Fixed Price projects - Inconvenient truths by Scot Ambler

In recent times, for some reason, call it bad karma perhaps, I have been part of projects which have had contractual and cost issues. Projects followed BRUF (Big Requirements Up Front) method to accumulate requirements, estimates and pricing were done and contract signed with Customer. The fixed price project was started. And the problems which ensued were typical of so many such projects in industry. They are well documented variousuly, so I am not going to add to that. But I have often wondered why customers insist on agreeing to a fixed price in beginning of a big project when most of times scope can hardly be known. What it does is that, it makes both the parties, the customer and the IT Supplier draw the lines like in a battle and start on a war footing with Sr. Management on both the sides acting like Generals engaged in high strategy. Supplier implements strict change control procedures and become fixated by change management and repelling anything not in original scope. As initial estimates done during contract signing phase can't be relied upon for accuracy, big contingencies are built into estimates but without any surety of its finality. Customer in meanwhile practicaly disengages during project execution waiting for the final delivery to happen as most of his risks are offloaded to supplier. The whole dynamics of a fixed price project creates an enviornment where both the customer and vendor are playing games to protect themselves and not working together to solve the problem for which project is being executed.

Scot Ambler in this articles has articulated what he calls Inconvenient truths about fixed price software development. In fact he goes even further and calls it an unethical practice. Most of points he has highlighted are valid and right on target. Customers have to realise that if they really care about ROI, they need to engage and work with suppliers and not look to offload thier risks in form of fixed price projects. IT vendors or providers on other hand , have to relook into thier own practices which they have been selling to customer for years . As Scot Ambler says "For several decades traditional software engineering theory has told us to do formal, up-front cost estimates. In turn, we have taught our customers that this is the way things are done " . So it is time we teach them that we were wrong.