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Software Development Contracts and Legal Issues Cost plus Fixed price Combined.

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Presentation on theme: "Software Development Contracts and Legal Issues Cost plus Fixed price Combined."— Presentation transcript:

1 Software Development Contracts and Legal Issues Cost plus Fixed price Combined

2 Cost-Plus Contracts Cost plus Is a contractual relationship in which the developer is paid for the cost of the services provided and in addition is allowed an agreed profit margin. Total only known after the project is completed Appropriate for small, undefined projects, for which it is difficult to identify the project’s requirement in advance. Used when the customer wants to retain control of the development process.

3 Cost-Plus Contracts The cost-plus should cover the following issues: List of persons to be assigned to the project Work definition The percent of time each person is assigned to the project Administrative overhead Authorized expenses to be reimbursed Billing procedure Payment procedure Termination procedure

4 Cost-Plus Contracts AdvantagesDisadvantages Provider No financial or business riskLow business profit Acquisition of knowledge and experience at the client’s expense Contract continuity is not assured, Staff discontent Customer Retention of control over development Increased development cost No commitment needed for full project contract Assumption of development risk Reduced risk ( no termination cost) Increased involvement Lack of well defined goals

5 Software Development Contracts and Legal Issues Fixed Price Contract There is a commitment by the developer to provide an agreed product or service for an agreed fee, within an agreed schedule. Fixed price contract must be well defined.

6 Fixed Price Contracts AdvantagesDisadvantages Provider Full control of the development process Assumption of development risk Potential higher business profitPotential friction with customer due to requirement changes and interpretation of requirements. Commitment for a complete project Customer Fixed budget for the projectIncreased development cost Minimum involvement in development Potential friction due to requirement interpretations Most of the development risk is transferred to the developer

7 Software Development Contracts and Legal Issues Combined Joint Venture Long-term commitments Outsourcing

8 RFP Request for Proposal / Invitation to Tender Before sending out RFP the following issues need to be considered  What are the objectives of the project?  Which organization are to be considered for the job  What type of contract will be offered  What responses must be received from developers so that they can be considered  When should the developer selection process be completed  When must the project be completed  Who, within the organization, will be assigned the responsibility of selecting the developer

9 RFP Preparing the RFP Statement of problem and project objective Technical requirements Administrative information Cost requirements Referenced documentation Required deliverables Required proposal format Submission schedule and decision schedule

10 The Proposal Proposal board Locate suitable RFP that are within the company’s line of business Within required size The proposal Preparation Team Technical knowledge Project management skill (estimation and planning) Financial knowledge knowledge (budgeting and financial planning) Familiarity with customer’s organization Experience in writing proposal

11 The Proposal The Proposal should address Who What Why How When How much

12 The Proposal Proposal components The technical proposal (What, how) The management proposal (how, when) The pricing proposal (how much) The statement of work (what, when) Executive summary Supplements Company background and experience Qualifications of key personnel Exhibits and relevant documents

13 The Proposal Review and Selection Vendor Selection Socio-political factors The selection board Evaluation Method  Variation of weighted techniques, whereby a number of factors score points that are then weighted and combined to provide an overall grade for the proposal.

14 The Proposal Review and Selection Evaluation Method ItemWeightRatingScoreDescription Technical35% Manageme nt 25% Cost30% Company background 10% Total100%X Ratings: 9-10 superior; 7-8 Good; 5-6 fair; 3-4 poor; 0-2 rejected

15 Legal Issues Contracts and agreements Software contractors, vendors, and suppliers Exchange of information with co- developers  Nondisclosure agreement (NDA) Employment agreement  Ownership of original ideas and software inventions, information disclosure,

16 Software Development Cycle Conception Software requirements Top level design Detailed design Implementation Integration Testing Maintenance

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