The Washington Post recently reported that the use of alternative fee arrangements in law firms has not only become much more prevalent but has also contributed to an increase in client billing. The Post notes the success of “flexible” and efficient billing strategies among small law firms and the digression from the individual hourly rates system.
Behind the increase in the use of alternative fees is the growing pressure from in-house legal departments to set up more efficient billing arrangements. These arrangements include flat fees, blended rates and incentive or success-based fees. Boutique firms have found these systems successful on many levels as the more efficient their legal staffs are, the more money the firms make. This satisfies law firm leaders “who are under unrelenting pressure to contain outside spending.”
Larger law firms are also getting in on the alternative fee action. A survey conducted by American Lawyer showed that more than 90% of large firms reported using flat fees for at least one matter last year. Other implementations include fee caps or “collars” where the parties agree on a flat fee and if the lawyers exceed that amount by a certain percentage the client may receive a discount. Clients of large firms are enamored by these arrangements because they offer consistency and predictability in outside legal spending.