Pricing & Alternative Fee Arrangements

In today’s cost-driven legal environment, almost all clients are demanding approaches to pricing and billing that limit or reduce legal expenses and key the value of the legal service they receive to its cost. This drive for cost control is routinely reflected in demands for discounted or capped fees. In addition, the trend away from time-based (i.e., hourly billing) fees and toward value-based (i.e., project/outcome-based) continues to accelerate, as clients strive to reduce legal costs, contain “outside legal spend,” and drive greater efficiency into their legal operations. Pricing agreements that are tied to value rather than time are referred to as “alternative fee arrangements,” or AFAs.

Client requests for AFAs are often linked RFPs requesting Legal Project Management. Although LPM provides efficiency benefits regardless of the type of fee arrangement between client and law firm, its value is particularly great where an Alternative Fee Arrangement (AFA) is being used. Under an AFA, the law firm can no longer pass its inefficiencies through to the client, so the law firm must operate efficiently in order to sustain profitability while maintaining undiminished service quality. In short, AFAs and LPM go hand-in-hand, and today’s firms must learn both disciplines in order to remain competitive.

RFPs & Outside Counsel Selection

Clients increasingly are turning to Requests for Proposal (RFPs) as their vehicle for selecting outside counsel, both for individual engagements and for entire tranches of work. Historically, the decision about whether to even respond to an RFP was left to the marketing department, and many firms also used their marketing departments to generate formulaic responses to formulaic RFPs using generic marketing materials and answers.

Today, clients’ RFPs questions are far more focused and far more demanding. Clients want RFP responses that describe relevant capabilities, experience, matter staffing, and LPM capabilities in detail. They expect well-reasoned, well-written bespoke RFP responses that address every issue and concern, and they will not reward bland, general or evasive responses with their business. Many clients are using “zero-based” RFPs to totally repopulate their panels of outside counsel, and often employ RFPs as part of convergence programs designed to reduce the number of outside firms the client employs.

As a consultant to law firms, Edge is experienced in:

• Helping firms create uniform and effective procedures for RFP intake, evaluation, and response.
• Providing guidance on which RFPs merit response and which are a waste of the firm’s time.
• Identifying and overcoming barriers to the firm’s selection.
• Assisting in drafting the firm’s responses to specific RFP questions.
• Planning for presentations to clients.
• Helping firms that “win” an RFP and yet subsequently fail to be assigned work pursuant to the RFP.