The Agile Manifesto values customer collaboration over contract negotiation which sets an important tone for procurement relationships on agile projects. The Agile Manifesto sets forth the idea that a buyer and seller work together to create products and governs the entire procurement process.
Need and Vendor Selection
On agile projects, procurement starts when the development team decides it needs a tool from or the services of another company in order to create the product. The development team and the scrum master work with the product owner to procure any necessary funds.
The development team may need to compare tools and vendors. After you choose what to buy and where to get it, the process is usually straightforward: Make the purchase, take delivery, and procurement is then complete.
Procuring services is usually longer and more complex than with tools. Some agile-specific considerations for selecting a services vendor include
- Whether the vendor can work in an agile project environment and, if so, how much experience the vendor has
- Whether the vendor can work on-site with the development team
- Whether the relationship between the vendor and the scrum team is likely to be positive and collaborative
Agile Project Cost structures
You need to know about different cost structures to fairly assess value:
- Fixed-price projects: A vendor works on the product and creates releases until the vendor spends all the money in the budget, or until it delivers enough product features, whichever comes first.
- Fixed-time projects with a specific deadline: For example, you may need to launch a product for a specific event or to coincide with the release of another product. With fixed-time projects, you determine costs based on the cost of the vendor’s team for the duration of the project, along with any additional resource costs, such as hardware or software.
- Time-and-materials projects: Work with the vendor lasts until enough product functionality is complete, without regard to total project cost. You know the total project cost at the end of the project, after your stakeholders determine that the product has enough features to call the project complete.
- Not-to-exceed projects: Projects in which time and materials have a fixed-price cap.
Contract Creation
The scrum master is generally responsible for initiating the contract creation, negotiating the contract details, and routing the contract through any necessary internal approvals, including review by a legal or procurement expert.
At the very least, most contracts have legal language describing the parties and the work, the budget, the cost approach, and payment terms. A contract for an agile project may also include:
- A description of the work the vendor will complete: The vendor may have its own product vision statement, which can be a good starting point to describe the vendor’s work.
- Agile approaches the vendor may use, including:
- Meetings the vendor will attend, such as the daily scrum, sprint planning, sprint review, and sprint retrospective
- Delivery of working functionality at the end of each sprint
- The definition of done — developed, tested, integrated, and documented — per an agreement between the product owner and the development team
- Artifacts the vendor will provide, such as a sprint backlog with a burndown chart
- People the vendor will have on the project, such as the development team
- Whether the vendor will work on-site
- Whether the vendor will work with its own scrum master and product owner or if it will work with your scrum master and product owner
- A definition of what may constitute the end of the engagement: the end of a fixed budget or fixed time, or enough working functionality
