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Optional Scope Contracts

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  • Kiel Hodges <kielhodges@mindspring.com>
    Could anyone relate their experiences with using Optional Scope Contracts? Thanks! Kiel Hodges
    Message 1 of 16 , Jan 22, 2003
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      Could anyone relate their experiences with using Optional Scope Contracts?

      Thanks!

      Kiel Hodges
    • Vinicius Manhaes Teles
      Kiel, We are signing our first optional scope contract this week after months of negotiation. The project will start next week. What exactly would you like to
      Message 2 of 16 , Jan 29, 2003
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        Kiel,

        We are signing our first optional scope contract this week after months
        of negotiation. The project will start next week. What exactly would you
        like to know about our experience?

        Well, in the first place, I should say that the customer didn't want an
        optional scope contract at the beginning. The customer has written an
        RFP in which he requested a fixed scope contract. We said, ok, we will
        give you two options. You can have an optional scope contract that will
        cost you X. But, if you really prefer, you can have a fixed scope
        contract that will cost you 1.5 * X. It's not very interesting to pay
        50% more, so somehow we caught his attention, so we could discuss the
        issues involving the two kinds of contracts. At the end, they were more
        comfortable with the optional scope contract.

        They let us know about their decision today. So, this is really fresh
        news. Perhaps, this is the first contract of this kind for XP
        development in Brazil. I'm saying that, because I've had the opportunity
        to talk about this with many people down here, and nobody would report a
        case like that. So, I have to confess. I'm very, very glad we did it!

        Regards,

        Vinícius Teles

        Improve It - www.improveit.com.br
        Applied Software Engineering
        Centro Empresarial Mourisco
        Praia de Botafogo, 501
        1o andar - Pão de Açúcar
        22250-040 - Rio de Janeiro - RJ - Brasil
        tel.: +55 21 2586-6324
        fax: +55 21 2586-6001
        cel.: +55 21 9228-5434



        -----Mensagem original-----
        De: Kiel Hodges <kielhodges@...>
        [mailto:kielhodges@...]
        Enviada em: quarta-feira, 22 de janeiro de 2003 14:29
        Para: extremeprogramming@yahoogroups.com
        Assunto: [XP] Optional Scope Contracts

        Could anyone relate their experiences with using Optional Scope
        Contracts?

        Thanks!

        Kiel Hodges


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      • William Pietri
        ... Bravo! I am very interested to hear how it goes. Please keep us posted with the details! I ll be especially eager to hear how your Planning Game meetings
        Message 3 of 16 , Jan 30, 2003
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          On Wed, 2003-01-29 at 22:04, Vinicius Manhaes Teles wrote:

          > We are signing our first optional scope contract this week after months
          > of negotiation.

          Bravo! I am very interested to hear how it goes. Please keep us posted
          with the details! I'll be especially eager to hear how your Planning
          Game meetings play out.

          Had you worked with this client before? If not, how did you win their
          trust enough for this?

          William

          --
          William Pietri <william@...>
        • Vinicius Manhaes Teles
          Hi William, Sorry, I couldn t answer before. We ve worked with this client before very shortly. Just for two weeks. We ve had a workshop where we discussed the
          Message 4 of 16 , Feb 2, 2003
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            Hi William,

            Sorry, I couldn't answer before. We've worked with this client before
            very shortly. Just for two weeks. We've had a workshop where we
            discussed the features of the system the client wanted to build. There
            was no development involved. So, they don't really know us all that
            much. We had to work hard to win their trust.

            The fact is that the business area liked our work during the workshop.
            So, they began to support us during the project bidding. They decided
            they really wanted to work with us, but that wouldn't be enough. IT and
            procurement would still need to accept us. We've had a very hard time
            with IT people. They didn't really like the idea of XP at first. So,
            they resisted a lot. But, fortunately, during the negotiation the first
            congress about XP in Brazil took place in São Paulo, last December. So,
            IT sent somebody to the congress and this person actually enjoyed a lot
            the new ideas. So, when he returned, he said good things about XP and I
            believe this helped us to win some trust with IT people. Any way, they
            fought against us till the very last moment. :-)

            So, basically, we had this scenario: business area supporting us and IT
            fighting against us. Fortunately, the business area won. :-)

            I believe the price played an important role too. We gave the client two
            options: fixed scope and optional scope. And honestly, fixed price was
            much more expensive. And it was almost the same price the other supplier
            was asking for. So, the optional scope contract, which the other
            supplier didn't offer, represented the possibility of good savings. This
            certainly tempted the client and they studied the subject thoroughly and
            probably came to the conclusion that it was worth trying it.

            Vinícius Teles

            Improve It - www.improveit.com.br
            Applied Software Engineering
            Centro Empresarial Mourisco
            Praia de Botafogo, 501
            1o andar - Pão de Açúcar
            22250-040 - Rio de Janeiro - RJ - Brasil
            tel.: +55 21 2586-6324
            fax: +55 21 2586-6001
            cel.: +55 21 9228-5434



            -----Mensagem original-----
            De: William Pietri [mailto:william@...]
            Enviada em: quinta-feira, 30 de janeiro de 2003 05:54
            Para: extremeprogramming@yahoogroups.com
            Assunto: Re: RES: [XP] Optional Scope Contracts

            On Wed, 2003-01-29 at 22:04, Vinicius Manhaes Teles wrote:

            > We are signing our first optional scope contract this week after
            months
            > of negotiation.

            Bravo! I am very interested to hear how it goes. Please keep us posted
            with the details! I'll be especially eager to hear how your Planning
            Game meetings play out.

            Had you worked with this client before? If not, how did you win their
            trust enough for this?

            William

            --
            William Pietri <william@...>


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          • Andrei GHEORGHE
            ... Interesting experience! ... Can you, please, give us more details about the two options you ve offered to the client? You are saying that fixed scope
            Message 5 of 16 , Feb 3, 2003
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              > -----Original Message-----
              > From: Vinicius Manhaes Teles [mailto:vinicius@...]
              > Sent: Monday, February 03, 2003 3:47 AM
              > Subject: RES: RES: [XP] Optional Scope Contracts
              >

              > We've worked with this client before
              > very shortly. Just for two weeks. We've had a workshop where we
              > [...]

              Interesting experience!

              > I believe the price played an important role too. We gave the
              > client two
              > options: fixed scope and optional scope. And honestly, fixed price was
              > much more expensive. And it was almost the same price the
              > other supplier
              > was asking for. So, the optional scope contract, which the other
              > supplier didn't offer, represented the possibility of good
              > savings. This
              > certainly tempted the client and they studied the subject
              > thoroughly and
              > probably came to the conclusion that it was worth trying it.
              >

              Can you, please, give us more details about the two options you've offered
              to the client? You are saying that fixed scope contract was much more
              expensive. With what price have you( and/or your client) compared it?

              I guess the fixed scope contract, has a fixed price, fixed scope, fixed
              deadline.
              I also guess that the optional scope contract has a fixed price&deadline
              too, but a variable set of features.

              What are they thinking about that? Are they concerned about the fact that in
              the end they will get too less features (stories)? Have you done some
              iterations before the agreement, in order to have a better estimate of the
              velocity?

              Thanks,
              --Andrei
            • Vinicius Manhaes Teles
              Hi Andrei, The fixed scope contract would have costed 50% more to the client, should the project be done by us or by our competitor. At the beginning of the
              Message 6 of 16 , Feb 3, 2003
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                Hi Andrei,

                The fixed scope contract would have costed 50% more to the client,
                should the project be done by us or by our competitor. At the beginning
                of the bidding, there were nine companies trying to win the project. The
                business area has applied some rules to qualify them. After a while,
                there were just two companies competing for the project. Our competitor
                presented just the fixed scope contract. We presented the fixed scope
                contract and the optional scope contract. The point is that our
                competitor's fixed scope contract price was very close to ours. So, the
                client wouldn't be able to save much accepting a fixed scope contract.
                Then, they preferred the less expensive optional scope contract that we
                offered.

                Your assumptions about the meaning of each contract are correct. In
                fact, the client is concerned about receiving fewer features than he
                would like. He knows that it might happen in the end. So, he has decided
                consciously. He is paying less and risking receiving less. We haven't
                done any iteration before the agreement, so the client just doesn't know
                whether we can really fulfill his needs or not. Still, he decided to
                take the chance. I can't tell you exactly why.

                I have to say that it really surprised me because I'm talking about a
                huge company that is very conservative. Our team has done a great job
                during the negotiation. There were some people involved that are very
                skilled and I think this was also important, because we managed to win
                the client's trust. But I can't help thinking that it's surprising to
                win a contract like that with this particular customer. Maybe I'll find
                more on this during the time. If that happens, I'll let you know.

                Vinícius Teles

                Improve It - www.improveit.com.br
                Applied Software Engineering
                Centro Empresarial Mourisco
                Praia de Botafogo, 501
                1o andar - Pão de Açúcar
                22250-040 - Rio de Janeiro - RJ - Brasil
                tel.: +55 21 2586-6324
                fax: +55 21 2586-6001
                cel.: +55 21 9228-5434



                -----Mensagem original-----
                De: Andrei GHEORGHE [mailto:agheorghe@...]
                Enviada em: segunda-feira, 3 de fevereiro de 2003 11:43
                Para: extremeprogramming@yahoogroups.com
                Assunto: RES: RES: [XP] Optional Scope Contracts

                Can you, please, give us more details about the two options you've
                offered
                to the client? You are saying that fixed scope contract was much more
                expensive. With what price have you( and/or your client) compared it?

                I guess the fixed scope contract, has a fixed price, fixed scope, fixed
                deadline.
                I also guess that the optional scope contract has a fixed price&deadline
                too, but a variable set of features.

                What are they thinking about that? Are they concerned about the fact
                that in
                the end they will get too less features (stories)? Have you done some
                iterations before the agreement, in order to have a better estimate of
                the
                velocity?

                Thanks,
                --Andrei
              • Zibecchi, Mariano
                Hi!! I wonder if someone could give me more hints about Optional Scope Contracts . I am about to negotiate a new contract with a customer and i d like to
                Message 7 of 16 , Feb 4, 2003
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                  Hi!!

                  I wonder if someone could give me more hints about "Optional Scope
                  Contracts".
                  I'am about to negotiate a new contract with a customer and i'd like to apply
                  something like this.
                  I've read Beck's article, but i'd like some real experience stories.

                  Thanks!

                  Mariano
                • mzibecchi <mariano.zibecchi@nuevobancosu
                  Hi!! I wonder if someone could give me more hints about Optional Scope Contracts . I am about to negotiate a new contract with a customer and i d like to
                  Message 8 of 16 , Feb 4, 2003
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                    Hi!!

                    I wonder if someone could give me more hints about "Optional Scope
                    Contracts".
                    I'am about to negotiate a new contract with a customer and i'd like
                    to apply something like this.
                    I've read Beck's article, but i'd like some real experience stories.

                    Thanks!

                    Mariano
                  • Andrei GHEORGHE
                    ... Vinicius, Thanks for understanding what I wanted to know, since I thought I wasn t very clear about it :) I m trying to understand and learn from other
                    Message 9 of 16 , Feb 4, 2003
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                      > -----Original Message-----
                      > From: Vinicius Manhaes Teles [mailto:vinicius@...]
                      > Sent: Tuesday, February 04, 2003 6:30 AM
                      > To: extremeprogramming@yahoogroups.com
                      > Subject: RES: RES: [XP] Optional Scope Contracts
                      >
                      > Your assumptions about the meaning of each contract are correct. In
                      > fact, the client is concerned about receiving fewer features than he
                      > would like. He knows that it might happen in the end. So, he
                      > has decided
                      > consciously. He is paying less and risking receiving less.
                      >

                      Vinicius,

                      Thanks for understanding what I wanted to know, since I thought I wasn't
                      very clear about it :)

                      I'm trying to understand and learn from other people experiences.

                      Well, if you don't mind... an interesting issue with optional scope
                      contracts is billing. I think it was a thread about it recently.

                      How are they paying you? (for each story-point a fixed amount of money, or a
                      fixed amount of money for each iteration, or a fixed amount of money for
                      each story, or...).

                      Is the contract saying something about what happens if they receive fewer
                      features?

                      >
                      > We haven't
                      > done any iteration before the agreement, so the client just
                      > doesn't know
                      > whether we can really fulfill his needs or not. Still, he decided to
                      > take the chance. I can't tell you exactly why.
                      >

                      Good luck! and keep us posted when you'll find out more.

                      --Andrei
                    • Vinicius Manhaes Teles
                      Hi Andrei, They will be billed monthly. The billing won t be associated with stories, or iterations, or anything like that. Every month the business area will
                      Message 10 of 16 , Feb 5, 2003
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                        Hi Andrei,

                        They will be billed monthly. The billing won't be associated with
                        stories, or iterations, or anything like that. Every month the business
                        area will sign a document where they agree that everything is going fine
                        so far. Then, we receive the money. If they don't agree with the work,
                        we will have to negotiate with them, but the contract doesn't say
                        exactly what will happen in this case.
                        The contract doesn't say anything about what to do if they receive fewer
                        features either. Actually, the contract just specifies that they have
                        contracted a development for 8 months with a team of 8 people working
                        under a methodology that delivers new features every two weeks. There is
                        no scope associated with the contract. Of course, the client has a
                        scope, but he knows he might receive fewer features, and he knows that's
                        one of the reasons why this kind of contract is less expensive. They are
                        paying less risking receiving less.
                        On the other hand, personally, I have committed myself and my team to
                        implement their requirements on time. This isn't written in the
                        contract, so they are trusting on me. This is very clear in this
                        project. We managed to build a strong relationship with this client and
                        they are really confident that we can do the work. The contract reflects
                        this. What reminds me of a conversation I have held with Kent Beck,
                        here, in Brazil, three months ago. He said me that contracts reflect the
                        relationship between the client and the contractor. He was certainly
                        right. :-)

                        Regards,

                        Vinícius Teles

                        Improve It - www.improveit.com.br
                        Applied Software Engineering
                        Centro Empresarial Mourisco
                        Praia de Botafogo, 501
                        1o andar - Pão de Açúcar
                        22250-040 - Rio de Janeiro - RJ - Brasil
                        tel.: +55 21 2586-6324
                        fax: +55 21 2586-6001
                        cel.: +55 21 9228-5434



                        -----Mensagem original-----
                        De: Andrei GHEORGHE [mailto:agheorghe@...]
                        Enviada em: terça-feira, 4 de fevereiro de 2003 12:15
                        Para: extremeprogramming@yahoogroups.com
                        Assunto: RE: RES: [XP] Optional Scope Contracts


                        Well, if you don't mind... an interesting issue with optional scope
                        contracts is billing. I think it was a thread about it recently.

                        How are they paying you? (for each story-point a fixed amount of money,
                        or a
                        fixed amount of money for each iteration, or a fixed amount of money for
                        each story, or...).

                        Is the contract saying something about what happens if they receive
                        fewer
                        features?
                      • Adam Wildavsky
                        ... If it s like every other fixed-price contract I ve seen they d risk receiving less even if they paid the higher fee. Under your optional scope contract
                        Message 11 of 16 , Feb 5, 2003
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                          At 12:13 AM -0300 2/6/03, Vinicius Manhaes Teles wrote:
                          >They are paying less risking receiving less.

                          If it's like every other fixed-price contract I've seen they'd risk
                          receiving less even if they paid the higher fee. Under your optional
                          scope contract they might also receive more than they expected. I
                          think XP offers the most realistic opportunity I've seen to
                          "under-promise and over-deliver." Surely it can't be long before we
                          take over completely!

                          For no good reason this reminds me of the casino's come-on in Las
                          Vegas: "Don't bet more than you can afford to win!"

                          Thanks for sharing your experience, and please let us know how your
                          contract goes.

                          --
                          Adam Wildavsky Extreme Programmer Tameware, LLC
                          adam@... http://www.tameware.com
                        • Andrei GHEORGHE
                          I think I got it. You have agreed on a fixed price per every month. No scope specified in the contract. In essence, it seems like the client has rent your team
                          Message 12 of 16 , Feb 6, 2003
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                            I think I got it. You have agreed on a fixed price per every month. No scope
                            specified in the contract.
                            In essence, it seems like the client has rent your team for a period of 8
                            months, paying x$ per month.

                            Thanks a lot,
                            --Andrei

                            > -----Original Message-----
                            > From: Vinicius Manhaes Teles [mailto:vinicius@...]
                            > Sent: Thursday, February 06, 2003 5:14 AM
                            > To: extremeprogramming@yahoogroups.com
                            > Subject: RES: RES: [XP] Optional Scope Contracts
                            >
                            >
                            > Hi Andrei,
                            >
                            > They will be billed monthly. The billing won't be associated with
                            > stories, or iterations, or anything like that. Every month
                            > the business
                            > area will sign a document where they agree that everything is
                            > going fine
                            > so far. Then, we receive the money. If they don't agree with the work,
                            > we will have to negotiate with them, but the contract doesn't say
                            > exactly what will happen in this case.
                            > The contract doesn't say anything about what to do if they
                            > receive fewer
                            > features either. Actually, the contract just specifies that they have
                            > contracted a development for 8 months with a team of 8 people working
                            > under a methodology that delivers new features every two
                            > weeks. There is
                            > no scope associated with the contract. Of course, the client has a
                            > scope, but he knows he might receive fewer features, and he
                            > knows that's
                            > one of the reasons why this kind of contract is less
                            > expensive. They are
                            > paying less risking receiving less.
                            > On the other hand, personally, I have committed myself and my team to
                            > implement their requirements on time. This isn't written in the
                            > contract, so they are trusting on me. This is very clear in this
                            > project. We managed to build a strong relationship with this
                            > client and
                            > they are really confident that we can do the work. The
                            > contract reflects
                            > this. What reminds me of a conversation I have held with Kent Beck,
                            > here, in Brazil, three months ago. He said me that contracts
                            > reflect the
                            > relationship between the client and the contractor. He was certainly
                            > right. :-)
                            >
                            > Regards,
                            >
                            > Vinícius Teles
                            >
                            > Improve It - www.improveit.com.br
                            > Applied Software Engineering
                            > Centro Empresarial Mourisco
                            > Praia de Botafogo, 501
                            > 1o andar - Pão de Açúcar
                            > 22250-040 - Rio de Janeiro - RJ - Brasil
                            > tel.: +55 21 2586-6324
                            > fax: +55 21 2586-6001
                            > cel.: +55 21 9228-5434
                            >
                            >
                            >
                            > -----Mensagem original-----
                            > De: Andrei GHEORGHE [mailto:agheorghe@...]
                            > Enviada em: terça-feira, 4 de fevereiro de 2003 12:15
                            > Para: extremeprogramming@yahoogroups.com
                            > Assunto: RE: RES: [XP] Optional Scope Contracts
                            >
                            >
                            > Well, if you don't mind... an interesting issue with optional scope
                            > contracts is billing. I think it was a thread about it recently.
                            >
                            > How are they paying you? (for each story-point a fixed amount
                            > of money,
                            > or a
                            > fixed amount of money for each iteration, or a fixed amount
                            > of money for
                            > each story, or...).
                            >
                            > Is the contract saying something about what happens if they receive
                            > fewer
                            > features?
                            >
                            >
                            >
                            >
                            > To Post a message, send it to: extremeprogramming@...
                            >
                            > To Unsubscribe, send a blank message to:
                            > extremeprogramming-unsubscribe@...
                            >
                            > ad-free courtesy of objectmentor.com
                            >
                            > Your use of Yahoo! Groups is subject to
                            > http://docs.yahoo.com/info/terms/
                            >
                            >
                          • kentlbeck <kentbeck@csi.com>
                            ... month. No scope ... period of 8 ... You could also write 4 2-month contracts, renewable only by mutual consent. Kent
                            Message 13 of 16 , Feb 6, 2003
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                              --- In extremeprogramming@yahoogroups.com, "Andrei GHEORGHE"
                              <agheorghe@s...> wrote:
                              > I think I got it. You have agreed on a fixed price per every
                              month. No scope
                              > specified in the contract.
                              > In essence, it seems like the client has rent your team for a
                              period of 8
                              > months, paying x$ per month.

                              You could also write 4 2-month contracts, renewable only by mutual
                              consent.

                              Kent
                            • joelshellman
                              I m trying to move the company I work for toward a more XPish style and have an opportunity to discuss contracts with management. I ve heard Optional Scope
                              Message 14 of 16 , Feb 16, 2004
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                                I'm trying to move the company I work for toward a more XPish style
                                and have an opportunity to discuss contracts with management. I've
                                heard Optional Scope Contracts mentioned often here and looked over
                                the article:

                                http://www.xprogramming.com/ftp/Optional+scope+contracts.pdf

                                My question: how is this different than a time and materials project?
                                Kent Beck says in that article:

                                "We will pay the team of six $75,000/month for the next 2 months.
                                Whatever software they do
                                deliver, will meet the quality standards in the small print below.
                                There are some initial estimates in
                                appendix A, but they are just for fun."

                                The only difference between the above and what I would expect in a
                                time and materials is the little blurb about quality. Am I missing
                                something?

                                In general, what are some successful contracting strategies to move a
                                custom software shop toward XP?

                                Thank you,

                                Joel Shellman
                              • yahoogroups@jhrothjr.com
                                ... From: joelshellman To: extremeprogramming@yahoogroups.com
                                Message 15 of 16 , Feb 16, 2004
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                                  ----- Original Message -----
                                  From: "joelshellman" <joel.at.ikestrel.com@...>
                                  To: "extremeprogramming@yahoogroups.com"
                                  <extremeprogramming.at.yahoogroups.com@...>
                                  Sent: Monday, February 16, 2004 12:39 PM
                                  Subject: [XP] Optional Scope Contracts


                                  > I'm trying to move the company I work for toward a more XPish style
                                  > and have an opportunity to discuss contracts with management. I've
                                  > heard Optional Scope Contracts mentioned often here and looked over
                                  > the article:
                                  >
                                  > http://www.xprogramming.com/ftp/Optional+scope+contracts.pdf
                                  >
                                  > My question: how is this different than a time and materials project?
                                  > Kent Beck says in that article:
                                  >
                                  > "We will pay the team of six $75,000/month for the next 2 months.
                                  > Whatever software they do
                                  > deliver, will meet the quality standards in the small print below.
                                  > There are some initial estimates in
                                  > appendix A, but they are just for fun."
                                  >
                                  > The only difference between the above and what I would expect in a
                                  > time and materials is the little blurb about quality. Am I missing
                                  > something?
                                  >
                                  > In general, what are some successful contracting strategies to move a
                                  > custom software shop toward XP?

                                  Mary and Tom Poppendieck cover contracts thoroughly
                                  in chapter 7 (Tool 22) of "Lean Software Development".

                                  One of their points is that "optional scope" is a key ingredient
                                  of almost all contracting strategies, although it's usually
                                  one of those tacit agreements that both parties know is
                                  going to happen regardless of the wording of the
                                  contract.

                                  Since we don't know enough in advance to know what
                                  is needed, and what the relative values are, some form
                                  of explicit optional scope is a real good idea. Beyond that,
                                  they discuss four different forms of contract that can
                                  include optional scope explicitly: time and materials, multi-stage,
                                  fixed cost and shared benefit.

                                  John Roth

                                  > Thank you,
                                  >
                                  > Joel Shellman
                                • John Brewer
                                  ... The big difference I see is frequent deliveries to the customer of a working system, implemented in order of business value, and the customer having the
                                  Message 16 of 16 , Feb 16, 2004
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                                    At 5:39 PM +0000 2/16/04, joelshellman wrote:
                                    >The only difference between the above and what I would expect in a
                                    >time and materials is the little blurb about quality. Am I missing
                                    >something?

                                    The big difference I see is frequent deliveries to the customer of a
                                    working system, implemented in order of business value, and the
                                    customer having the ability to terminate the contract on fairly short
                                    notice for any reason.

                                    The problem with traditional time and materials contracts is the lack
                                    of feedback. The customer doesn't get a system delivered until very
                                    late in the game, so he can't tell if things are on track or not. If
                                    it turns out they aren't, the customer is often forced to choose
                                    between starting over from scratch, or continuing to pour in money in
                                    hopes that the developers will eventually get the system to work.

                                    --

                                    John Brewer
                                    Jera Design

                                    Extreme Programming FAQ: http://www.jera.com/techinfo/xpfaq.html
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