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Fear of flying alternatively – billing arrangements other than hourly and discounted

During May 2006, 162 readers of InsideCounsel responded to a survey by a law firm, Butler Rubin Saltarelli & Boyd. One question asked why alternative fee arrangements do not occur more frequently, with the results provided in InsideCounsel, Oct. 2006 at 53.

Two reasons were most commonly selected: “outside counsel hasn’t approached me about alternative fee arrangements” (49.2% selected this response) and “lack of experience to see if such arrangements work” (47.6%). It is disappointing that so many law departments are so passive; they should insist that their firms propose arrangements other than hourly billing. As to inexperience, just do it!

The remaining reasons were much less frequently chosen. “Under no pressure from management to control legal spending” (11.1%), “Not willing to take risks with my company’s case matters” (23.8%), and “Other” (30.2%). To the reason that “management” has not pushed cost saving, I am disappointed again; a good general counsel should seek cost efficiency whether or not the CEO and other peers press for that goal.

As to risk taking, that is not only a makeweight argument but also misconceives that litigation is the only arena in which law departments can pursue alternative billing arrangements. “Other” might include such notions as that “our spend is too small and irregular to embrace alternatives,” “the services we ask of outside counsel do not lend themselves to alternative arrangements,” or “our clients, to whom we pass on legal fees, do not support such an effort.” Only the diminutive fees point passes muster.

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One response to “Fear of flying alternatively – billing arrangements other than hourly and discounted”

  1. Jeff Carr says:

    Rees — as you know, the FMC Technologies Legal Team is a strong proponent of true alternative fee arrangements. Nearly 100% of our US engagemetns are on a performance based pay system and the majority of our non-US engagements are as well. I echo and agree with your points with a few observations: volume based discounts are discounts, not alternative fees; you don’t need volume to use alternative fee systems (we use 2 forms — a matter specific and an engagement specific model — ACES and ACES LT); the largest impediment is not the outside firm, but your own inside counsel, once you find a system that works, as GC you must require and moitor adherence (carrots and sticks work here as well).