Each time I attend a conference about agile software development, inevitably, the same question always appears: how to deal with fixed price contracts when working on agile methodologies. Usually, people did not get any satisfactory answers.

Scott Ambler, Practice Leader Agile Development within the IBM Methods group,
invariably gets the same question when working with clients or internal development teams. So he decided to take it one step further and address the question in the Dr. Dobb’s article “Agile on a Fixed Budget: Resources, schedule, and scope“:

The column first summarizes strategies for what you would do when each of these factors is allowed to vary so that you understand what trade-offs you’re making. Then it describes what I consider to be your best approach remaining to you for each combination of constraining the three factors. The main point of the article is that although it isn’t ideal to have one or more of these factors constrained, you can still take an Agile approach even when such constraints exist.

Scott approach is not the panacea, but it’s a worth read.

Another interesting read is the Arnon Rotem-Gal-Oz post “Fixed Bids and Agile Projects”, which shares a few strategies he successfully used and provides two useful links: Agile Fixed Price Projects part 1: “The Price Is Right” and Agile Fixed Price Projects part 2: “Do you want agility with that?”.

And finally, here there are some other opinions I have recollected:

Do you have any other successful strategy or experience?