In recent years, ties between firms and the companies they represent have frayed. Many clients have pared back their rosters of outside counsel, sometimes ending decades-long relationships. Even when clients have stayed with their outside counsel, they have routinely demanded deep discounts in the price of their legal work. Much of the tension in this troubled relationship focuses on the hourly rate system, which is used by nearly all large law firms and most small ones. Many in-house lawyers advocate replacing it with alternative fee arrangements (AFAs), or billing methods based on metrics other than the number of hours worked. The deep recession of 2007–09 has given these proposals a new urgency.Key findings:
- The frequency with which firms bill using alternative fee arrangements
- How AFAs have grown since 2009, and how they are projected to grow through 2015
- How firms are managing, monitoring & pricing AFAs
- Factors preventing the more widespread use of AFAs
In November 2010, ALM Legal Intelligence conducted a survey of law professionals to examine the use of alternative fee arrangements (AFAs) by law firms of varying sizes. A total of 314 respondents, primarily managing partners, lawyers, firm administrators, and chief financial officers, took part in the survey. Respondents came from small firms (46 percent), midsize firms (16 percent), large firms (21 percent), and extra-large firms (17 percent).