Director of IT at City and County of San Francisco

Through this article, Sean Finley explores the challenges of aligning Agile methodologies with traditional Waterfall contract structures in project management. By examining real-world experiences, she highlights the critical importance of establishing mutually agreeable milestones that reflect Agile principles.

What do you do when you have a contract that states the vendor will manage the project via agile ideology, yet the payments and structure of the contract are tied tightly with Waterfall ideology? Right now, it seems the sales teams’ developing contracts are not in sync with the operation teams managing the work.  Many contracts remain tied to milestone payments, which is common when managing projects with a Waterfall methodology, yet the teams are using Agile project management operationally. 

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  ​When faced with a misalignment between Agile methodology and Waterfall contract structures, going back to the drawing board is essential for success.

This is especially true in the public sector as there are many, often archaic, contract guidelines to ensure that contracts are managed in a fair and equitable process.

What we saw happen with a recent contract is we began working on the project using Agile methodology, using scrums and making changes as we went along.  However, when pressed for our first milestone payment, we learned that a lot of the work tied to the milestone had not yet been done.  This led to some frustration as we could not pay for work that was not completed yet; work was being done.  We then moved to a modified Agile and Waterfall approach, which allowed us to make payments but slowed progress and caused more frustration.

After much conversation, we learned that you cannot have a mixed methodology and make appropriate progress simultaneously.  Having one foot in the Agile pool and one foot in the Waterfall pool did not work.  When you hit this wall, you must go back to scratch and redo the original contract based on mutually agreeable milestones tied to sprints, story points and error rates, like, how many bugs are being experienced vs what has been agreed to be mutually acceptable.

Beyond agreeing to new contract clauses, you also need to go back and redo the project plan in its entirety.  The project plan is crucial to obtaining executive buy-in for the new terms of the agreement.  In many cases, executives agreeing to these new agile-based milestones need to be educated on the process and the project plans are usually an effective form of communication because they are used to project plans.

Now that one project is back on track, the real work can begin.  Implementation partners must return to their sales teams and redo their contract templates.  These templates must be tied to Agile-based performance metrics and not Waterfall-based milestones.  On the client side, public sector agencies need to go back to contract management offices and educate them on how to assess and manage Aagile-based contracts so that issues of the past do not become issues in the future.