Software Project Management

(Contract Management )
by
Dr. Dilkeshwar Pandey
(Professor-CSE)
KIET Group of Institutions
 Acquiring software from external
supplier

This could be:

• a bespoke system - created specially for
the customer
• off-the-shelf - bought ‘as is’
• customised off-the-shelf (COTS) - a core
system is customised to meet needs of a
particular customer
SPM (6e) Managing contracts© The McGraw-Hill Companies, 2017 2
• fixed price contracts
Types of contract
• time and materials contracts
• fixed price per delivered unit

Note difference between goods and

services
Often licence to use software is bought
rather than the software itself

SPM (6e) Managing contracts© The McGraw-Hill Companies, 2017 3

 Fixed price contracts
Advantages to customer
• known expenditure
• supplier motivated to be cost-
effective

SPM (6e) Managing contracts© The McGraw-Hill Companies, 2017 4

 Fixed price contracts
Disadvantages
• supplier will increase price to meet
contingencies
• difficult to modify requirements
• cost of changes likely to be higher
• threat to system quality
SPM (6e) Managing contracts© The McGraw-Hill Companies, 2017 5
 Time and materials
Advantages to customer
• easy to change requirements
• lack of price pressure can assist
product quality

SPM (6e) Managing contracts© The McGraw-Hill Companies, 2017 6

 Time and materials
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
SPM (6e) Managing contracts© The McGraw-Hill Companies, 2017 7
 Fixed price per unit delivered
FP count Design implement- total cost/FP
cost/FP ation cost/FP
to 2,000 $242 $725 $967
2,001- $255 $764 $1,019
2,500
2,501- $265 $793 $1,058
3,000
3,001- $274 $820 $1,094
3,500
3,501- $284 $850 $1,134
4,000
SPM (6e) Managing contracts© The McGraw-Hill Companies, 2017 8
• Estimated
Fixedsystem size 2,600
price/unit FPs
example
• Price
• 2000 FPs x $967 plus
• 500 FPs x $1,019 plus
• 100 FPs x $1,058
• i.e. $2,549,300
• What would be charge for 3,200
FPs?
SPM (6e) Managing contracts© The McGraw-Hill Companies, 2017 9
Advantages for Fixed price/unit
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 10
 Fixed price/unit
Disadvantages
• difficulties with software size
measurement - may need
independent FP counter
• changing (as opposed to new)
requirements: how do you charge?

11
 The tendering process
• Open tendering
• any supplier can bid in response to the
invitation to tender
• all tenders must be evaluated in the
same way
• government bodies may have to do this
by local/international law (including EU
and WTO, World Trade Organization,
requirements
12
 The tendering process
• Restricted tendering process
• bids only from those specifically
invited
• can reduce suppliers being
considered at any stage
• Negotiated procedure
• negotiate with one supplier e.g. for
extensions to software already
supplied 13
 Stages in contract placement
requirements
analysis

evaluation
plan

invitation to
tender

evaluation of
proposals
14
 Requirements document:
sections
• introduction
• description of existing system and current
environment
• future strategy or plans
• system requirements -
• mandatory/desirable features
• deadlines
• additional information required from
bidders
15
 Requirements
• These should 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

16
 Evaluation plan
• How are proposals to be evaluated?
• Methods could include:
• reading proposals
• interviews
• demonstrations
• site visits
• practical tests 17
 Evaluation plan -contd.
• 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?
18
 Invitation to tender (ITT)
• Note that bidder is making an offer in
response to ITT
• acceptance of offer creates a contract
• Customer may need further information
• Problem of different technical solutions to
the same problem

19
 Memoranda of agreement
• Customer asks for(MoA)
technical proposals
• Technical proposals are examined and
discussed
• Agreed technical solution in MoA
• Tenders are then requested from suppliers
based in MoA
• Tenders judged on price
• Fee could be paid for technical proposals by
customer
20
 Contracts
• A project manager cannot be expected
to be a legal expert – needs advice
• BUT must ensure contract reflect true
requirements and expectations of
supplier and client

21
 Contract checklist
• Definitions – what words mean precisely
e.g. ‘supplier’, ‘user’, ‘application’
• Form of agreement. For example, is this a
contract for a sale or a lease, or a license to
use a software application? Can the license
be transferred?
• Goods and services to be supplied – this
could include lengthy specifications
• Timetable of activities
• Payment arrangements – payments may be
tied to completion of specific tasks
22
• Ownership
Contract checklist - continued
of software
• Can client sell software to others?
• Can supplier sell software to others?
Could specify that customer has
‘exclusive use’
• Does supplier retain the copyright?
• Where supplier retains source code, may
be a problem if supplier goes out of
business; to circumvent a copy of code
could be deposited with an escrow 23

service
 Contract checklist
• Environment - continued
– for example, where
equipment is to be installed, who is
responsible for various aspects of
site preparation e.g. electricity
supply?
• Customer commitments – for
example providing access,
supplying information
• Standards to be met 24
 Contract management
Some terms of contract will relate to
management of contract, for example,
• Progress reporting
• Decision points – could be linked to
release of payments to the contractor
• Variations to the contract, i.e. how are
changes to requirements dealt with?
• Acceptance criteria
25
 How would you evaluate the
following?

• usability of an existing package

• usability of an application yet to be built
• maintenance costs of hardware
• time taken to respond to requests for software
support
• training
26
 Contract management

• Contracts should include agreement

about how customer/supplier
relationship is to be managed e.g.
• decision points - could be linked to
payment
• quality reviews
• changes to requirements 27
 References:

1. B.Hughes, M. Cotterell, R. Mall, Software

Project Maagement, Fifth Edition,
McGraww Hill Education (India) Pvt.
Ltd., 2018.
2. NPTEL Video Lecture (SPM).