Unit4_Managing Contracts.ppt
- 2. MANAGING CONTRACTS • MANAGING CONTRACTS oIntroduction oTypes of Contracts oStages in Contract Placement oTypicalTerms of a Contract oContract Management oAcceptance.
- 3. ACQUIRING SOFTWARE FROM EXTERNAL SUPPLIER • A bespoke system • Created specially for the customer • Off-the-shelf • Bought ‘as is’ • Customized off-the-shelf (COTS) • A core system is customized to meet needs of a particular customer
- 4. TYPES OF CONTRACT • Fixed price contracts • Time and materials contracts • Fixed price per delivered unit
- 5. FIXED PRICE COST • With fixed price contracts, also known as lump sum contracts, the buyer and service provider agree on a fixed price for the services in question. • This type of contract is low-risk for the buyer, but high-risk for the seller since the time and costs of the project could exceed the fixed price.
- 6. FIXED PRICE CONTRACTS •Advantages to customer • Known expenditure • Supplier motivated to be cost-effective • Disadvantages • Supplier will increase price to meet contingencies • Difficult to modify requirements • Upward pressure on the cost of changes • Threat to system quality
- 7. TIME AND MATERIALS • This contract is used when labor is the main deliverable and typically provides the seller an hourly rate.
- 8. TIME AND MATERIALS •Advantages to customer • Easy to change requirements • Lack of price pressure can assist product quality • Disadvantages • Customer liability - the customer absorbs all the risk associated with poorly defined or changing requirements • Lack of incentive for supplier to be cost effective
- 9. FIXED PRICE PER UNIT DELIVERED • This type of contract, also called an hourly rate contract, combines elements of fixed price and cost contracts. • A unit price contract pays a specified hourly rate for every hour spent on the project. • It is commonly used by freelancer workers.
- 10. FIXED PRICE PER UNIT DELIVERED •Advantages for customer • Customer understanding of how price is calculated • Comparability between different pricing schedules • Emerging functionality can be accounted for • Supplier incentive to be cost-effective
- 11. FIXED PRICE PER UNIT DELIVERED •Disadvantages • Difficulties with software size measurement - may need independent FP counter • Changing (as opposed to new) requirements: how do you charge?
- 12. THE TENDERING PROCESS • Types ofTenders oOpen tendering oRestricted tendering process oNegotiated procedure
- 13. THE TENDERING PROCESS • Open tendering oAny supplier can bid in response to the invitation to tender oAll tenders must be evaluated in the same way oGovernment bodies may have to do this by local/international law (including EU andWTO,WorldTrade Organization, requirements
- 14. THE TENDERING PROCESS • Restricted tendering process oBids only from those specifically invited oCan reduce suppliers being considered at any stage
- 15. THE TENDERING PROCESS • Negotiated procedure oNegotiate with one supplier oE.g. for extensions to software already supplied
- 17. STAGES IN CONTRACT PLACEMENT Requirements analysis • Requirements document: sections o Introduction o Description of existing system and current environment o Future strategy or plans o System requirements - Mandatory/desirable features o Deadlines o Additional information required from bidders
- 18. STAGES IN CONTRACT PLACEMENT • These will include • functions in software, with necessary inputs and outputs • standards to be adhered to • other applications with which software is to be compatible • quality requirements e.g. response times
- 20. STAGES IN CONTRACT PLACEMENT • Evaluation plan • Need to assess value for money (VFM) for each desirable feature • VFM approach an improvement on previous emphasis on accepting lowest bid • Example: • Feeder file saves data input 4 hours work a month saved at £20 an hour system to be used for 4 years if cost of feature £1000, would it be worth it?
- 21. STAGES IN CONTRACT PLACEMENT • Invitation to tender (ITT) o Note that bidder is making an offer in response to ITT o acceptance of offer creates a contract o Customer may need further information o Problem of different technical solutions to the same problem o Memoranda of agreement (MoA) o Customer asks for technical proposals o Technical proposals are examined and discussed o Agreed technical solution in MoA o Tenders are then requested from suppliers based in MoA o Tenders judged on price o Fee could be paid for technical proposals by customer
- 22. STAGES IN CONTRACT PLACEMENT • Evaluation of Proposal o Methods could include: o reading proposals o interviews o demonstrations o site visits o practical tests