client specifications can be freely met without delay or excess costs.