Stuck in a Project Management Rut? Try an Agile/ Fixed-Bid Approach

Categories: Agile DevOps

by Paolo Jaucian, July 20, 2018

The general approach to project management is quite rigid in the world of information technology. Most projects are managed with either the ancient Waterfall methodology (or some variation thereof) or the relatively new upstart methodology, Agile.

But there’s far more to overseeing a software development project than selecting a framework for managing the flow of tasks and milestones. There’s also the little matter of paying for the project. And, just as for management frameworks, there are different approaches for funding projects.

The budgetary equivalent to the Waterfall methodology would be fixed-bid pricing. Agile, on the other hand, typically utilizes a more flexible approach to funding.

How about using fixed-bid pricing on an Agile project?

Won’t work, most industry experts say. Agile requires a far more flexible approach, supporting budgetary needs that might ebb and flow rather unpredictably. And the fixed-bid approach requires a detailed level of upfront planning that just isn’t a part of the Agile world.

So what do you do when your client — a Fortune 500 company with a name that would be instantly recognized in any household — insists that their project will be fixed-bid and Agile?

Computer Says No?

We were recently faced with that very conundrum.

Our mega-client told us that they wanted their fixed-bid project to utilize the Agile project management framework. Or, to put it in the terms of conventional thinking, they wanted us to mix oil and water.

This mega-client wasn’t really asking. It’s more like they were insisting. And that sparked some interesting discussions among our management team. Because management’s initial reaction was to respond with a rather dogmatic “no, we can’t do that.” Rather like the Carol Beer “Computer says no” sketches.

(If you haven’t seen any of those sketches from the Little Britain TV show, look them up on YouTube. They’re both hilarious and satirically derisive of the typical corporate mindset.)

But after some internal discussion, our management came to the correct conclusion: This is what our customer wants, and the customer is paying our bills. It’s up to us to give them what they want.

That meant, of course, that it was up to us — the team in the trenches — to successfully mix oil and water. And that’s how we learned that doing so wasn’t impossible after all. Agile and fixed-bid can live together just fine.

The Best of Both Worlds

Agile advocates fluidity and speed. Fixed-bid dictates that budgets be rigid and inflexible, guarding against cost overruns. It’s certainly understandable that combining the two would be an attractive option for our client. Making them work together requires some creativity on the part of project management, but it can be done.

In this case, I found a solution that was palatable to both the client and our internal team management. This solution was to fix the price of the total number of story points closed. This approach enables a considerable degree of flexibility while providing sufficient rigidity to ensure that specific milestones can be identified and tied to payment milestones. Ultimately, this approach can deliver the best of both worlds: The Agile speed of project delivery with the security and certainty of fixed-bid pricing.

But making the approach work does require somewhat of a mindset shift. Not everything should be regarded as polarized black and white, with no middle ground. “Computer says no” should not be a standard answer. Perhaps most importantly, every team member should be willing to do what is necessary to make the process work. And that might occasionally require some morphing of traditional team roles and responsibilities.

The New has Become the Norm

As you might guess (else I wouldn’t be writing this post!), our attempt at mixing oil and water was quite successful. We did manage our client’s project with an Agile approach, and with a fixed-bid budget.

The client was very pleased with our willingness to try a new approach. And the project successfully achieved its target deliverables within the (fixed) budget.

This project was so successful, in fact, that all projects since that we’ve tackled for the client have been structured under the same hybrid framework. All of those projects have also been successful. And now, the Agile/fixed-bid project management framework has become the default normal approach for all new projects with that client.

I believe that there will be a wider transition to this hybrid approach industry-wide. In recent years I’ve observed a shift in clients’ desires to work under more of a fixed-bid approach. It’s easy to understand the appeal for clients; fixed-bid makes it easier to forecast costs, and it distributes the risk among both the client and the service provider.

The single greatest challenge with fixed-bid may lie with requirements development; it can be a bit of a wildcard in Agile. (Most fixed-bid projects designate a percentage of the budget for risks and contingencies, but tapping that emergency fund for requirements development is typically frowned upon.)

Going forward, I expect we’ll see a gap evolve among project management styles: Those willing to do whatever it takes to make an Agile/fixed-bid approach work, and those that continue to hide beneath the skirt of traditional processes and definitions.

You can guess which management style I believe will be the more successful.

Dogs and Cats Can Coexist

Most of us in software development are techies. We’re engineers at heart. We have the drive to make things work. And that drive can be harnessed in making polarizing technologies or methodologies work together — just like Agile and fixed-bid pricing.

After all, if natural enemies like dogs and cats can coexist — and they do successfully in millions of households — then why not Agile and fixed bid?

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