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RES: RES: [XP] Optional Scope Contracts

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  • 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 1 of 16 , Feb 2, 2003
      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 2 of 16 , Feb 3, 2003
        > -----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 3 of 16 , Feb 3, 2003
          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 4 of 16 , Feb 4, 2003
            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 5 of 16 , Feb 4, 2003
              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 6 of 16 , Feb 4, 2003
                > -----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 7 of 16 , Feb 5, 2003
                  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 8 of 16 , Feb 5, 2003
                    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 9 of 16 , Feb 6, 2003
                      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 10 of 16 , Feb 6, 2003
                        --- 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 11 of 16 , Feb 16, 2004
                          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 12 of 16 , Feb 16, 2004
                            ----- 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 13 of 16 , Feb 16, 2004
                              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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