Tag Archives: agile contracts

Hur Karlstad sjukhus byggdes på tid och budget med Agila kontrakt

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Karlstad sjukhus har i flera omgångar byggts om och byggt ut. Samtliga hus har levererats på tid, budget och med en fungerande vårdverksamhet från dag 1. Sjukhuset har sparat 300 miljoner åt Värmlands läns landsting. Lösningen? Effektstyrd upphandling med Agila kontrakt och Partnering. Vad skapade förutsättningarna för att lyckas? Vi intervjuade Lars Nilsson, som ledde upphandlingen av Karlstad sjukhus.

(How Karlstad hospital was built on time, on budget and with working medicare from day 1, using Agile contracts). Read the interview here (in swedish)


Insights from Nordics first Agile contracting conference

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OK, technically speaking, it was called a networking day.  But that wouldn’t do justice to the content here.

The main thing we got out of the ACPN Agile contracting conference was the three different perspectives from lawyers, customers and providers.  That gave us a unique insight into the challenges and questions from each party.

Some cool facts:

  • Founders of both the Danish Agile contract (K03) and the Swedish Agile contract attended the conference.
  • Agile contracts were used in large projects (up to €120M) by customers in Finland and Denmark.
  • Customers who have used Agile contracting in big projects have been really successful. We saw impressive results in one case: Danish Business Authority (a €60M program) delivered their projects on time using Agile contracts and at the same time managed to reduce service calls by 40%, case handling time by 69% and improve one time pass by a whopping 92%!

Insights and reflections from the conference:

  • Agile contracts are being used in large public sector programs in both Denmark and Finland. The Finnish Agile contract (€1.2 Billion) was a direct order from the Finnish Ministry of Finance and a precondition to get the funding. You can’t help but wonder why Sweden is trailing.
  • A driving force behind the adoption of Agile contracts in Finland is the tight budget conditions.
  • Time and materials contracts are not recommended for parties who work together for the first time. A target price model works better because it gives both parties the incentive to deliver on time.
  • Code camps where you develop a small part of a software solution together in 1 day, is the method of choice to learn about the provider’s maturity and skill level. It forces both parties to look under the hood which reduces risk.
  • During code camps and provider evaluation, the providers are generally paid time and materials for their participation. This is a fair trade between the customer who wants to find the best skill for the job, and the providers, who provide the options.
  • Legal issues are not a constraint to Agile contracting but getting the wrong lawyer as advisor is. The best choice for mid- to large-size IT projects is to create a small procurement team consisting of an Agile specialist, a software architect, a lawyer with Agile contracting experience and 1-2 customer representatives. This gives you the benefit of having software, legal and business /user experience and perspectives.

If you want to read more about the conference and including a short video summary – check out:

The conference was organized by Crisp & Nordic River (Sweden), Best Brains (Denmark) and Codento (Finland).


Vad innebär agila kontrakt? – slides från Meridiumdagen

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Sammanfattar i min presentation från Meridiumdagen ett antal Agila kontrakt som är i bruk idag och vad man bör tänka på när man använder dem.

——————   For the English reader:

What does Agile contracts really mean? –  I walk through a number of real contracts that are in use today (presentation was given in Swedish)


Det jag upplever genomgripande saknas i alla agila kontrakt  är en mekanism genom vilken kunden och leverantören snabbt kan upp ett bygga förtroende. Har man det sedan tidigare är det sällan ett problem, men frågan är hur man gör om kunden och leverantören är nya för varandra. Det finns dock en enkel lösning.

Som upphandlare väljer jag ut två leverantörer. Dessa får sedan bygga en prototyp motsvarande första iterationen av produkten. Leveranören som inte får kontraktet, får betalat för iterationen. Den andra leveranören som får kontraktet.

Knepet i utvärderingen är att du måste lyfta under huven på produkten för att se ingenjörsmässighet bakom. Det är där du ser skickligheten. Glömde jag nämna att Crisp gör sådant? 🙂

Slides: Vad innebär Agila kontrakt?

Fixed priced contracts – flawed by design

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Why do we have fixed price contracts?
“We need to know what we get” – would be the most obvious answer.

“We want to pick the manufacturer with the best price. They won’t quote us without a fixed set of requirements”  – also a likely answer.

Do you always take the same amount of steps on a jogging round?
Do you always pick the shoes with lowest price?
Not likely.

Even so we persistently request and call out for fixed priced contracts.

“But we have to have some estimate of where it is going to end”. Well. Now we are getting somewhere.

Planning is everything, plan is nothing
When outlining a fixed priced contract, we look into our needs in detail. We look at what is important and think about non functional demands, such as reliability, load, security and maintainability. At the same time we also set out a target goal for the business case, so we make sure we make money on it. This is all good.

Trap #1: Does a need discovered written down ever get removed?
Trap #2: Do we prioritize our demands against each other?
Trap #3: Is that prioritization made on business grounds?

There can be all sorts of explanations why a requirement exits. IT department might want to play with a new technology. A security manager is sure that security comes first. Et cetera.

Point is: the requirement review is a constant action if we want to reflect reality. Not a one time deal during a six month period.

Litmus test: Have you ever removed a requirement once written down?

Myth: Fixed priced contracts gives the lowest cost

  1. A skilled supplier typically would include a risk premium (cost of risk) in a fixed contract. Think of it in the same way as the risk premium you get in fixed rate interest
  2. If suppliers overbid, you suddenly risk needing to save them from financial trouble. And this half way through your project with no way out
  3. A supplier only focusing on cost is least likely to have the skilled staff you would like leverage from. More likely they are junior and learning at your expense

Overall, a fixed priced contract will not give you the lowest cost because the biggest part of risk is put on the supplier.

So what is it we want to achieve, really?

  1. We want to maximize our business options at any given time
  2. We want to keep a low risk level (work in progress) at any given time. Why? Because invested unfinished work we risk loose in favor of adopting to outside changes.

How do we deal with it?
Here is the key: you need to put together a cross functional team that can take ideas to runnable software at the end of every sprint.

  1. Without this we short circuit the customer feedback loop preventing him to learn what he really needs
  2. If we cannot deliver runnable software, we cannot build trust needed to outweight  the importance of the contract

If your customer at any point of time prefers thew existing software in favor for the written contract, you know you are on the right track.