Commercializing Agile

Agile in its various forms is becoming mainstream, and this means an increasing number of commercial contracts are being delivered by contractors who either choose, or are required, to use an agile methodology to create their contracted deliverables. While this is probably a good thing, this shift in approach can cause a number of problems. The major shift in approach is managing the legally imposed, contractual requirement to deliver 100% of the designated project deliverables on time.  The funds available to the contractor to do this work are defined by the contract price, and failure to deliver the contracted deliverables within the contracted timeframe can lead to significant cost penalties being applied[1].  

The requirement to deliver a project as promised in the agreed contract is business-as-usual for most construction and engineering project and is common across many other industries. While relatively rare software companies have also been successfully sued for breach of contract when their deliverables did not meet the contracted obligations, some early cases are discussed in Software sales hype and the law, and IT Business Sued for US$300 million+.  In short, choosing to use Agile as a project delivery methodology will not change the laws of contract, which means organizations using the agile methodology will need to become more commercial  and adapt their processes to include:

1. Developing the realistic time and cost estimates needed to enter into a contract.
2. Monitoring and controlling the project work to optimize the delivery of the contracted requirements within the contract timeframe.
3. Enhancing their contract administration to deal with changes, variations, reporting, claims and other contractual requirements and issues.

This post is a start in looking for practical solutions to some of these challenges.

Contract Claim Administration

Two of the core tenets of Agile are welcoming change when it creates additional value for the client, and working with the client to discuss and resolve problems. While these are highly desirable attributes that should be welcomed in any contractual situation, what happens when the relationship breaks down, as it will on occasions?

The simple answer is that every contract is subject to law, and the ultimate solution to a dispute is a trial, after which a judge will decide the outcome based on applying the law to the evidence provided to the court. The process is impartial and focused on delivering justice, but justice is not synonymous with a fair and reasonable outcome.  To obtain a fair and reasonable outcome, evidence is needed that can prove, or disprove each of the propositions being put before the court.

The core elements in dispute in 90% of court cases relating to contract performance are about money and time. The contractor claims the client changed, or did, something (or things) that increased the time and cost of completing the work under the contract; the client denies this and counterclaims that the contractor was late in finishing because it failed to properly manage the work of the contract.    

The traditional approach to solving these areas of dispute was to obtain expert evidence as to the cost of each change and the time needed to implement each of the changes and its effect on the completion date. Determining the cost of a change is not particularly affected by the methodology used to deliver the work. The additional work involved in the change and its cost can be determined for a change in an ‘agile’ project in a similar way to most other projects. Where there are major issues is in assessing a reasonable delay.

For the last 50+ years, courts have been told by many hundreds of experts, the appropriate way to assess project delay is by using a critical path (CPM) schedule. Critical path theory is based on an assumption that to deliver a project successfully there is one best sequence of activities that have to be completed in a pre-defined way to achieve the best result. Consequently, this arrangement of the work can be modelled in a logic network and based on this model, the effect of any change can be assessed.

Agile approaches the work of a project from a completely different perspective. The approach assumes there is a ‘backlog’ of work to be accomplished, and the best people to decide what to do next are the project team when they are framing the next sprint or iteration. Ideally, the team making these decisions will have the active participation of a client representative, but this is not always the case. The best sequence of working emerges, it is not predetermined and therefore a CPM schedule cannot be developed before the work is started. 

Assessing and separating the delay caused by a change requested/approved by the client from delays and inefficiencies caused by the contractor is difficult at the best of times, this process becomes more difficult in projects using an agile approach to the work but is essential for assessing time related claims under a contract.

There are some control tools available in Agile, but diagrams such as a burndown (or burnup) chart are not able to show the effect of a client instructing the team to stop work on a particular feature for several weeks, or adding some new elements to the work. The instructions may have no effect, the team simply work on other things, or they may have a major effect. The problem is quantifying the effect to a standard that will be accepted as evidence in court proceedings.  CPM has major flaws, but it can be used to show a precise delay as a specific consequence of a change in the logic diagram. Nothing similar seems to have emerged in the Agile domain.

These challenges are discussed in WPM – Schedule Control in Agile and Distributed Projects (and are the focus of ongoing work).

The agile paradigm has a lot to offer, but to become a commercially effective option, the project controls and contractual frameworks will need a major overhaul.  For more on managing agile see: https://mosaicprojects.com.au/PMKI-ITC-040.php#Process1

[1] Developing and defending contractual claims is discussed in Forensic analysis and reporting (cost & time): https://mosaicprojects.com.au/PMKI-ITC-020.php#Process1