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Agile Review Series: Agile Procurement & Contracts
Full 150 Agile Review & Questions Video: https://youtu.be/Z-teNScLspI
How do Agile teams work with vendors while staying flexible and value-focused? In this video, we’ll explore Agile Procurement & Contracts, covering how Agile organizations manage vendor relationships, contract design, and performance in adaptive project environments.
This is the eleventh video in our 15-part Agile Review & Question series. You’ll learn how Agile-friendly contracts — such as time-and-materials with incentives, fixed-price with Agile milestones, and incremental delivery agreements — support collaboration, transparency, and continuous value delivery. Then, you’ll test your knowledge with 10 scenario-based practice questions (Questions 101–110) with detailed explanations.
✅ You’ll learn how to:
• Apply Agile contract models that balance flexibility and accountability
• Collaborate with vendors as part of the Agile process
• Negotiate and manage contracts to support iterative delivery
• Handle vendor misalignment and integrate third-party work smoothly
• Manage change and value delivery across procurement boundaries
By practicing these questions, you’ll strengthen your ability to handle Agile procurement and contract scenarios — a key skill area for both the PMP® exam and real-world project management.
Chapters:
0:00 Agile Procurement & Contracts Overview
2:31 Question 101
4:43 Question 102
Show More Show Less View Video Transcript
0:00
The topic we'll cover is agile
0:01
procurement and contracts. And this is
0:04
all about how agile organizations
0:06
approach vendor relationships and
0:07
contract design in ways that support
0:10
flexibility, collaboration, and
0:12
incremental delivery. In traditional
0:14
procurement, contracts often lock in
0:16
scope, price, and delivery dates before
0:19
work even starts. That's a problem in
0:21
agile because we learn and adapt as the
0:24
project unfolds. The PMP exam will test
0:27
your ability to recognize how agile
0:29
friendly contracts create room for
0:31
change while still managing risk and
0:33
accountability. In agile procurement,
0:36
contracts are designed to align vendors
0:38
with the delivery of value, not just the
0:40
completion of tasks. Instead of rigid
0:42
one-time handoffs, we want partnership
0:45
over control. That means vendors and
0:47
internal teams work toward shared
0:49
outcomes, iterating together, and
0:51
incorporating feedback along the way.
0:54
You'll want to understand contract
0:55
models that work well in agile
0:57
environments such as time and materials
1:01
TNM with performance incentives which
1:03
pay for effort and reward early value
1:06
delivery or quality. Fixed price with
1:09
agile milestones where payment is tied
1:11
to achieving value-based outcomes not a
1:14
single final deliverable. Incremental
1:17
delivery agreements where the vendor
1:18
delivers in small batches allowing for
1:21
inspection, adaptation, and scope
1:23
adjustments. Procurement in agile also
1:26
means planning with adaptability. Teams
1:28
might onboard vendors mid- project,
1:31
change vendors as needs evolve, or
1:33
adjust the scope of work based on
1:35
priorities uncovered during delivery. On
1:38
the exam, expect questions about
1:40
collaborating with vendors as true
1:41
members of the agile process rather than
1:44
as outsiders. That includes involving
1:46
them in planning sessions, reviews, and
1:49
even retrospectives so they understand
1:51
the product vision and can adapt
1:53
quickly. You should also be comfortable
1:55
with concepts like contract language
1:57
that supports change techniques for
2:00
resolving vendor misalignment and
2:02
negotiation strategies that balance
2:04
flexibility with shared risk. Finally,
2:07
agile procurement isn't about losing
2:09
control. It's about maintaining
2:11
transparency and delivering value across
2:13
organizational boundaries without
2:15
sacrificing adaptability. Now, we'll go
2:18
through 10 practice questions to test
2:20
your understanding of agile contract
2:22
models, procurement strategy, vendor
2:24
collaboration, and how to handle change
2:27
through iterative agreements. Let's get
2:29
into the first question in this topic.
2:32
Question 101. A large financial services
2:35
company is engaging a software vendor
2:37
for a multi-release product delivered
2:39
using scrum. The business unit wants
2:41
flexibility to adapt scope based on
2:43
evolving regulations while procurement
2:46
leadership insists on clear
2:47
accountability for budget and delivery.
2:50
Which contract approach would best
2:52
balance agile values with procurement's
2:54
need for control? A. Time and materials
2:57
contract with no spending cap to allow
2:59
full flexibility in changing scope. B.
3:02
Fixed price contract with all features
3:05
and deliverables agreed before
3:06
development begins. C. Incremental
3:09
delivery contracts with payments tied to
3:11
completion of prioritized features. D.
3:14
Cost plus incentive fee contract with
3:17
bonuses based on productivity metrics
3:19
and story points completed. You can
3:22
pause the video here if you need more
3:24
time to work on the question. The
3:26
correct answer is C. This question tests
3:29
your understanding of selecting contract
3:31
types that support agile principles
3:34
while meeting traditional procurement
3:35
concerns. Agile friendly contracts
3:38
should promote adaptability,
3:40
transparency, and value delivery while
3:42
still managing cost and performance
3:44
expectations. Choice C is the best
3:47
option because incremental delivery
3:48
contracts tie payments to completed high
3:51
priority features, ensuring the vendor
3:53
is rewarded for delivering value early
3:55
and often. This structure also makes it
3:58
easier to adapt to evolving requirements
4:00
without renegotiating the entire
4:02
contract. Choice A is incorrect. While
4:06
it offers maximum flexibility, a time
4:08
and materials contract without a
4:10
spending cap exposes the buyer to cost
4:12
overruns and lacks the accountability
4:14
procurement is seeking. Choice B is
4:17
incorrect. A fixedpric contract with all
4:20
deliverables defined upfront removes the
4:22
flexibility agile needs and makes it
4:24
harder to adapt to change without formal
4:26
change requests. Choice D is incorrect.
4:30
While cost plus incentive fee contracts
4:32
can encourage performance, tying bonuses
4:34
to metrics like story points can promote
4:37
the wrong behaviors and do not directly
4:39
ensure value delivery. Let's move on to
4:42
the next question if you're ready.
4:43
Question 102. A startup is partnering
4:47
with a software vendor to launch a new
4:49
mobile app. The startup wants to release
4:51
usable features to market every few
4:54
weeks to attract early adopters and
4:56
investors while keeping the option to
4:58
pivot the product direction based on
5:00
analytics. The vendor is open to this
5:03
but wants to ensure they are compensated
5:05
regularly for completed work. Which
5:08
contract approach would best meet the
5:10
needs of both parties? A fixedpric
5:13
contract covering all planned features
5:15
with partial payments released after
5:17
every month of work to manage cash flow.
5:20
B incremental delivery contract with
5:22
payments tied to acceptance of each
5:25
production ready release. C. Time and
5:28
materials contract with a not to exceed
5:30
limit and progress demos at the end of
5:32
each month. D. Retainerbased contract
5:36
providing upfront payment for a block of
5:38
sprints with scope adjustments allowed
5:40
only at the end of the block. You can
5:42
pause the video here if you need more
5:44
time to work on the question. The
5:46
correct answer is B. This question tests
5:49
your understanding of how incremental
5:50
delivery contracts align with agile's
5:53
focus on delivering value frequently
5:55
while maintaining flexibility. These
5:57
contracts link payment to completed
5:59
usable deliverables, giving both parties
6:01
clear checkpoints to confirm progress
6:03
and adjust scope as needed. Choice B is
6:06
the best option because it ensures the
6:08
vendor gets paid for each production
6:10
ready release while allowing the startup
6:12
to pivot direction based on market
6:14
feedback. This balances predictable
6:16
vendor compensation with agile
6:18
adaptability. Choice A is incorrect.
6:21
While monthly partial payments provide
6:23
steady cash flow, a fixedpric contract
6:26
locks in scope, making it expensive and
6:29
time consuming to adapt the product as
6:32
priorities change. Choice C is
6:34
incorrect. Time and materials with a not
6:37
to exceed limit controls cost, but still
6:39
pays based on effort rather than
6:41
results, which may reduce the vendor's
6:43
focus on delivering usable features
6:45
quickly. Choice D is incorrect. A
6:48
retainer for a block of sprints gives
6:50
the vendor upfront payment but delays
6:52
scope adjustments until the end of the
6:54
block, limiting the ability to respond
6:56
quickly to market feedback. Let's move
6:58
on to the next question if you're ready.
7:01
Question 103. During a complex agile
7:04
program, your organization is working
7:06
with an external vendor to build
7:08
critical components that must integrate
7:09
seamlessly with the in-house team's
7:12
work. The vendor delivers on time but
7:14
often misses subtle requirements leading
7:16
to costly rework. The vendor insists
7:19
that all communication go through their
7:22
account manager which slows issue
7:24
resolution. What should the project
7:26
manager encourage to improve
7:28
collaboration and reduce integration
7:30
issues? A. Require the vendor to submit
7:34
detailed user story acceptance
7:36
documentation before every sprint review
7:38
to confirm understanding of
7:40
requirements.
7:42
B. Integrate vendor representatives
7:44
directly into relevant agile ceremonies
7:46
to enable real-time communication and
7:48
feedback. C. Hold a dedicated
7:51
requirement alignment meeting with the
7:53
vendor at the start of each sprint to
7:55
reduce misinterpretation risks. D.
7:58
Assign a dedicated internal liaison to
8:00
consolidate all vendor communication
8:02
into a single weekly update. You can
8:05
pause the video here if you need more
8:07
time to work on the question. The
8:09
correct answer is B. This question tests
8:12
your understanding of vendor
8:13
collaboration in agile environments.
8:16
Agile emphasizes direct communication,
8:18
transparency, and frequent feedback to
8:20
ensure shared understanding and reduce
8:22
waste. Choice B is the best option
8:25
because integrating vendor
8:27
representatives into agile ceremonies
8:29
such as sprint planning, daily standups,
8:31
and sprint reviews provides direct
8:33
access to the team, speeds up
8:35
clarification, and helps catch
8:37
misunderstandings early, reducing costly
8:39
rework. Choice A is incorrect. While
8:42
detailed acceptance documentation can
8:45
clarify expectations, it relies on
8:47
written communication alone, which is
8:49
slower and more prone to
8:50
misinterpretation than realtime
8:52
dialogue. Choice C is incorrect. A
8:56
requirement alignment meeting at the
8:58
start of each sprint can help, but
9:00
limiting collaboration to a single touch
9:02
point misses the benefits of ongoing
9:05
iterative communication throughout the
9:07
sprint. Choice D is incorrect. Assigning
9:10
a single liaison consolidates
9:12
communication but also adds a
9:13
bottleneck, delaying the flow of
9:15
information and reducing opportunities
9:17
for direct interaction. Let's move on to
9:20
the next question if you're ready.
9:22
Question 104.
9:24
Midway through an agile project, a key
9:26
vendor proposes a change that could
9:27
improve performance but will delay
9:29
delivery by two sprints. The client is
9:31
open to it but wants to confirm the
9:33
impact before deciding. What should the
9:36
project manager do next? A. Agree with
9:39
the vendor to proceed with the change
9:41
immediately and inform stakeholders
9:42
during the next sprint review. B. Work
9:45
with the vendor and team to assess the
9:47
changes impact on scope, schedule, and
9:50
value before seeking client approval. C.
9:54
Ask the vendor to submit the change
9:56
through the formal contract change
9:57
control process to ensure documentation
9:59
and compliance. D. Defer the change to a
10:03
future release to protect the current
10:04
delivery commitments and avoid
10:06
disrupting velocity. You can pause the
10:09
video here if you need more time to work
10:11
on the question. The correct answer is
10:13
B. This question tests your
10:16
understanding of managing change with
10:18
third parties in agile projects. Agile
10:21
promotes collaboration, transparency,
10:23
and informed decision-making, especially
10:25
when external vendors are involved.
10:28
Choice B is the best option because it
10:30
ensures that the vendor team and
10:32
stakeholders have a clear understanding
10:33
of the changes impact before committing.
10:36
This collaborative evaluation aligns
10:38
with agile's emphasis on adapting while
10:40
still delivering value. Choice A is
10:43
incorrect. While collaborating with the
10:46
vendor shows partnership, proceeding
10:48
before fully assessing the impact risks
10:51
scope creep, missed deadlines, and
10:54
reduced trust with the client. Choice C
10:57
is incorrect. Following the formal
11:00
contract change process ensures
11:02
documentation, but may slow
11:03
decisionmaking and discourage
11:05
collaborative exploration of the changes
11:07
benefits. Choice D is incorrect.
11:10
Deferring the change protects short-term
11:13
commitments, but misses the opportunity
11:15
to incorporate potentially high value
11:18
improvements when they are most
11:20
beneficial. Let's move on to the next
11:22
question if you're ready. Question 105.
11:26
Your organization is engaging a vendor
11:28
under a time and materials contract to
11:30
develop an agile solution. Leadership is
11:33
concerned about cost overruns and wants
11:36
to motivate the vendor to deliver high
11:38
priority features quickly without
11:40
sacrificing quality. Which contract
11:43
approach would best address this
11:45
concern? A. Add a penalty clause for any
11:48
sprint that does not meet the planned
11:51
velocity. B. Negotiate a blended rate
11:54
with a cap on total hours while offering
11:56
bonuses for meeting quality and delivery
11:59
targets. C. Include performance-based
12:02
incentives tied to the timely delivery
12:04
of accepted high value features. D.
12:07
Switch to a fixed price contract with
12:10
phase deliverables to allow some
12:12
flexibility in scope adjustments. You
12:14
can pause the video here if you need
12:16
more time to work on the question. The
12:18
correct answer is C. This question tests
12:21
your understanding of time and materials
12:24
contracts with performance incentives in
12:26
agile. While TNM contracts provide
12:29
flexibility, they can lead to cost
12:31
concerns unless paired with mechanisms
12:33
that encourage efficiency and quality.
12:36
Choice C is the best option because
12:38
tying incentives to the timely delivery
12:40
of accepted high-v value features
12:42
motivates the vendor to prioritize work
12:44
that delivers measurable business value
12:47
without sacrificing quality. This aligns
12:49
payment with outcomes rather than
12:51
effort. Choice A is incorrect. Penalty
12:54
clauses based solely on velocity may
12:56
drive the vendor to focus on output over
12:59
value, potentially lowering quality and
13:01
encouraging metric manipulation. Choice
13:03
B is incorrect. A blended rate with capp
13:06
hours controls costs but still bases
13:08
payment on time, not value, which may
13:12
reduce urgency in delivering the most
13:14
important features. Choice D is
13:17
incorrect. A fixedpric contract with
13:20
phase deliverables can create
13:22
checkpoints but still limits
13:24
adaptability to changing priorities and
13:26
can lead to contentious change
13:28
negotiations. Let's move on to the next
13:31
question if you're ready. Question 106.
13:34
A manufacturing company awards a vendor
13:36
a fixed price contract to deliver a
13:38
scheduling system to satisfy executives.
13:40
Progress must be visible at regular
13:43
intervals, but the product owner wants
13:44
the flexibility to rep prioritize
13:46
features after each release. The vendor
13:48
is open to agile delivery, but wants
13:51
clear payment terms. Which contract
13:53
structure best meets these needs? A
13:56
fixedpric contract with milestone
13:58
payments based on agreed calendar dates
14:01
to ensure predictable cash flow for the
14:03
vendor. B. Fixed price contract for the
14:06
full scope with all changes managed
14:08
through formal contract amendments to
14:10
maintain cost certainty. C. Fixed price
14:13
contract that pays equal monthly
14:15
installments with scope adjustments
14:17
permitted only at the mid- project
14:19
review. D. Fixed price contract with
14:22
payments tied to the delivery and
14:24
acceptance of prioritized feature sets
14:26
at predefined release points. You can
14:29
pause the video here if you need more
14:30
time to work on the question. The
14:32
correct answer is D. This question tests
14:36
your understanding of fixedpric
14:37
contracts with agile milestones. The
14:39
challenge in these scenarios is to
14:41
balance predictable payment schedules
14:43
with agile's ability to adjust
14:45
priorities between releases. Choice D is
14:48
the best option because linking payments
14:50
to accepted prioritized feature sets
14:52
delivered at agreed release points
14:54
ensures that value is delivered
14:55
incrementally while still giving the
14:57
vendor predictable payment triggers.
14:59
This supports flexibility for the
15:01
product owner and transparency for
15:03
executives. Choice A is incorrect. While
15:06
calendar-based milestone payments offer
15:08
predictable cash flow, they don't
15:10
guarantee that working valuable features
15:12
are delivered at each payment point.
15:15
Choice B is incorrect. Managing all
15:17
changes through formal contract
15:19
amendments provides cost certainty but
15:21
limits agile adaptability, making it
15:24
harder to rep prioritize after each
15:26
release. Choice C is incorrect. Equal
15:29
monthly installments offer consistent
15:31
payment but restrict scope changes to a
15:34
single mid-p project review, reducing
15:36
responsiveness to evolving needs. Let's
15:39
move on to the next question if you're
15:41
ready. Question 107.
15:44
A product owner wants to bring in a
15:46
specialized vendor during the second
15:48
quarter of an agile project. The team
15:49
wants to ensure the contract supports
15:51
iterative delivery and avoids delays
15:53
when the vendor joins. What should the
15:56
project manager do during procurement
15:58
planning? A. Set vendor scope and
16:00
contract terms early to support
16:02
incremental delivery and integration. B.
16:05
Include only highlevel contract terms
16:07
and negotiate details after the vendor
16:10
is onboarded. C. Negotiate a fixedpric
16:13
contract to ensure the vendor stays
16:15
within budget regardless of changes. D.
16:18
Identify the vendor's backlog items
16:20
early and align contract milestones with
16:24
planned releases. You can pause the
16:26
video here if you need more time to work
16:28
on the question. The correct answer is
16:30
A. This question tests your
16:33
understanding of procurement planning in
16:35
agile. The goal is to prepare contract
16:37
terms that support the iterative nature
16:40
of agile while ensuring a smooth start
16:42
when the vendor joins. Choice A is the
16:46
best option because establishing the
16:47
vendor's scope and contract terms early
16:50
while keeping them flexible for
16:52
incremental delivery ensures the vendor
16:55
can integrate quickly into the agile
16:57
cadence without delays or contractual
16:59
gaps. Choice B is incorrect. Highle
17:02
terms can leave too many details
17:04
unresolved, creating onboarding delays
17:06
and possible misalignment with agile
17:08
delivery needs. Choice C is incorrect. A
17:12
fixedpric contract may control costs but
17:15
often restricts flexibility making it
17:17
harder to adapt scope based on feedback.
17:20
Choice D is incorrect. Aligning backlog
17:23
items and milestones with releases helps
17:26
planning but doesn't address the
17:28
importance of setting the right contract
17:30
terms before the vendor joins. Let's
17:32
move on to the next question if you're
17:34
ready. Question 108. During contract
17:38
negotiations with a new vendor, the
17:40
project manager wants to ensure the
17:42
agreement supports iterative delivery
17:44
and the ability to adjust priorities
17:46
between releases. Which contract term
17:49
would best achieve this? A. Payment tied
17:52
to a final system acceptance with
17:55
partial reviews allowed during
17:57
development to track progress. B.
17:59
Milestone payments triggered by
18:01
completion of predefined feature sets
18:03
after each iteration. C. A fixed
18:06
delivery schedule with performance
18:08
bonuses for meeting agreed feature
18:09
completion dates. D. Scope defined at
18:13
contract signing to control risk with
18:15
flexibility to swap features of equal
18:17
size between releases. You can pause the
18:19
video here if you need more time to work
18:21
on the question. The correct answer is
18:23
B. This question tests your
18:26
understanding of contract negotiation
18:28
for iterative delivery. Agile contracts
18:31
should encourage incremental delivery of
18:33
value while preserving the ability to
18:35
adjust priorities as the project
18:36
evolves. Choice B is the best option
18:39
because tying milestone payments to
18:41
completed feature sets after each
18:43
iteration provides tangible checkpoints,
18:45
supports frequent value delivery, and
18:47
allows scope rep prioritization between
18:50
iterations. Choice A is incorrect.
18:52
Although partial reviews give
18:54
visibility, tying payment to a single
18:56
final acceptance discourages early
18:58
delivery of usable features and delays
19:00
meaningful feedback. Choice C is
19:02
incorrect. A fixed schedule with
19:04
performance bonuses incentivizes hitting
19:06
dates, but it limits flexibility and may
19:09
push teams to prioritize speed over
19:11
value. Choice D is incorrect. Allowing
19:14
feature swaps appears flexible, but
19:17
locking scope upfront still constrains
19:19
adaptability and prevents full rep
19:21
prioritization as new insights emerge.
19:24
Let's move on to the next question if
19:26
you're ready. Question 109. Midway
19:29
through an agile project, a vendor
19:31
insists on delivering work in large
19:33
batches every two months even though the
19:35
team's cadence is two week sprints. This
19:38
misalignment is causing delays in
19:40
integration and testing. What should the
19:43
project manager do to address this
19:44
issue? A. Adjust the team's sprint
19:47
length to match the vendor's delivery
19:49
schedule. B. Negotiate with the vendor
19:52
to break work into smaller testable
19:54
increments that align with the sprint
19:56
cadence. C. Work with the vendor to keep
19:59
their current delivery cycle, but
20:00
negotiate earlier partial handoffs for
20:03
critical components. D. Increase buffer
20:06
time in the schedule to handle large
20:08
batch deliveries without impacting
20:09
releases. You can pause the video here
20:12
if you need more time to work on the
20:14
question. The correct answer is B. This
20:18
question tests your understanding of
20:20
handling vendor misalignment in agile.
20:22
Agile works best when deliverables are
20:24
produced in small testable increments
20:26
that align with the team's cadence,
20:28
enabling faster feedback and
20:30
integration. Choice B is the best option
20:32
because breaking vendor work into
20:34
smaller increments aligns deliveries
20:36
with the team's sprint rhythm, reducing
20:38
integration delays and improving
20:39
collaboration. Choice A is incorrect.
20:43
Changing the team's sprint length to
20:44
match the vendor's slower pace would
20:46
undermine agile responsiveness and delay
20:49
feedback loops. Choice C is incorrect.
20:52
Negotiating partial handoffs is better
20:54
than accepting full large batch
20:56
deliveries, but still doesn't fully
20:58
resolve the integration and feedback
21:00
timing mismatch. Choice D is incorrect.
21:04
Adding buffer time avoids short-term
21:06
schedule pressure but fails to address
21:09
the root cause of misalignment. Let's
21:11
move on to the next question if you're
21:13
ready. Question 110.
21:16
While drafting a contract for an agile
21:18
project, the client's legal team insists
21:20
on detailed scope descriptions to avoid
21:22
disputes. The project manager wants to
21:24
preserve flexibility to adapt priorities
21:26
as the work progresses. Which contract
21:29
clause would best support this
21:31
flexibility? A. Scope changes require a
21:34
formal amendment process to ensure all
21:36
parties are aligned and risks are
21:38
documented. B. Payments are tied to
21:41
completion of the agreed scope with
21:43
minor scope swaps allowed if they don't
21:45
change total effort. C. Scope is defined
21:48
at a high level with specific features
21:50
to be detailed and prioritized in the
21:52
product backlog during the project. D.
21:55
Any scope change can be approved by the
21:57
product owner if budget neutral, but
21:59
must be documented and signed off before
22:01
work begins. You can pause the video
22:04
here if you need more time to work on
22:06
the question. The correct answer is C.
22:09
This question tests your understanding
22:11
of contract language to support
22:13
flexibility in agile projects. The goal
22:15
is to allow for changes in priorities
22:17
without creating heavy administrative or
22:20
contractual barriers. Choice C is the
22:22
best option because defining scope at a
22:24
high level and detailing features in the
22:26
backlog during the project allows teams
22:28
to adapt priorities based on feedback
22:31
and evolving needs while still providing
22:33
enough contractual structure for
22:35
alignment. Choice A is incorrect. While
22:37
a formal amendment process ensures
22:39
alignment and documentation, it slows
22:41
responsiveness and undermines agile's
22:44
ability to adapt quickly. Voice B is
22:47
incorrect. Allowing minor swaps provides
22:49
some flexibility, but tying payments to
22:51
the completion of a predefined scope
22:53
still limits the ability to rep
22:55
prioritize based on changing business
22:57
value. Choice D is incorrect. Allowing
23:00
budgetneutral changes through product
23:02
owner approval sounds agile friendly,
23:04
but the required pre-work documentation
23:07
and signoff can create delays and reduce
23:10
adaptability.
23:11
This wraps up 10 questions for agile
23:14
procurement and contracts. That's 110
23:16
questions completed in our 150 question
23:19
series. You're building a strong
23:21
foundation for your PMP exam success. If
23:24
you found these questions helpful, make
23:26
sure to like the video and subscribe.
23:28
and I'll see you in the next topic when
23:30
you're