A colleague of mine recently mentioned a service-acquisition approach that formalises one of the risk-reduction approaches used by Agilier. The approach, known as “Evolutionary Acquisition” in the USA and “Progressive Acquisition” elsewhere, is used as a way to reduce the risk of acquiring products or services, especially those that are complex and of long duration. The approach can be used for all types of acquisition but the following comments are made with made one eye on large-scale software- and systems-engineering programmes.
Conventional Approach
The conventional approach to acquiring services for this kind of work is to define all the requirements up-front and ask suppliers to put in a fixed-price bid. The “lucky” winner will then sign a standard contract for the whole programme and the acquirer will expect the system delivered on the date specified, to the budget specified. Sadly this “big-bang” approach seldom works, for the following reasons:
It is rarely possible to specify all the requirements up-front and requirements are likely to change throughout the programme – both leading to potential complex contract variation.
The acquirer isn’t prepared for the complexity of handling the control and change demands of all the programme elements at once.
The focus is almost exclusively on the acquirer and supplier – there is a notable lack of end-user involvement, leading the end-user dissatisfaction.
Evolutionary/Progressive Approach
Instead of using a single one-off contract, the Evolutionary/Progressive approach consists of a multi-part contract, consisting of:
A Head Contract, containing the high-level structure for the overall programme containing: high-level scope, costs and timescales; programme management control mechanisms, project delivery methods, payment mechanisms and exit strategies. It may also contain an agreement to what constitutes minimum amount of work.
One or more Contract Work Orders (CWOs) – one for each work segment, containing: a more detailed scope of work, responsibilities and the form of payment. Each CWO is individually negotiated based on the previously-completed segments and will have its own deliverables within the overall programme.
Compared to conventional big-bang approach, this acquisition approach has the advantages that the contract allows:
the initial subset of capability to be deployed without the full set of requirements to be known;
the acquirer to change requirements more easily;
scope for technology upgrades;
for the initial subset of capability to be deployed rapidly if necessary;
the acquirer to switch suppliers if required;
greater control of contractual flow-down to sub-contractors.
In addition, the approach:
lowers risk for both parties;
cost-compensates the supplier more fairly: earlier segments of work are more likely to be cost-reimbursable (eg time and materials) as the level of uncertainty is high; later segments are more likely to be fixed-price as the level of uncertainty decreases.
For large software- and systems-development programmes, it is likely that a segment of work will be treated as a separate project – each segment delivering additional functionality to the end-users. Hence, for software-development, an agile approach may be suitable; while for systems-development, a combined approach of plan-driven and agile may be suitable.
Ideally there should be overlaps between the segments of work. As one segment approaches its conclusion, the next should be commencing. As each segment of work will have its own Contract Work Order, it is important that contractual negotiations occur closely with the managerial and technical work-streams for that segment.
Best Practice
Some further thoughts on suggested best practice on Evolutionary/Progressive Acquisition approach:
For the acquirer, support for the approach must permeate throughout the organisation and should involve:
senior management dealing with the strategic direction of the company;
those departments dealing with commercial/contractual matters;
the end-user community, as the approach will take regular time in their diary compared to a “big-bang” contract approach.
For the supplier, the approach must involve:
business winning divisions (sales and marketing);
project delivery – the team is comfortable of the implications of using the approach, for example planning, reviewing and customer interaction may be very different compared to a big-bang approach;
commercial/contractual, to deal with the agreements with both the acquirer and the subcontractor(s), if present.
For subcontactor(s), if present: a flow-down arrangement must exist contractually between them and the supplier to ensure that there is minimal disconnect.
For all parties, a common approach to the programme structure is essential. If there is unfamiliarity with the approach then a cultural change effort is required – ideally jointly held.