Corp. Counsel, April 2011 at 22, summarizes a recent panel discussion on alternative billing. Altria Client Services’ Murray Garnick, an Associate General Counsel, told the audience that “A firm is disguising hourly billing as value billing if it merely estimates the number of hours it would spend on a case and derives a flat fee from that.”
I disagree with Granick if his implication is that something devious or dishonorable happens if a fixed fee derives from an estimate of the amount of hours needed to accomplish the goal (resolution of a case). Estimated hours represent a solid basis for a flat fee. Moreover, a flat fee, however derived, differs enormously from hourly fees. The firm and the client have arrived at a mutually acceptable fee, and therefore value to the client, for services and the firm has an incentive to deliver on budget. No more time and materials, gone are the salad days of cost plus, both parties embark on a different paradigm: a major step toward efficiency and cost consciousness. The clock replaced by a price tag makes a huge difference, and it is irrelevant how the price came to be proposed.