Budgets and fixed-fees share four common elements

Law departments often ask their firms to submit budgets on matters. Less often they negotiate fixed fees with their firms. Both methods of cost-control rest on four common elements, which both inside and outside lawyers need to handle skillfully. They need to:

1. Think through, state and critique the plausibility of both cost arrangements. This requires them also to articulate the assumptions that give reality (or not) to the budget or fee;

2. Embrace the principal of basic fairness: if events turn out to vary materially from what could have reasonably been projected, the sides need to reach an equitable adjustment;

3. Be alert to gaming, learn from each experience, and widen the applicability of these departures from hourly billing;

4. Accept the concomitant compromise between cost and quality. Neither technique permits the firm to turn over every stone the way hourly billing encourages.

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