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Alternative Fee Arrangements Becoming More Popular

By Laura Strachan, Esq. on November 11, 2010 5:55 AM

Billable hours are still king of the castle when it comes to law firm billing. Alternative fee arrangements, however, are increasing in popularity for a variety of reasons, according to The Metropolitan Corporate Counsel. The alternative billing scheme can be a benefit to both a firm and clients.

Some 56% of in-house counsel polled in a recent survey responded that alternative fee arrangements may be here to stay. Why? Because they often provide a more predictable measure of costs to clients. Although this may not necessarily translate into savings for a client (or losses for a firm), it can serve to keep business coming in -- a welcome sign for many firms hit hard by the recession.

The top concerns indicated by firms looking to adopt or expand their alternative fee arrangements include: practical challenges in adopting new practices, quality and accountability issues, and the difficulty in determining new pricing schemes. The fact that an alternative fee arrangement basically means anything other than billable hours does provide flexibility for a firm to develop a billing system that works for them, and limit any economic risks associated with alternative fee arrangements.

"People are afraid there will be a drop-off in quality in an alternative fee arrangement. They're worried they will never get the best people working on their account -- that they will never get the A-team," according to Gordon Wylie, Litigation Counsel at Guardian Life Insurance. These concerns are slowly eroding away, however, as evidenced by the increase in alternative fee arrangements.

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