Do you know some of the drawbacks of a fixed price fixed scope contract?
11/03/2014 6:43 AM by
A fixed price - fixed scope project sounds good but doesn't always end up with the result either the client or the developers expect and sometimes the key players can end up disappointed.
There are 4 main reasons...
- You can’t predict the future
Figure: The cone of uncertainty in software cost and size estimation
- Waterfall project planning has been proven to not deliver over 30 years of trying... The Gartner Group says 74% of failed software projects in the last 2 years
- See the Cone of Uncertainty to see the range of cost change at different stages through a project:
- Changes requests are an extra cost and slow progress
- It costs more because the fixed price part is fixed to the original scope, not changes. So changes are a cost on top as changes are new work and out of scope
- Progress is slower because the change request cycle on fixed scope consumes time and discussion of the nature of work and whether it is in or out of scope
- From experience during the development the client will realize some items are not what they wanted, but they still pay due to fixed price
- When the client sees the real system implemented they will often have better ideas and realize there are parts originally scope they don’t meet their real needs but because it is in the contract they pay for them even when they are not implemented, and pay extra for the changes to give what they really need
- In reality fixed-price fixed scope leads to lower quality in most cases
- The lack of a running cost and instead a ceiling on the cost will normally result in a low pressure project environment at the start of the project and very high pressure to complete it only towards the end of the project. In that period of high pressure as developers are working to hit the one big delivery it becomes tempting to them and sometimes even expected by their management that they will cut corners
Instead, the use of an iterative methodology like SCRUM that provides constant progress reporting and gives the client agility to implement the required features with adjustments during the project, works to reduce the cost and also provides the most important features paid as Time and Materials in a working solution sooner.
Do you feel this rule needs an update?