How to Plan for Alternative Fee Agreements.

By: Tyler Chapman

How to plan for and execute AFAs:

Based upon various articles I have read about Alternative Fee arrangements, it seems that both law firms and their clients are befuddled by AFAs.  It seems the general consensus is that clients feel that they’ll get a better deal from firms, and firms feel like they will get more business from clients.  So what’s the problem?   How does one construct AFA offerings that are fair while at the same time maintain profitability?

The key to constructing AFAs that benefit you and the client is to first determine what the client is trying to accomplish.

  • Are they looking for stable and predictable bills (retainers/flat fees)?
  • Are they looking to stick to a budget (capped fees)?
  • Are they looking for a partner to share the risk and reward (contingent)?
  • Are they looking for routine work with occasional increase in activity (personnel types)?

Once the needs are determined, creating AFAs is a function of your practice areas and your workflows.  With a bit of critical thought and analysis on past cases it is possible to structure the AFA for everyone’s benefit.  Firms using UTBMS Task codes on their time entries also have the ability to group and analyze based on a task level to even further drill into expected or average outcomes based on historical data.  By doing this, you take the guess work out of how long it takes the firm to complete tasks for cases.  You now have the ability to argue with cold hard facts billing allowances.

Don’t make the mistake of discounting the firm’s time too extensively, the firm’s relationship with the client must be one that profits both sides.  AFAs help align the firm’s goal (earning fees) with that of the client (attaining excellent legal representation).   By bringing the goal’s closer into alignment both sides benefit.