The SAFe Way to Agile IT Contracting

Complex IT projects are infamous for cost overruns, missed deadlines, and underdelivery. The Standish Group found only 29% of IT projects succeed – meaning delivered on time and budget with required features. Traditional contracting methods exacerbate these issues.

Fixed-price contracts incentivize vendors to cut corners. Buyers struggle with rigid terms locking in early decisions when requirements understanding was minimal. Time and material models provide little oversight into delivery efficiencies and product quality.

The Scaled Agile Framework (SAFe) offers a better paradigm via the SAFe Contract. It brings Agile values of transparency, inspection, and adaptation into IT procurement. By reshaping risk-sharing and alignment, it gives both buyers and suppliers a path to shared success.

The SAFe Contract has two phases. Pre-commitment sets expectations, metrics, and budgets collaboratively. Program execution validates progress against those metrics using Agile delivery and regular stakeholder reviews. Priorities and funding adapt quickly based on value realization.

This article explains the SAFe Contract mechanics. It outlines the activities and mindset shifts necessary to transition from traditional fixed or time-based contracts. Embracing SAFe can overcome decades of adversary relationships and runaway IT projects. When implemented effectively, all parties build trust through transparency on goals and progress. The era of finishing under budget and delighting users has arrived.

What is the SAFe Managed-Investment Contract?

The Scaled Agile Framework (SAFe) provides guidance on scaling Agile practices across large initiatives and multiple teams. The SAFe Contract takes lessons from Agile software development and applies them to how enterprises procure complex IT solutions. Its phases and underlying mechanics aim to foster greater alignment through transparency, adaptation, and shared incentives between client and vendor.

The Pre-Commitment Phase

The pre-commitment phase is a critical aspect of the SAFe Contract that sets the stage for alignment and transparency in the execution phase. It focuses on upfront planning, feasibility analysis, scoping, budgeting, and establishing metrics-based governance.

Activities in the pre-commitment phase include:

Vision Setting

• The buying organization communicates business drivers, challenges, desired outcomes
• Suppliers gather broad objectives and constraints to inform solution scoping
  

Solution Scoping

• Suppliers assess technical and resource feasibility to meet business needs
• Jointly define an MVP with must-have features
• Prioritize additional features into a preliminary roadmap/backlog
  

Financial Scoping

• Supplier provides budget estimates for the MVP and potential follow-on capabilities
• Buyer secures initial funding based on the feasibility study
• Contract terms established aligning payments to verified feature deliveries
  

Governance Modeling

• Define metrics framework linked to business value
• Agree on cadence for solution increment reviews
• Establish decision protocols for reprioritization or changes in funding
  

Commitment Gate

• Ensure stakeholders aligned on scope, budget, roadmap, metrics, and funding processes
• Formally award contract and release payment for first execution increment
  

The pre-commitment activities are essential to vet feasibility, gain stakeholder buy-in, and operationalize the governance model. This upfront investment significantly reduces downstream risks.

With the vision, implementation approach, and metrics-based oversight structure endorsed by both parties, the stage is set to leverage Agile execution. The transparency and inspection rhythms mean scope alignment can be maintained over extended timelines. Priorities and resourcing adapt based on value realization rather than contractual obligations.

The clarity on change control processes also strikes an effective balance where buyers contain costs and suppliers respond to shifting needs. This fosters healthy, trusting relationships focused on business solutions over the long-term.

In summary, an effective pre-commitment phase is crucial to set up the win-win dynamics possible under the SAFe Contract. The early effort in mapping roadmaps, measuring value, and building in flexibility prevents the common downstream pitfalls facing traditional procurement models.

Execution using Planning Intervals

With the pre-commitment phase formalizing the contracted solution scope, metrics framework, and initial funding budget, delivery kicks off through Agile development coordinated via Planning Intervals (PIs).

PIs provide the regular cadence to inspect progress, adapt plans, and control scope. Each PI spans 4-12 weeks, aligning teams to a shared mission. The activities in a PI cycle include:

PI Planning

• Lock priorities for PI into team backlogs based on roadmap
• Detail user stories and tasks for the iteration
• Confirm capabilities to be demonstrated
  

Iterative Development

• Execute 2+ week sprints building, testing, and integrating features
• Continually engage users for feedback to refine solutions
• Address defects and technical debt items
  

System Demo

• Demo solution increments to users at the end of the PI
• Gather feedback on features delivered
• Assess performance and quality against metrics
  

Inspect and Adapt

• Reconvene stakeholders to critically review metrics
• Reprioritize backlogs based on newly learned constraints
• Commit funding for next PI or adjust budget
  

PIs instill discipline through regular validation points. Demonstrating solution advances and reviewing metrics uncovers whether capabilities map to actual user needs. Funding continuity then adapts according to realized value.

If some features prove low ROI, budgets can shift towards more impactful capabilities. Timelines may also expand or contract depending on feedback. This flexibility amidst oversight upends traditional contracting risks, aligned to Agile principles.

Over multiple PIs, solutions progressively meet target metrics. But the contracted economics incentivize solving user problems over simply delivering predefined specifications. Priorities evolve informed by data versus opinions or contracts enforcing rigid requirements frozen early on.

The result is both buyer and supplier succeed by building the right solution at the best pace given technical and fiscal constraints. The SAFe Contract provides a framework for this via continuous inspection, adaptation, and shared stakeholder accountability for business outcomes.

Building Win-Win Relationships

The SAFe Contract aims to fundamentally reshape how buyers and sellers of complex IT solutions interact. Rather than a zero-sum game with overconstrained budgets, bloated scopes, and misaligned priorities, it fosters win-win relationships focused on value.

For buying organizations, it means:

• Getting solutions continuously aligned to problems that matter
• Controlling spend based on regular solution validation points
• Adapting vendor priorities rapidly based on feedback
• Paying only for features that impact metrics
  

For suppliers, benefits include:

• Developing deep domain expertise with a partner over time
• Maintaining happy customers via continuous delivery
• Containing costs by building only valuable features
• Innovating more on platform capabilities
  

Unlike traditional models, both parties share risk and reward. The regular inspection cadence provides economic governance and oversight absent in contracts paying purely for time and materials.

However, suppliers also enjoy flexibility around technical implementation details and can leverage Agile practices for execution. The focus stays on fitness for purpose rather than contractual compliance.

Additionally, the emphasis on value realization over specifications means longer-term relationships get built. Suppliers become trusted solution partners versus interchangeable vendors. Institutional knowledge gets retained about what works over multiple delivery cycles.

Of course, the SAFe Contract has its challenges. It requires more procurement maturity from buyers to evaluate progress based on metrics versus contracts alone. Suppliers must also master Agile methods for transparency on team velocities and roadmap forecasting.

But as organizations scale these capabilities, they break decades-old dysfunction around IT project risks. By better aligning relationships to user value, all stakeholders progress together. This remains the SAFe Contract’s fundamental advancement for managing contemporary IT programs.

Conclusion

The SAFe Contract offers a profoundly better model to manage the risks and complexities inherent in large-scale IT solution development. By rethinking outdated assumptions around fixed-price and time-based contracts, it aligns incentives for long-term value creation rather than short-term cost efficiencies alone.

The practices codified in SAFe—such as continuous planning and visibility, user-centricity, and value-based prioritization—have revolutionized software delivery. The SAFe Contract aims to bring similar breakthroughs to IT contracting and procurement for enterprise systems.

Pre-commitment activities set the stage for transparency and adaptation during project execution. Program Increments then facilitate regular stakeholder reviews on solution fitness based on objective metrics versus opinions alone. This governance rhythm allows priorities and resourcing to be calibrated to realized user outcomes.

For both buying organizations and suppliers, these fundamentals foster healthier partnerships not possible using conventional contracting tools. Risks transform into rewards as technology investments continuously deliver against business goals. Fixed specifications give way to fluid possibilities anchored to problems that matter most.

As more IT leaders discover the merits of SAFe, expect its contracting method to rapidly emerge as the new gold standard. It may well prove the missing link to finally improving the economics and outcomes for large-scale technology projects after decades of dismal results using legacy approaches. The era of finishing under budget, delighting users, and unlocking innovation has only just begun.