In November, I spoke at the Ark Group Conference on Alternative Fee Arrangements (AFA). My Unbundling Repetitive Aspects of Large Matters presentation tried to de-mystify and simplify AFA, which has become a very hot legal market topic. Here are the presentation highlights.
Inside and outside counsel would find AFA easier if, instead of thinking about entire matters, they considered the components of big matters. By big matters I mean single large matters such as major litigation or an M&A deal or “portfolio” matters such as real estate transactions, sales contracts, or NDAs.
These big matters typically include high volume, repetitive elements that can be treated as fairly discrete activities and therefore costed and priced separately. Here are some examples of common “discrete activities:”
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Matter Type
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High Volume Elements
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Litigation
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- -Document review
- -Motions
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Deal
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- -Due diligence
- -Employment contracts
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Real Estate
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- -Environmental review
- -Lease agreements
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Sales contract
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- -Drafting and execution
- -Manage rights and obligations
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NDA
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- -Standard language
- -Managing
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The key to achieving workable alternate fees for both clients and firms is to unbundle these and other high volume tasks and treat them as discrete activities. Doing so can lower the cost and improve the predictability. All that’s needed is to apply the appropriate mix of process, technology and human resources:
- Process
- Workflow analysis
- Metrics and QC
- Data analytics (EDD)
- Knowledge management
- Business intelligence
- Project management
- Technology
- Document assembly
- Conceptual review tools
- Repositories
- Contract management systems
- Human Resources
- Partners, associates, and staff attorneys
- Paralegals
- Contract lawyers
- Outsourced lawyers (onsite, onshore, offshore, multi-shore)
By unbundling - that is, by separating matters into discrete “chunks of work” - and using the tools above, tracking costs and effort, and monitoring and repeating the process to refine estimates, clients and lawyers likely will find that they reduce cost and, as important, make cost more predictable. That in turn should make AFA much easier.
I was not ‘wearing my vendor’ hat when presenting so mentioned legal process outsourcing (LPO) only in passing. Of course, I do think that lawyers will increasingly turn to LPO services as they move to alternate fees. Lower cost is only part of the inevitable attraction. The process, QC, and predictability of LPO services also support AFA. In fact, the process approach of LPO may end up informing how lawyers think about the work that they only they can do.
This post originally appeared at my personal blog, Strategic Legal Technology. For recent news and blog posts on AFA, see the following:
- Survey Shows the Bell Is Tolling for the Billable Hour, (Corporate Counsel magazine, 1 Dec 2009)
- The Change Agenda: Can You Hear the Ice Melting? (Aric Press, AmLaw Daily Blog, 30 Nov 2009)
- Beyond Billing (by consultant and blogger Jordan Furlong at his Law21 blog, 26 Nov 09)
- Altman Weil analysis of potential loss of BigLaw pricing power (in a blog post titled ‘Will law firms be forced to give up their best lever to enhanced profits?’, 23 Nov 09 )
- Alternative Fees: So how’d you come up with that number? (Patrick Lamb of Valorem Law, 24 Nov 09)
- United Technologies Takes a Stand, Puts Billable Hour ‘on Life Support’ (Corporate Counsel magazine, 23 Nov 09)
- Levi’s Is Paying Orrick a Flat Fee to Handle All But Its IP Work (ABA Journal, 23 Nov 09)
- Alternative Fee Arrangements (AFA) and Law Firm Business Intelligence (Strategic Legal Technology blog, 22 Nov 09)
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