58 LEXPERT MAGAZINE
|
MAY 2018
LLP, the legal industry's first certified pric-
ing professional (CPP) and the only profes-
sional to hold both the CPP and certified
legal manager (CLM) designations, says
the number of "pricing professionals" in
the US, the UK, Canada and Australia rose
700 per cent between 2010 and 2017.
So what gives?
Rick Kathuria of Toronto, National
Manager, Project Management and Legal
Logistics at Gowling WLG, may have the
answer. "We'd like to change the language
in this arena from 'alternative fees' or 'alter-
native billing' to 'fee arrangements' or 'ap-
propriate fee arrangements,'" he says. "Cli-
ents want to understand how their costs
will be determined so they can do effective
budgeting with certainty and predictabil-
ity for legal services that offer good value.
It's not all about cost-cutting."
at said, it becomes apparent that alter-
native or appropriate fee arrangements can
be based at least partly on hourly rates. If
that's correct, it flies – at least at first blush -
in the face of the commonly held view that
the hourly rate approach faces extinction.
On closer analysis, however, it appears
that what clients object to is not the con-
cept of hourly rates in and of themselves,
but what has been called the "billable
rate model" in which time spent is not
limited. Altman Weil's 2014 Chief Legal
Officer Survey concluded that 43 per cent
of general counsel (GC) and chief legal of-
ficers (CLO) couldn't care less how their
external lawyers arrived at their fees, so
long as "they get the results they want at a
competitive price."
But efficiency and competitiveness oc-
cupy much of the same space. at's why
discounted rates and blended rates are in
themselves not alternative or appropri-
ate fee arrangements in a real sense: they
provide no incentive for efficiency because
they put no limit on the number of hours
for which a firm can bill.
at doesn't mean, however, that hourly
rates have become irrelevant from law
firms' perspectives. In order to come up
with an appropriate estimate of cost that
will satisfy the client's need for predictabil-
ity, law firms have had to resort to project
management to ascertain in advance what
resources they will have to commit to get
the job done to the client's satisfaction. To
this end, time is one of the important re-
sources they must measure, one to which
they must assign a value by estimating the
number of hours required at a projected
rate to do the work profitably.
e upshot is that the current climate in
the legal market - one that emphasizes in-
creased scrutiny of value for each dollar of
legal spend - has forced law firms to come
up with more professional and sophisti-
cated ways of arriving at "appropriate" fee
arrangements. To the extent that these ar-
rangements depart from the billable rate
model, they are properly called "alterna-
tive" fee arrangements, whether or not they
include hourly billing as a component.
AFAs are a product of the Great Reces-
sion of 2008, when clients started losing
funding for legal spend and needed to fig-
ure out how to afford their lawyers. eir
pushback on the billable model focused on
RICK KATHURIA
>
GOWLING WLG
We'd like to change
the language in this arena
from 'alternative fees' or
'alternative billing' to 'fee
arrangements' or 'appropriate
fee arrangements. Clients
want to understand how
their costs will be determined
so they can do effective
budgeting with certainty and
predictability for legal services
that offer good value. It's not
all about cost-cutting.
PHOTO:
SHUTTERSTOCK
| IN-HOUSE ADVISOR: EVOLVING FEE ARRANGEMENTS |
