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The Alternative Fee Landscape by Mind Map: The Alternative Fee Landscape
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The Alternative Fee Landscape

7. Value Billing

Embodied by Valorem Law Group

2. Variations on Hourly Billing (may not really be cast as alternative fees but included here for completeness)

% discounts

blended hourly rates

3. Bonus

May apply to the whole portfolio or individual cases

5. Fixed Fee Arrangements

Can relate to all or categories of work or individual cases

Could be a monthly or annual retainer, fixed fee per case

10. Determinants of Sucess

Understanding how the process will work is essential and process redesign may be a significant source of savings in itself

Focus on determining your priorities and aligning fees so as to encourage the lawyers to support those priorities

Don't assume one size fits all. Delineate between types of work

A detailed an specific breakdown of the work covered is essential

Ongoing monitoring is very important and there is a close link with matter management, billing and reporting systems

Have contingency plans in place to manage challenging situations

Make sure agreed variations are properly documented

Few firms are really adept at implementation of alternative fees. It is a genuine differentiator

4. Menu (Unit) Pricing

Strictly a fixed fee form of arrangement menu pricing is where specific prices are identified for tasks or phases

6. Cap and Collar

A cap is where fees are capped at a certain amount

In a collar arrangement, where the firm can drive fees below a certain amount there is a bonus of some form

4. Secondments

Can integrate well with the business

Can replace the need for work to be sent out to law firms

9. Possible future directions

Dynamic pricing as with airlines (see the comments on dynamic pricing by Ron Friedman of Prism Legal)

Mastermind group/Knowledge sharing network

Combined fee proposals with LPO/performance of tasks in lower cost jurisdictions

Clearer integration with expert technologies

Opportunities for firms specialising in lean operations and lower cost based arrangements

Law firms could employ pricing experts i.e. specialists with the skills to assist in accurately assessing pricing for fixed fee bids

Novel Pricing Arrangements

8. Outstanding Questions

How do you manage complex litigation or transactions where, at certain times, costs are being incurred quickly and rapidly developing issues inhibit accurate costs forecasts?

Is the relatively low take up of AFAs a sign of lawyers' resistance to change or an indication that in truth, hourly billing yields a reasonable result most of the time i.e. if it aint broke...

1. Why Consider Alternative Fee Arrangements?

AFAs are not a universal good but time based billing "rewards efforts and not results"

AFAs encourage discussions with firms about what the client considers to be of value and how they will measure success

Encourages firms to participate in cost control

More than cost control, your business may prioritise cost certainty and predictability in arrangements with a smaller number of firms. AFAs can help achieve this objective

Why not try them? - you can always revert to the status quo

11. Resources on Alternative Billing and value based pricing

The Strategy and Tactics of Pricing (5th Edition) by Thomas Nagle, John Hogan and Joseph Zale (Mar 12, 2010)

Winning Alternatives to the Billable Hour: Strategies that Work by Mark A. Robertson

The End of Lawyers?: Rethinking the nature of legal services by Richard Susskind OBE

In Search of Perfect Client Service by Patrick Lamb

The LegalBizDev Guide to Alternative Fees by Jim Hassett