Agile-based contracts

By Marcin Gabryszak, Pałucki Truściński Prawo i Podatki SP. J.

Agile software development is aimed at generating software, assuming that the concepts, as well as clients’ demands, are subject to continuous evolution throughout the implementation of the project.

Based on the aforementioned assumption, software is developed through groups of independent project teams. Each member of the team holds a particular responsibility. While performing the task, the team member remains independent and autonomous, and therefore is not liable to any typical project hierarchy.

Agile software development gained significant relevance back in 2001, upon the approval of the so-called Agile Manifesto. The manifesto provides a response to issues related to the implementation of IT projects carried out in line with the cascade model that, according to the authors of the Agile Manifesto, was an outdated method applied to IT projects – one that was not matched to real market conditions. The foundation of the Agile Manifesto was based upon the following assumptions:

1) #people and interactions are more important than processes and  tools,

2) operating software is more important than a detailed specification,

3) #cooperation with the client is more important than the negotiation of contracts,

4) #response to changes is more important than the performance of the master plan.

The Agile philosophy contributed to the establishment of a wide array of methodologies related to software development. The most popular one is Scrum (known and applied long before the Agile Manifesto), yet some other (more rare) methodological solutions could be found in practice, including: Extreme Programming, Lean, Dynamic System Development Method, and Agile Project Management.

In general, software development based on Scrum methodology is designed to close a certain stage of the project within so-called iterations, ending up with tests of the code that has been developed, as well as analysis and verification of requirements and mapping of subsequent solutions.

There are a large number of benefits resulting from the application of Agile methodologies. What makes them exceptional is the fact that they feature flexibility, whilst maintaining the core objective, which is the successful implementation of a particular IT solution. Undoubtedly, Agile based methodologies work smoothly with popular management processes. Thus, MoP supports management of the organization portfolio, and Prince2 may be the pillar in project management.

The fact is, that in terms of legal issues, determining the contract performed on the basis of Agile might be troublesome, since one of the key elements of the manifesto is the superiority of collaboration with the client over the contract negotiation, or operating software over a detailed specification. Moreover, another drawback is that at the very start of the project we are neither aware of the final results of the assumed project, nor of its values or parameters.

Nonetheless, projects carried out using Agile methodologies should not be demonized and one should not assume that cooperation between the parties cannot be formalized securely when it comes to legal issues. A properly described operating procedure helps to define not only the time frames, but also the estimated costs of the project. The Agile based contract ought to adequately determine the division of roles within a project, specifying certain responsibilities that may facilitate the identification of rules of interaction among particular project participants. Those participants may vary depending on the operating methodology that has been selected. To give an example, while performing a contract based on Scrum methodology it is advisable to describe tasks and responsibilities of Scrum Master, Product Owner and the Team as coherently as possible. In addition, the fact that the project evolves in the course if its performance requires a different approach to contractual penalties.

These are procedural infringements that have to be legitimized, rather than failure to implement the goal that has been assumed at the project launch. Due to possible setbacks in the execution of Agile projects (as with any implementation project), it is worth setting out the least severe provisions of the Exit Plan stipulated within the contract, combined with the mutually acceptable settlement for the works that have been performed so far.

The fact is that the contract has to be customized and prepared on an individual basis, as the final results are hard to predict. However, in spite of widespread opinions, a suitable agreement can be drawn up. Yet, it is necessary to become familiar with the objectives of the Agile Manifesto, and therefore considerably increase the probability of completing the implementation project successfully. Additionally, an ultimately efficient cooperation between a legal practitioner, a business, and IT representatives is highly necessary.