Software Development Contracts and Legal Issues

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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 projects
  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

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Cost-Plus Contracts
Advantages Disadvantages
Provider No financial or business risk Low business profit
Acquisition of knowledge and experience at the clients 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.

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Fixed Price Contracts
Advantages Disadvantages
Provider Full control of the development process Assumption of development risk
Potential higher business profit Potential friction with customer due to requirement changes and interpretation of requirements.
Commitment for a complete project

Customer Fixed budget for the project Increased development cost
Minimum involvement in development Potential friction due to requirement interpretations
Most of the development risk is transferred to the developer
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Software Development Contracts and Legal Issues

• Combined
• Joint Venture
• Long-term commitments
• Outsourcing

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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

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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

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The Proposal

• Proposal board
• Locate suitable RFP that are within the companys
  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 customers organization
• Experience in writing proposal

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The Proposal

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

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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

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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.

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The Proposal Review and Selection

• Evaluation Method

Item Weight Rating Score Description
Technical 35
Management 25
Cost 30
Company background 10
Total 100 X
Ratings 9-10 superior 7-8 Good 5-6 fair 3-4
poor 0-2 rejected
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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,

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