Progressive Contracting Overcomes Impediments
As we saw in Part II, a new, progressive approach to software acquisition
can accommodate the growing complexity of today's projects. Because of
its flexibility and adjustability, a progressive contracting scheme can also
help overcome many of the other barriers we noted above. We
recommend that a software development acquisition contract be
structured on two levels: 1) A Head Contract that sets the stage for 2) a
series of overlapping Contract Work Orders (CWOs). The CWOs
progressively describe the full technical details of the work to be done and
the functionality or features to be delivered in the product. And they can
be planned, developed, and delivered using the iterative, four-phase
approach embodied in the Rational Unified Process,¨ or RUP¨ (see Part II for details).
Scope of a Head Contract
In addition to the requirements listed above under Elements of a Valid
Contract, the Head Contract should contain the following:
- Clearly articulated definitions of terms used in the contract,
preferably at the beginning of the document.
- Detailed descriptions of any special responsibilities of either party to
the contract, such as responsibility for coordination or obligation to
respond, as mentioned earlier.
- Permissions or limitations regarding subcontracting.
- Descriptions of acquirer-furnished property or facilities, such as
existing hardware or software to be used in the course of the work.
- Specifications regarding ownership of patents, copyrights, or
licenses applicable to the software and documentation involved in
- Provisions for inspection, testing, and correction of defects.
- Guidelines and restrictions regarding changes to the contract scope,
with corresponding changes in schedule and price for the work.
- High-level schedule milestones and completion dates, as well as
reasons for excusable delays and any incentives or penalties.
- Terms of payment and/or allowable expenses for remuneration.
- Regulations regarding overtime, staff premiums, and other forms of
- Circumstances under which the acquirer may terminate the
contract, along with the terms of compensation under each
- Penalties for default -- that is failure to perform on the part of the
- Notification and resolution procedures for disputes.
- Product warranties provided by the supplier.
- Clear ownership provisions for the resulting product or portions of it
(e.g., source code for particular functions or components).
If this seems like a lot to digest and execute, it is! Even if they use a
progressive approach, companies will typically rely on standard boilerplate
clauses to fulfill many of these content requirements for the Head
Scope of a Contract Work Order
The scope of a contract work order (CWO) focuses on the technical
content of the next iteration in the series, the nature of which will change
as the project progresses to maturity. In general, and assuming the work
has been discussed and agreed-upon during original contract negotiations
or during the last stage of the previous CWO, as discussed earlier, the
CWO should contain the following:
- Instructions to proceed.
- Technical Instructions, or the increment's technical scope of work.
- Any special instructions relating to this increment, such as product
testing and acceptance.
- Requirements for CWO administration, such as coordination
requirements, and a schedule of milestones and delivery
instructions for this increment.
- Form of payment for this increment -- in other words, whether it is
cost reimbursable or fixed price.
- Acquirer's and supplier's authorizing signatures, typically of those at
the working management level.
This "two-tier" contracting approach lays out the main legal content at the
outset and greatly simplifies the content of CWOs, which represent
supplementary agreements. This enables the technical people on both
sides of the agreement to focus on content, to the advantage of both
parties as well as the end product.