Although Agile is a well established software development paradigm, major concerns arise when it comes to contracting issues between a software consumer and a software producer. How to contractualize the Agile production of software, especially for security & mission critical organizations, which typically outsource software projects, has been a major concern since the beginning of the “Agile Era.” In literature, little has been done, from a foundational point of view regarding the formalization of such contracts. Indeed, when the development is outsourced, the management of the contractual life is non–trivial. This happens because the interests of the two parties are typically not aligned. In these situations, software houses strive for the minimization of the effort, while the customer commonly expects high quality artifacts. This structural asymmetry can hardly be overcome with traditional “Waterfall” contracts. In this work, we propose a foundational approach to the Law & Economics of Agile contracts. Moreover, we explore the key elements of the Italian procurement law and outline a suitable solution to merge some basic legal constraints with Agile requirements. Finally, a case study is presented, describing how Agile contracting has been concretely implemented in the Italian Defense Acquisition Process. This work is intended to be a framework for Agile contracts for the Italian public sector of critical systems, according to the new contractual law (Codice degli Appalti). ICSE-SEIS’18, May 27-June 3 2018, Gothenburg, Sweden © 2018 Copyright held by the owner/author(s). Publication rights licensed to Association for Computing Machinery. ACM ISBN 978-1-4503-5661-9/18/05 https://doi.org/10.1145/3183428.3183435 Preprint: https://drive.google.com/file/d/1swAO7r0yJXHwiH8kkHtsqH5sm75OoVXd/view?usp=drivesdk

1. CONTRACTING AGILE DEVELOPMENTS
for Mission Critical Systems in the Public Sector
DANIEL RUSSO - UNIV. BOLOGNA & CINI
G. TACCOGNA, P. CIANCARINI, A. MESSINA, G. SUCCI

3. KEY DIFFERENCES
WATERFALL
▸ (Supposed) clear definition of
development costs.
▸ Early & fixed requirement
definition.
▸ Predefined schedule.
▸ Tracing liability if something goes
wrong.
▸ Who is to blame?
▸ Variable costs.
▸ Late & flexible requirements
definition.
▸ Flexible schedule.
▸ Shared liability.
▸ Code ownership principle.
AGILE

4. WHY DO WE NEED CONTRACTS?
BENEFITS
▸ Coordination of independent
actions in multiple equilibria.
▸ Nash equilibrium - Prisoner’s
dilemma.
▸ Exchange implementation
with information asymmetry.
▸ Product warranty
▸ Specification costs.
▸ Impossible to define all
contingencies upfront.
▸ Dynamic inconsistency.
▸ Vendor’s lack of motivation to
increase quality.
▸ Unverifiable actions.
▸ Hard to find out breach of contract.
DRAWBACKS

5. HOW TO SOLVE CONTRACTUAL DRAWBACKS WITH AGILE?
MITIGATION AND ALIGNMENT OF DIVERGENT INTERESTS
▸ Realistic expectations.
▸ Continuous specification.
▸ - Specification costs
▸ Bonus-malus reward system.
▸ - Unverifiable actions
▸ - Dynamic inconsistency

6. THE PRINCIPLES
PROCUREMENT LAW’S BASIC CONSTITUTIONAL PRINCIPLES
▸ It’s taxpayers’ money, so…
▸ No contractual freedom like in the private sector.
▸ Free competition.
▸ Equal treatment & Non-Discrimination.
▸ Transparency & Accountability.
▸ Adequacy & Proportionality.

7. HOW DOES AN AGILE CONTRACT FOR PUBLIC ADMINISTRATIONS LOOKS LIKE?

8. PROCUREMENT GUIDELINES FOR AGILE CONTRACTS
THE OBJECT
▸ The contractual object has to be
determinate or determinable.
▸ A collaboration program can not
be agreed upfront, if it is not
sufficiently determined.
▸ Agile contracts need to be defined
ex ante at least in functional terms,
refining requirements afterwards.

9. PROCUREMENT GUIDELINES FOR AGILE CONTRACTS
THE STRUCTURE
▸ Clear and defined upfront.
▸ Two-level contractual governance.
▸ 1st: General terms, customer’s
needs, and context.
▸ 2nd: Specific for each iteration.
▸ Time limitation.

10. PROCUREMENT GUIDELINES FOR AGILE CONTRACTS
THE COMPETITION
▸ Competition terms as open as
possible.
▸ Contractual execution clear and
defined.
▸ An efficient and effective selection
of the general elements is pivotal
to select the best partner.

11. PROCUREMENT GUIDELINES FOR AGILE CONTRACTS
ECONOMIC VALUE
▸ The determination of the economic
value must be clear and effective.
▸ Binding rules of compensation.
▸ Clear compensation calculation.
▸ Bonus-Malus quality provision.

12. PROCUREMENT GUIDELINES FOR AGILE CONTRACTS
PROVISION OF ACCOUNTABLE VARIATIONS
▸ Provide flexibility in the contractual
partnership.
▸ Applicable if 1st level contract
needs some changes.
▸ Several limitation:
▸ if the object is heavily extended.
▸ if the economic equilibrium
changes significantly.
▸ …

13. PROCUREMENT GUIDELINES FOR AGILE CONTRACTS
VERIFICATION
▸ Does the deliverable fulfill
customer’s expectations?
▸ Inspection and verification
procedure should be stated.
▸ Which tools will be used?

14. PROCUREMENT GUIDELINES FOR AGILE CONTRACTS
STRUCTURE OF THE CONTRACT

15. POSSIBLE IMPLEMENTATION
FUNCTION POINTS
▸ Provide objectivity in the
evaluation process,
independently from the used
technology.
▸ Known and already used within
the public sector.
▸ Quality compensation with
Bonus-Malus evaluation.
▸ Clear temporal duration.
▸ Stakeholders commitment.
▸ Quality compensation with
Bonus-Malus evaluation.
SCRUM SPRINTS

16. CASE STUDY
LC2EVO ITA ARMY
▸ 87 Weeks of development.
▸ 2.6 Million Euro.
▸ +50% incremental factor
(effectiveness and risk reduction),
with respect to Waterfall.
▸ Important cost reduction.

17. DANIEL.RUSSO@UNIBO.IT
Enjoy ICSE 2018!
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