Agile contracts are a contractual model agreed upon by suppliers and customers for software development using Agile methods. The model introduces an initial backlog of requirements (User Stories) after which budget, due date, and the way of steering the scope within the framework is agreed upon.
This differs from traditional fixed-price contracts in that fixed-price contracts usually require a detailed and exact description of all the requirements in advance. Fixed price contracts aim at minimizing the potential risk caused by unpredictable, later changes. In contrast, Agile fixed price contracts simply require a broad description of the entire scope instead of a detailed one.
In Agile contracts, the supplier and the customer together define their common assumptions in terms of the business value, implementation risks, expenses (effort) and costs. On the basis of these assumptions, an indicative fixed price scope is agreed upon which is not yet contractually binding. This is followed by the initial backlog, during which the actual implementation begins. At the end of this phase, both parties compare the empirical findings with their initial assumptions. Together, they then decide on the implementation of the entire scope and fixate the conditions under which changes are allowed to happen.
