Tips for Managing Fixed Price Projects in Agile

Agile has become one of the leading methods in the project management industry. Clients are beginning to view this methodology as a smoother and overall better option for their projects. In return, many organizations have now fully implemented Agile to not only develop their software, but also to gain the confidence and trust of their clients.

Although this approach has traditionally worked best under a variable “times and material” mode, many clients still demand fixed costs, which can result in huge client-vendor relationship issues.

But if we stop and think about it, the fact that Agile projects move along faster and result in better-finished products has little to do with fixed or variable budgets. Sometimes, having a fixed budget along with a well-defined scope can even be beneficial in an Agile environment.

In this article, we will discuss a few of the most common obstacles that arise in fixed-price Agile projects, and how to overcome them.

Challenges

Complete Requirements

Many times user stories do not have all the information that we need. Since we can change requirements at any time in Agile, we just assume that we can acquire that information after. However, when working on a fixed-priced contract, that could be a recipe for chaos.

Managing Expectations

Managing expectations is one of the most important aspects of any project, especially in an Agile environment. Fixed-budgets come with a rougher terrain, and managing expectations needs to be handled more closely.

Responding to Changes

The core of Agile is about effectively responding to changes. This is the biggest problem in fixed-priced projects. When cost does not change, it can often contradict the principles of Agile.

Best Practices

Communicate Clearly

Communication is key in Agile. This is even truer for fixed-budget projects. Clear communication within the team and with clients should be continuous and take centre stage. A solid communication plan needs to be established from the beginning in order to aid the team in interacting with the stakeholders and clients. Regular and comprehensive updates about the project should also be available meetings.

The product owner should be constantly prioritizing the product backlog and be available to clarify any question the team has on user stories.

Constantly Maintain the Product Backlog

This is arguably one of the most important steps in a fixed-priced environment. Teams should focus on defining the scope in as much detail as possible, with a solid definition of acceptance criteria. Ultimately, this is the basis of foundation for writing the statement of work.

Instead of Change Requests, Exchange Requests

Change requests are not really part of the Agile approach. However, teams can make use of the exchange requests in order to swap stories that are similar in sizes. When exchanging and sizing user stories, it is important to keep in mind the impact of a new user story on the existing project.

The great thing about Agile is that it is a very flexible and visible for customers. It gives them the ability to prioritize their features requirements according to their product road map. When a project is on a fixed budget, customers should be given the flexibility to trade features and requirements as long as it does not sacrifice project schedule or cost.

From Fixed Scope to Fixed Budget

It cannot be denied that there is a significant conflict between the mind-set of Agile and a fixed-priced scope. However, if we focus on converting the fixed scope into the fixed budget, or changing the scope within a define size, we will still be able to embrace the values of Agile.

For example, for a project that has 1000 story points, a team can change the scope within those 1000 story points by replacing existing stories with newer ones.

Basically, this will allow the client to replace requirements that the team has not started working on, and new features can be added to the backlog if items of equal priority are removed.

Conclusion

Fixed-price projects in Agile bring a new challenge to the table. Because they can be unfamiliar to a team, they require a stronger level of management. The important thing is to be able to identify challenges and handle them upfront. Agile techniques should be used to solve problems and handle risks, as appose to limiting yourself by attempting to avoid risks all together. By following these techniques, you can keep the flexibility of Agile alive in fixed-priced projects.