{"id":1,"date":"2016-01-21T07:35:45","date_gmt":"2016-01-21T06:35:45","guid":{"rendered":"http:\/\/zaven.co\/blog\/?p=1"},"modified":"2025-04-08T19:55:21","modified_gmt":"2025-04-08T17:55:21","slug":"budgeting-a-project-agile-scrum-methodology-with-a-fixed-price","status":"publish","type":"post","link":"https:\/\/zaven.co\/blog\/budgeting-a-project-agile-scrum-methodology-with-a-fixed-price\/","title":{"rendered":"Budgeting a project: agile SCRUM methodology with a fixed price?"},"content":{"rendered":"

It is a quite common scenario when a client approaches us with their idea and asks for an exact project costs evaluation. As a requirement, he wants the project to be developed in line with Agile<\/em> software<\/em> development methodologies<\/em> because he was told it is the best way to go. Faced with two contradictory requirements, one can\u2019t help but wonder: Can you combine a fixed price approach with the agile SCRUM methodology?<\/strong>
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TL;DR:<\/p>\n

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  1. To evaluate a project within a fixed price model, it is necessary to own the whole specification<\/em> and you have to account for risk.<\/li>\n
  2. Agile software development imposes a flexible approach to requirements<\/em> and a willingness to accept changes.<\/li>\n
  3. Combining Agile product management with a fixed price model requires planning tasks in advance and relying on Change Management<\/em> (which, like all things dealing with future predictions, isn\u2019t very reliable itself).<\/li>\n
  4. Even if you make a budget estimate based on a very precise specification, there\u2019s still no guarantee that the cost won\u2019t change. This is caused by SCRUM\u2019s flexible nature and the fact, that every app operates within a changing environment (devices, operating systems, 3rd party services, infrastructure, laws, etc.).<\/li>\n
  5. The fixed price model is adjusted to optimize finances at the expense of good practices which can only result in lowering the quality of the end product.<\/li>\n<\/ol>\n

    What is Agile SCRUM methodology?<\/h2>\n

    New projects, we all love them. We love accepting challenges and we love the excitement that comes along with all the possibilities. From my experience, the Agile SCRUM methodology<\/a> is great when it comes to managing projects with different levels of complexity and scale. SCRUM proved to be the best solution especially when we were developing small projects in the MVP<\/abbr> phase. Why is that?<\/p>\n

    Because SCRUM<\/strong><\/span> gives us loads of possibilities to make changes while realizing and testing the concept before it will be shown to the end user.<\/strong><\/span> This made it the perfect methodology to be extended outside of the IT and implemented, with success, in other fields. Which industries? Well, the list is long by just to give you an example SCRUM is often used in manufactures, military, laboratories, universities etc.<\/p>\n

    \"Agile

    Agile Project Lifecycle Management<\/p><\/div>\n

    What is the \u201cfixed price\u201d model?<\/h2>\n

    The fixed price model assumes that the assessment of the finance costs, needed to complete a project, must be made by the contractor in advance<\/strong>. To set the price, it is necessary to determine the functional scope (required by the client) and also the time that is needed to finish a particular project in a given price range.<\/p>\n

    Attempts in doing so very often face one very big limitation: the lack of full requirements. Frequently, at the beginning of a project, it is very hard <\/strong><\/span>for a <\/strong><\/span>P<\/b><\/strong><\/span>roduct <\/strong><\/span>O<\/b><\/strong><\/span>wner<\/strong><\/span> to<\/strong><\/span> extract <\/strong>all <\/strong><\/span>the important <\/strong><\/span>details<\/strong><\/span> from <\/strong><\/span>a<\/strong><\/span> broader<\/strong><\/span> idea<\/strong><\/span>. This is completely understandable, although it makes it impossible to evaluate exact costs.<\/p>\n

    This is one of the reasons why lean methodologies (e.g. Agile SCRUM methodology) were invented in the first place so that it would be possible to work on a project without having to determine the whole scope and supplying the development team with a full documentation.<\/p>\n

    Why assessment is so important<\/h3>\n

    Cost evaluation is a very important element when you start a business relation. It helps the contractor to become more aware of the project feasibility within the resources that he has available. At the same time, the Product Owner has the possibility to familiarize with the team and the way they think.<\/p>\n

    Basically, the better we get to know each at the beginning, the easier it will be to work together later. But the most important part of making a cost estimate is so that the client can find out if he can afford it<\/strong>.<\/p>\n

    One project, different prices<\/h3>\n

    Usually, the Product Owner will send dozens of e-mails, to lots of different companies asking for their costs estimates.<\/strong> Furthermore, it is not a secret that he is also asking for an evaluation of a project he has already done. Entrepreneurs do it to find out what the capability of a particular contractor is.<\/p>\n

    Is it worth the effort? It is hard to say because all projects are different, as well as the people behind them. Every programming team has its own experiences and various problem-solving approaches (connected with project-specific issues).<\/p>\n

    Agile PLM and possible risks<\/h3>\n

    If the Product Owner<\/span> is interested in Agile software development, which will allow him to make changes while working on the project, he should keep it mind two things:<\/p>\n