Contracting Support (NPR 5333)

What is NPR5333?

The NPR 5333 is a new 'Nationale praktijk Richtlijn (Dutch for National Practice Guideline) regarding output-based measurement, performance management, and contracting of agile software development and maintenance. The NPR was released in the Dutch market in October 2025 and was created by over 50 people from 35 companies (customers and suppliers). The aim is to address one of the industry's main 'bad practices': contracting for agile development using Time and Materials (T&M), i.e., hourly rates.

When the industry moved from traditional 'waterfall' development to agile ways of working, the scope of the work became flexible ('embrace change over following a plan'), which led to a situation where suppliers did not want to quote a fixed price/fixed date project any longer. The result was that most companies started to hire 'hands' from suppliers to populate their teams. Often, hourly rates are contracted using rate cards specifying the functions, seniority level, and the hourly rate for those functions.

Why is this a 'bad practice'? Well, if you are going to select suppliers or employees based on hourly rates, the old proverb 'If you pay peanuts, you will get monkeys' may become true. Hiring someone based on their hourly rate does not take into account productivity or quality, for instance.

A short analogy: If you hire a painter to paint your house using an hourly rate, you may select one painter who charges $50 per hour over one who charges $60 per hour. However, if the second painter is 50% faster with the same or better quality, you end up paying more in the end, even when you think he is cheaper.

Another reason is that you want suppliers to be engaged and take ownership of performance and quality. In T&M contracts, there usually is no ownership at all, and the incentive is to spend more hours instead of becoming more productive. Bad quality even pays off, as this needs to be fixed, and this effort is also charged again.

The NPR proposes a set of key metrics in four categories: cheaper, better, faster, and happier. The core set consists of 27 metrics, but the full set is much larger. The NPR also gives a path for organizations to start measuring and become more mature before going into output-based contracting.

AgileBenchmark founder Harold van Heeringen is one of the people who has worked on NPR 5333, and AgileBenchmark is uniquely positioned to help organizations regain grip on their agile development outsourcing by implementing the proposed metrics and by measuring these over time. As an objective and independent third party, both customers and suppliers can rely on the expertise and measurements of AgileBenchmark.

Benefits: output-based contracts of agile software development:

• Focus on Output, not hours: Pays for delivered business value and working software, not time spent, aligning vendor incentives with client goals.

• Reduced Scope Creep: Fixed outcomes defined upfront via user stories or functional size (e.g., Function Points) prevent endless feature additions without budget adjustments.

• Higher Predictability: Combines output-based pricing with agile iterations, delivering measurable increments on a fixed cadence for reliable forecasting.

• Improved Quality: Vendors are rewarded for testable, production-ready features—encouraging automation, refactoring, and robust Definition of Done.

• Faster Time-to-Value: Prioritizes MVP and high-impact functionality early, enabling earlier ROI compared to traditional fixed-scope waterfalls.

• Risk Transfer to Vendor: Supplier absorbs effort overruns within agreed output units, shielding the client from productivity variances.

• Flexibility Within Bounds: Allows reprioritization of backlog items mid-contract as long as total functional output remains within budget.

• Objective Acceptance Criteria: Ties payment to verifiable deliverables (e.g., passed tests, deployed features), minimizing disputes over "completion."

• Scalable for Multi-Team Programs: Aggregates output metrics across squads using normalized benchmarks, enabling consistent governance at the portfolio level.

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