Domain II: Value-Driven Delivery: Part 2

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 Learning Objectives

By the end of this lesson, you will be able to:

Explain minimally viable product (MVP) and the steps involved in

project planning using MVP

Describe agile compliance and the key drivers

List some of the important review and feedback techniques

Interpret how to apply earned value management to agile

projects

Explain the various agile contracting methods

Minimally Viable Product
 Minimally Viable Product

A minimally viable product (MVP) is the smallest set of functionalities that

provides enough value to the customer.

Remember the Pareto’s law (80% of benefits come from 20% of requirements).

By focusing on MVP, the maximum

MVP improves the predictability and
value can be delivered early in the
flexibility of a project
project cycle
 Minimally Viable Product

The steps involved in project planning using MVP are as follows:

1 2 3 5
4
Accommodate
Determine MVP Introduce slack Manage change Increase MVP new features

Incrementally delivering the features that are part of MVP provides maximum value to stakeholders.
 Step 1: Determine MVP

Involves identifying the minimum set of features that will deliver value to the customer
and that the team can commit to deliver

Prioritized
feature list

Feature 1

Feature 2 Minimally
viable
product
Feature 3

Feature 4
Schedule/
budget cut-off
Feature 5
 Step 2: Introduce Slack

Prioritized
feature list

Feature 1
Introduce slack or buffer depending on factors,
Feature 2 Minimally
such as: Viable
• Duration of the project Product
Feature 3
• Number of change requests typically raised
during a project
Feature 4
• Reliability of an organization in delivering
products on schedule
• Type of the project Feature 5
Contingency/
Nice to have
Feature 6
Schedule/
budget cut-off
Feature 7
 Step 3: Manage Change

During the project, some change is inevitable.

Agile Approach

Fixed
Cost Time

Quality

Variable Features
 Step 3: Manage Change

Prioritized
feature list

Feature 1

Any new requirement that the product owner

Feature 2
includes in the MVP would result in:
New feature
• Reducing the slack
Feature 3
• Dropping a low-priority feature
Feature 4
Minimally
viable
Feature 5 product cut-off

Feature 6
Schedule/
budget cut-off
Feature 7
 Step 4: Increase the MVP

Prioritized
Feature List
• A new feature is added to the existing
Minimally Viable Product New feature
Feature 1
prioritized
• The new feature must be positioned
according to the customer’s prioritization Feature 2
• The team’s velocity increases as the project New feature
progresses
Feature 3
• More features can be included if the team
agrees
Feature 4
• In this case, the MVP can be increased Minimally
while supporting the current release date viable
Feature 5 product cut-off

Feature 6
Schedule/
budget cut-off
Feature 7
 Step 5: Accommodate the New Feature

Prioritized
Feature List

Feature 1
• The new feature will become a part of the
MVP Feature 2
• This new feature can be added by reducing
the slack or contingency New feature
• In this case, the schedule or budget cut-off
would not change Feature 3
Minimally viable
Feature 4 product cut-off

Feature 5
Schedule/
Feature 6 budget cut-off
Agile Compliance
Agile Compliance

• This requires agile projects to adhere to the prescribed

regulations or rules

• Compliance requirements must be prioritized alongside

other requirements

• A product must adhere to the rules that regulate the

market or are stipulated by the company

• These rules are set by the market or the government or

are dictated by the organization’s needs
Key Drivers of Agile Compliance

• Organizations have compliance standards, ranging

from branding and messaging to features and quality
of their products

• Governments require compliance in areas involving

finance, security, and standards for products that
could affect human health or safety

• Organizations should ensure an optimal level of

security and compliance without compromising
business agility or violating legal and moral
responsibilities
 Incremental Delivery

• Incremental delivery refers to the process of building products that could be

deployed at the end of one or more iterations

• Partial deliveries of the final product are made as early as possible if they are
beneficial to the business

• Incremental delivery helps build more features on the previously accepted solution.
This ensures the entire project is built on a strong foundation
 Benefits of Incremental Delivery

Early feedback helps in development of Early ROI can help finance the
the rest of the project rest of the project

Facilitates moving the product Enables easier fixes at

into service less cost
Review and Feedback

• Feedback is a mechanism to ensure what is delivered

is what is expected and desired

• The shorter the feedback loops, the greater the

opportunity to adjust to what is expected

• Agile emphasizes the importance of feedback loops

 Feedback Techniques

• A popular term used in agile development is IKIWISI or I’ll Know it When I See It

• Feedback techniques are used to confirm that what is being developed is what is required

• This ensures that business value can be confirmed and enhanced through frequent reviews and
feedback
 Feedback Techniques

Prototype Simulation Demonstration Evaluation

This is something It is developed on a The team showcases Feedback is gained

that a customer can computer and displayed the product during through surveys or
look at or even as a virtual scrum review interviews
touch representation of the
solution
 Feedback Techniques

The feedback systems built into the scrum methodology are as follows:

Daily feedback on Process feedback Product feedback

sprint planning during retrospectives after each sprint
Earned Value Management
Earned Value Management

• A technique that shows the progress of a project using

ratios and metrics

• Story points are used to track planned work against actual

work performed

• The end of the iteration is used as a checkpoint to calculate

the earned value and determine the status
Earned Value Management in Agile

• A story point is used as the measure of work planned

and work performed

• Each sprint boundary is the measuring point to plan

changes and reevaluate the earned value results

• An EVM like the PMP schedule and cost performance

indexes may not be applicable to agile projects

• However, there is frequent involvement of business

owners and specific durations for timeboxes
 Earned Value Management Terminologies

Planned Value (PV) The value of work planned to be accomplished based on the budget

Earned Value (EV) The integrated value of work actually accomplished based on the budget

Actual Cost (AC) The actual cost incurred for an increment of work

Budget at
The budget assigned to complete the work
Completion (BAC)
 Earned Value Management Terminologies

Estimate to The forecasted amount to complete the remaining work based on past
Complete (ETC) performance

Estimate at The forecasted total amount for all the work in the project plan based on the past
Completion (EAC) performance

Planned Story
Release Point Story points that are defined at the product backlog level for the release
(PSRP)

Expected Percent Current sprint

Complete (EPC) Total planned sprints

Actual Percent Story points completed

Complete (APC) Total planned story points
 Earned Value Metrics

Metric Formula Metric Analysis

BAC * Planned • Indicates how much value was planned to be

Planned Value
Percent Complete generated by a particular milestone or point in time
Formulas for calculating earned value metrics are given in the
following table:
BAC * Actual • Indicates how much value has actually been
Earned Value
Percent Complete generated at a particular milestone or point in time

EV – AC
Cost Variance • Measures cost efficiencies
EV
Cost Performance Index (CPI) • Indicates if the project is over budget or under budget
AC
Schedule Variance EV – PV • Measures schedule efficiency
Schedule Performance Index EV • Indicates how fast you are progressing against the
(SPI) PV rate of progress planned
• Indicates the forecasted amount to complete the
(BAC − EV)
ETC remaining work (assuming current cost performance
CPI will continue)

BAC • Indicates the forecasted cost for the total planned

EAC or AC+ETC
CPI work
 Planning Parameters of Earned Value Metrics

Budget calculations can be made using the agile parameters as follows:

BAC = Product backlog × Cost per point

Product backlog
Planned number of iterations =
Baseline velocity
 Earned Value Metrics for Agile

Agile projects often focus on the following key EVM definitions:

Product Backlog in Points Baseline Velocity

The total scope of development for the project is The planned value of the total number of points
presented as story points planned to be delivered or completed during each
iteration

Cost Per Point

An estimated cost for delivering a single point.

This would normally be based on the past
performance of the delivering organization
 Earned Value Metrics: Scenario

Calculate the budget at completion, number of iterations required, percentage of completion planned
for each iteration, and planned value per iteration from the following project information:
• Total product backlog: 200 points
• Velocity of the team: 25 story points
• Cost required to deliver a story point: $1,600
 Earned Value Metrics: Solution

Budget at completion = Cost required to deliver a story point x Total product backlog
= $1600 x 200 = $320,000

Total product backlog 200

Number of iterations = = =8
Velocity of the team 25

Velocity of the team 25

Planned percentage complete per iteration = = = 12.5%
Total product backlog 200

Planned value per iteration = Planned percentage complete per iteration x Budget at completion

= 12.5% x $320,000 = $40,000

 Earned Value Metrics: Interpretation

At the end of the first iteration, the following were reported:

• Actual costs (AC) = $30,000
• Points completed = 20 (10% of the total backlog)
• EV = APC x BAC = 10% x $320,000 = $32,000
• CPI = EV / AC = $32,000/$30,000 = 1.07
• SPI = EV / PV = $32,000/$40,000 = 0.80

With current performance, the project can be completed within the budget. However, it cannot meet
the project’s scheduled completion date.
Agile Contracts: Components
 Components of Agile Contracts

Agile contracts contain the agile nature of a project. An agile contract must contain the following:

Objectives Objectives of the project and cooperation between the companies

Project structure Scrum process, key roles, responsibilities, and outline of the structure of the project

Personnel responsible at the operational and escalation levels and their

Key personnel
requirements

Payment terms Payment and billing, including any bonus and penalty clauses

Termination clause Clauses governing the normal and early termination of the project

Civil liability limit, venue, severability, and others based on local law and legal
Legal details
customs
 Agile Contracting Methods

Agile methodologies can work with any form of contracts. Some of the contract types are as follows:

Time and Material with

Fixed Price or Fixed Time and Materials
Fixed Scope and a Cost
Scope (T and M)
Ceiling

Time and Material with

Bonus or Penalty
Variable Scope and a Rolling Agile Contracts
Clauses
Cost Ceiling
 Fixed-Price or Fixed-Scope Contract

Fixed price, fixed scope

• The relationship between the effort and the
revenue or profit for a fixed-price with a fixed-
scope contract is given Revenue
• In this contract, the amount charged by the Revenue is
vendor is fixed, so the revenue is fixed $$$ Profit constant,
• The profit decreases as the effort on the regardless of
project increases the effort
applied or
• Therefore, the risk of cost escalation is borne delivery date
by the seller
Effort
 Time and Materials (T and M) Contract

Time and Materials

• The relationship between effort, revenue, and
profit for time and materials contract is given
here
Revenue
• In a T and M contract, the seller’s revenue is
directly proportional to the effort $$$
• Each unit of the effort includes a profit margin. Profit
The profit also increases linearly with the effort
• The risk of cost and effort escalation is borne
by the buyer Effort
 T and M with Fixed Scope and Cost Ceiling

Time and Materials with

• Time and materials contract with a fixed scope is
Fixed Scope and Cost Ceiling
given
• The amount that the seller can bill for is capped
at a certain ceiling
• The seller’s revenue and profit increase until the
cost ceiling is reached, beyond which the profits
start diminishing $$$ Revenue Work stops
when all the
• The buyer is warranted against an indefinite requirements
extension of the project and a penalty is imposed Profit have been met
on the seller if there is an extension beyond the
agreed point
Effort
 Bonus or Penalty Clauses

Bonus or penalty clauses are variants of fixed-price contract, which states the following:

If the project is delivered on time There is neither bonus nor penalty to the seller

The seller is liable to get an additional amount as

If the project is delivered prior to the deadline
bonus, as agreed with the buyer

The seller is liable to pay penalty to the buyer, as

If the project is delivered post the deadline
the buyer is impacted due to the delayed delivery

• The T and M contracts can be tailored by adding bonus and penalty clauses
• The hourly rates paid per resource would change depending on whether the team
completes the work earlier or later than the specified timeline
 Rolling Agile Contracts

Generic name given to hybrid contract types that combine the elements of other
contracting methods

• Agile delivery models are used to create win-win

situations for both the client and the supplier

• For example, a bonus may be given if the project

is completed on time
 Terms Used in Agile Contracts

Specific terms can be included in a contract to reflect the agility of the project.

Some of the terms could be as follows:

• Buyer and seller agree that work will be delivered

incrementally, and the onus of providing timely feedback on
the delivered increments is on the buyer
• There may be more intermediate deliveries and therefore
payments can also be released faster
• Buyer and seller can agree on a fixed cost for each increment
(sprint or iteration)
• The buyer may be given an option to terminate projects early
by paying reasonable compensation
• Agility in contracting makes the process more flexible. Think
about how you can include this in your projects
Knowledge Check
Knowledge
Check
How does agile deal with compliance requirements?
1

A. They must be managed as part of the overall deliverables of the project.

B. Agile projects are not a good fit for projects with compliance requirements.

C. Agile projects manage compliance by treating the stories as epics.

D. Compliance would be a risk that should be documented in the risk register.

 Knowledge
Check
How does agile deal with compliance requirements?
1

A. They must be managed as part of the overall deliverables of the project.

B. Agile projects are not a good fit for projects with compliance requirements.

C. Agile projects manage compliance by treating the stories as epics.

D. Compliance would be a risk that should be documented in the risk register.

The correct answer is A

Agile projects must manage compliance requirements as part of the overall deliverables of the project.
Knowledge
A company must complete a high-risk project. They have decided to outsource the
Check
development. What would be the best contracting model to minimize financial risk to
2
the company?

A. Time and material

B. Fixed price

C. Time and material with a bonus clause

D. Cost plus
 Knowledge
A company must complete a high-risk project. They have decided to outsource the
Check
development. What would be the best contracting model to minimize financial risk to
2
the company?

A. Time and material

B. Fixed price

C. Time and material with a bonus clause

D. Cost plus

The correct answer is B

Fixed price contract is the best way to manage the risk of this type of project.
Knowledge
Check
If the CPI of a project is 1.1 and the SPI is 0.8, what is the inference about the project?
3

A. It is over budget and behind schedule

B. It is under budget and ahead of schedule

C. It is under budget and behind schedule

D. It is over budget and ahead of schedule

 Knowledge
Check
If the CPI of a project is 1.1 and the SPI is 0.8, what is the inference about the project?
3

A. It is over budget and behind schedule

B. It is under budget and ahead of schedule

C. It is under budget and behind schedule

D. It is over budget and ahead of schedule

The correct answer is C

The project is under budget as the CPI is greater than one and behind schedule because the SPI is less than one.
 Key Takeaways

A Minimally Viable Product (MVP) is the smallest set of

functionality and involves five steps in project planning:
Determine MVP, introduce slack, manage change, increase
MVP, and accommodate new features.

Agile compliance is a concept which necessitates the agile

projects to adhere to the prescribed regulations or rules.

Incremental delivery refers to the process of building

products that could be deployed at the end of one or more
iterations.
 Key Takeaways

Agile recommends an incremental delivery, backed up by

continuous feedback from stakeholders through prototypes,
simulations, demonstrations, and evaluations.

Earned Value Management (EVM) is a technique that shows

progress of a project using ratios and metrics.

Agile projects must demonstrate that they satisfy the

market, organization, and government’s compliance
requirements.