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Organizations usually contract their software projects to avoid the risks associated with developing the software internally and to control their costs. However, a study of two-dozen contracted project indicates that such organizations face unique risks and hidden costs that are particular to software aquisitions. This paper describes research done to estimate the effort expended by organizations in overseeing and participating in contracted software projects and the implications for predicting costs and identifying risks of such projects. It presents a framework for collecting and measuring costs incurred before, during and after the contract award. For many of the organizations that participated in the survey, realizing the actual costs and risks of a project was an eye opener – hidden costs and risks are significant and they are typically not managed. The research results emphasize the need for institutionalizing processes for the collection of data about contracting costs within an organization so that databases of metrics about completed projects can be built and later used to forecast costs for future projects to improve decision-making processes. The research results also emphasize the need to acknowledge the risks involved so they can be mitigated to improve the relationship with the contracor and the chances for project success. The authors are engaged in research directed toward assisting such organizations in identifying the risks and costs and improving the acquisition process.

Additional Costs And Risks In Software Acquisition Projects