A Renewed Push for Fixed-Fee Billing Arrangements?

Alternative billing arrangements are hardly a new concept. In many ways, fixed-fee billing is actually a retro concept. Fifty years ago, lawyers were not slaves to the billable hour.

Fixed-fee arrangements have been trying to make a comeback for over a decade. At the same time, there have been many efforts to create new forms of billing that reward firms for success. I remember organizing a CLE program, Beyond the Billable Hour, in the mid 90’s. But the current financial crisis seems to be creating a renewed push by corporate counsel to get law firms to move away from open ended hourly billing arrangements.

We are in a period of crisis in the legal profession. Deal flow is constricted and litigation has not picked up enough to offset the loss of deal related business. In the coming year, this means that clients will have more leverage. Law firms that are able to adapt to this new reality and offer creative billing arrangements will be the winners.

IMHO, everyone will be happier when firms start to move away from the billable hour. Law firms will be rewarded for efficiency and associates will feel less pressure to record 200 billable hours in a month. Until that happens, though, we are in for a rough ride. Maybe a new wave of financial regulation will help fill in the missing hours at some AmLaw 100/200 firms. Maybe the litigation boom will arrive as companies and individuals scramble to recoup their investment losses. Smart firms will be properly positioned to capture this work. But in order to survive during this recession, firms will need to carefully review their expenses and come up with creative ways to satisfy their cost conscious clients.

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