Basic Rules of Negotiation in Agile Contract Management

Last Updated January 26, 2022

Software engineering companies developed the Agile methodology to meet the need for a system that would be flexible and would enable teams to complete projects quickly.

Because the methodology breaks down a project into short-term cycles called sprints, Agile allows for faster development of products and services. It also incorporates frequent feedback from clients.

The methodology, which has worked well in software engineering and other industries, is designed to replace the cumbersome processes that used to – and in some organizations still do – govern new product development. One such process is that of contract management.

Benefits of Agile

Much as it does with other processes, Agile requires a different approach to contract negotiations.

It is often the case that those on either side of the table in a negotiation simply lay out their demands and refuse to compromise, which can lead to further project delays.

Agile does away with this mentality. It requires people on both sides to acknowledge that creating a contract is the ultimate goal of both parties. That means the best method for reaching this goal is one that includes frequent meetings between both sides.

Agile also requires both parties to understand that changes will eventually be made to a contract. Therefore, they should work together to set up a contract in which such changes do minimal damage to the parties involved.

In addition to focusing on mutual goals, flexibility and frequent collaboration, Agile also breaks contract negotiations into short-term goals. The result is that all sides complete the overall project more quickly.

Best Practices For Agile Contract Negotiations

Here are five best practices for leveraging Agile in contract negotiations. Typically, these negotiations occur between the supplier of a service, such as a software engineer, who is creating a contract with a client who wants to use the service to develop a product.

However, Agile can apply to any type of contract negotiation.

Develop Product Backlog Together

Before starting, you must know where you are going. Developing a product backlog that lists all the features needed for a finished product will provide everyone with a map. The backlog does not have to be overly detailed at this point, but it does need to prioritize what needs to be accomplished.

This cooperative effort creates a shared vision of the final product.

Small Steps

Begin with only one sprint to accomplish the first priority on the backlog. This way the first stage of the project is quickly delivered to the client and gives them the opportunity to provide feedback.

Regular Collaboration

The process of negotiating a contract should include meetings between both parties on a regular basis – even daily ones (called Scrums), if appropriate. Frequent meetings allow both sides to provide continual feedback and updates on the status of the current sprint.

Flexibility

The concept of Agile is built around the idea that changes will need to be made, but those changes should be built into the contract and shouldn’t hinder a project from moving forward. Changes will come out of the frequent collaborative sessions, which give both sides a voice in making alterations to improve the final product or the process itself.

Focus on Quality

Projects are often unpredictable. The research and work done on each sprint may uncover issues that alter timelines and the overall direction of the project. Such changes are expected, and the Agile contract allows for them. It doesn’t emphasize a vendor’s hitting all the marks as stated in an original contract. Rather it, focuses on the final goal: a quality product.

In the end, bringing Agile to contract negotiations is beneficial because it allows for the most innovative, creative work to get accomplished without the restrictions of traditional contract negotiations.