How many times have you heard the saying “if engineering firms can build airports/dam/buildings for a fixed fee, why can’t law firms handle matters on a fixed fee?” Well, engineering and construction firms may not be all that shrewd, according to a book review in the Wall St. J., Dec. 5, 2007 at D9. Based on a book about the construction industry, the reviewer writes that “[construction] firms aren’t really competing to deliver quality for the lowest possible price.” Instead, “‘they compete for the future right to increase the initial cost of their agreement.’” That situation may also hold true when law firms bid on a fixed-fee basis; they are really competing for the right to raise costs later on. The low-ball bid serves as an entry point and a base for fee increases in the future.
The solutions discussed in the book involves, among other ideas, hiring experts to oversee and restrict overruns. Tougher contracts should enforce fixed costs or, at least, severely limit the scope for escalation. Careful RFPs and reference checks may lower the chance of hiring law firms that renege on their deal. Nothing new here, but the urban myth of conformance to fixed fees in construction feels the wrecking ball.