Because government contracts typically pre-suppose a waterfall approach, new approaches are required in order to work within these contracts in an agile manner, according to CIO.
Organizations struggle with traditional fixed price tenders because they are trying to get the best value for money solution, along with a quickly delivered, high quality end product.
One way to provide better budget estimates and make room for agile is to use “function points” – units of measure to express the amount of business functionality an information system as a product provides to a user.
From the article:
[A] tender which requires a tenderer to bid based on function points is more likely to deliver a system which will satisfy client needs and represent good value for money, as the tenderer is providing a price per function point for a system of a certain size and type not a price for a completed system with functionality defined at the time of bidding.
Read the full article: Is a ‘fixed price’ Agile contract possible? | CIO