Sarah Mui, ABA Journal
Jean P. O’Grady, a knowledge strategist at DLA Piper took on this year’s Alternative Fee Arrangements at Legal Departments and Law Firms report at Dewey B. Strategic. And she noticed some other things on top of all of the stats about the prevalence of AFAs.
“A careful reading of the report shows that the real drivers of the AFA movement are not the GCs but the corporate executives and often the procurement departments who have been charged with rationalizing and reducing legal spending using the same tools they use for the procurement of office equipment,” O’Grady writes. (read the post)
Toby Brown, 3 Geeks and a Law Blog
An article on a recent legal market survey suggested a new trend in legal pricing: a trend away from Alternative Fee Arrangements (AFAs). Trend may be too strong a word, but in any event, the survey results bear consideration.
Offline I received a number of reactions about the survey result. Most people were concerned it might be viewed as a sign things are returning to the Old Normal. Yet at the same time, no one suggested they were seeing signs of such a return.
So what does it mean? (read the post)
Ryan McClead, 3 Geeks and a Law Blog
Perhaps Law.com was just fishing for traffic by choosing a controversial headline (something we at 3 Geeks would never condone!) but yesterday’s article, misleadingly entitled AFAs Trending Down in U.S. and U.K., got a lot of attention. To be fair, the data gathered in the 9th Annual Litigation Trends Survey Report, does indeed show a decrease in AFAs from 2011 to 2012. And it gives some indication that those numbers MAY go lower again this year. However, there is one big problem with the headline, the second word. The appropriate headline would have been AFAs Down in U.S. and U.K. There is no trending about it. (read the post)
Toby Brown, 3 Geeks and a Law Blog
It may appear I am on some Defend BigLaw run with my recent posts. It’s actually not that, but merely some pent up pet peeves I need to air. This one addresses the attack on law firms for how they come up with matter budgets and fixed fees.
The scenario goes something like this: When a client asks for a fixed fee (typically with little to no scope) and the law firm calculates that number by adding up the number of hours and multiplying it by hourly rates, they apparently are committing some act of near-fraud. (read the post)
Catherine Dunn, Corporate Counsel
When David Cohen went in-house at Nokia in 2007 to oversee litigation, he was also tasked with taming the chaotic tangle of the company’s outside legal representation. The cell phone maker used some 900 legal vendors around the world, had unclear relationships with firms, and didn’t keep track of who was doing what.
Five years later, Cohen had whittled the number of legal vendors down to 230, gotten firms to file budget forecasts every month, and had reduced the law department’s spend by 15 to 20 percent
How did he do it? (read the article)
Time to Blow Up the Billable Hour Formula
Michael Roster, The New Normal
It’s time we face a fundamental problem that’s existed for the past 35 years after we moved away from fixed prices, retainers and other approaches that had previously been used and instead went to fees based solely on hours.
Hours are performing two diametrically opposed functions. First, they are being used as a unit of production where we can budget how many hours are needed for tasks and then see if there aren’t ways to improve efficiency. But that means—as we do in manufacturing and everywhere else—looking at ways to reduce the number of hours for a task and ways to reduce the cost of those hours (that is, the internal cost of production).
Yet law firms simultaneously have made hours the basis of profitability, which means benefiting from more hours being applied to a task and continual increases in hourly rates. (read the post)
Patrick J. Lamb, The New Normal
I routinely am asked for copies of our engagement letters by people who want to utilize an alternative fee arrangement with their client. To address these queries, I have boiled down the points to be covered. As I have said many times, Valorem is a litigation firm, so this list is most relevant to other litigators. Some of the points are applicable elsewhere, but a fulsome list of points to cover should be prepared for each specific area in which a value fee might be used. Without further ado, here is my list of issues to be addressed in an engagement letter using value fees:
1. Set a specific fee structure.(read the post)
Ron Friedmann, Prism Legal
Ten days ago I attended the Futures Conference, organized by the College of Law Practice Management and hosted by Georgetown Law (agenda). I report here highlights and lessons I learned.
The New Normal of the legal market is all about value for the client. Value is in the eye of the beholder say the panelists in the Exploring the Nuance of Value session. Toby Brown, Director of Pricing, Akin Gump explained that he regularly talks to clients to learn what they mean by value. Sometimes it is lower cost, sometimes it is predictability, and sometimes it is regular, even payments.
Mark Chandler, General Counsel, Cisco Systems called value subjective. (read the post)
Daniel J. DiLucchio, Jr., Altman Weil Inc.
Newtown Square, PA, November 5, 2012 – Corporate law departments report that they are re-negotiating outside counsel fees, shifting work to lower-priced law firms, increasing in-house capacity, opting for alternative service providers and using new technology — all to develop a more cost-effective legal services model — according to over 200 General Counsel who participated in the Altman Weil 2012 Chief Legal Officer Survey.
“Chief Legal Officers are not waiting for law firms to change their business models,” said Altman Weil principal Daniel J. DiLucchio. “They are taking change into their own hands in 2012 to create a new internal value proposition.” (read the post)
Erik Sherman and Jennifer Tonti, ABA Journal
While the study ALM Legal Intelligence did for LexisNexis CounselLink is cautious in its analysis, it shows some progress in the use and the future of alternative fee arrangements, or AFAs, as a replacement for standard billable-hour invoicing.
Citing “the economic collapse of 2008 to 2010,” the study notes, “alternative fee arrangements obtained a new urgency.” Increased use of AFAs shows in the results.
“Of the 218 law firm respondents, only one reported that their firm does not employ alternatives to the hourly billing rate model other than discounting. On the legal department side, 18 percent of the 206 corporate respondents reported that they do not employ AFA billing.” (read the article)