- First alternative fee was a discount. Lawyers still think discounted fees are alternative fees.
- Clients are looking at many different ways for lawyers/law firms to create values. AFAs are a piece of the puzzle. ACC CLO 2011 Survey Results
- With the betterment of the economy, lawyers think they can start raising their rates. Clients are not there yet.
- Budget predictability is driving AFAs.
- Legal project management is the hot trend in RFPs.
- Clients and law firms are still weary about AFAs. Lawyers wonder if they can make money; clients wonder if this is a backdoor way into raising rates.
Critical to Success is defining the scope.
- What is and isn’t included
- Hours or time frame
- Tasks or elemets
- How are you going to communicate changes to scope
- What are you going to do with items outside the defined scope
Risk Collars: A strategy to cover significant overages for the firm or cost savings for client if significantly under expected cost.
Fixed Fees: A flat fee to hande either an entire matter or a whole portfolio of work. Can be particularly useul with more routinized work, especially for a specific cient.
- Can really work well if you have historic information for your pricing.
Capped Fees: Bill hourly with a hard stop.
Retainers: Seeing a comeback. Can provide budget predictability.
- Clients are afraid to pick up the phone and call because the clock starts ticking. This can help build the relationship between attorney and client.
Milestone Formula: Fixed feed paid for specific stages of a matter. Have to have a safety net with a risk collar. This AFA pushes the communication. Attorney and client MUST communicate through all stages.
Task-Based Billing: Fixed fees are identified and charged for each specific task in a matter.
Blended Rates: Blend all rates to create an average hourly rate for which all work is charged. OR, blend rates within each category: one rate for partners, one rate for all associates.
Volume Discounts: Do you front end it? Assume you’ll get x-amount of fees, so you start discounting from day one, or you give a rebate and/or apply it towards future bills. Make sure clients can ACCEPT the rebates.
Secondments: Embedding lawyers at the client for a fixed period of time. 20 – 40 hours per week, on site. Can do it during specific periods of time – ie 2 weeks per quarter during reporting season.
Value Billing: Submit bill that shows the total cost ot the firm and ask the client to pay what it thought the matter was worth; trust is the key.
My take away: We over think and over analyze what an alternative fee arrangement is. And, like everything else, it’s about value to, and communication with, our clients.