Alternative Fee Arrangements Work Best When Both Sides Benefit

Companies are investigating ways to control costs and to link law firm billing to value received. This movement away from the billable hour can be seen as a 'fight' (as characterized by a recent Wall Street Journal article that framed the discussion as the 'Billable Hour' Under Attack), which may be unnecessarily adversarial.

Bill Sowinski heads the CT TyMetrix decision support services group, and has worked extensively with alternative fee arrangements:

"Alternative fee arrangements work best when both sides benefit. Ideally, an arrangement should benefit clients by reducing cost and more quickly resolving matters without compromising quality.

Law firms benefit in one of several ways. One way is to yield to the client’s leverage and reduce income but retain business.

A preferred model is to secure reduced cost, but to allow the law firm to manage matters cost effectively by allowing the firm to assign the appropriate resources to required tasks (this is the Sidney method described in the article.) Gross receipts might decline, but the law firm’s net will increase.

A variation on the preferred model is to reward a firm that will reduce cost with more business which it is allowed to cost effectively manage. In that scenario, both the firm’s gross and net increase while the client reduces cost.

Of course, poorer performing firms will lose business to the selected firm but that is a good result.

The difficulty in establishing healthy alternative fee arrangements is largely due to a lack of understanding by the client and the firm as to the costs associated with individual matters and groups of matters. That weakness can be overcome with careful analysis of the costs and resources deployed in past matters. That analysis should be shared with the law firm so the firm can determine if it can manage its allocation of resources to make an alternative fee arrangement profitable.

Finally, the client must make its matter management philosophy and objectives absolutely clear to the law firm so that the firm fully understands what is required and can support the matters accordingly."

CT TyMetrix continues to be interested in realizing advances in value-based billing, including providing in-house law departments with a set of fixed-fee and alternative fee arrangement tools to manage a range of billing arrangements, as discussed previously on this blog:

• Supporting and Standardizing Fee Agreements
• The Future of the Billable Hour
• Value-Based Billing

Nine Best Practices for Managing Outside Counsel

Outside counsel share a common goal with their in-house counterparts: to effectively manage matters and achieve successful outcomes. At the same time, each faces unique pressures: outside counsel are out to run a profitable business, while in-house counsel is acutely concerned with cost reduction.

CT TyMetrix and InsideCounsel magazine are presenting a free webinar on Thursday, September 10 to highlight nine best practices to achieve strategic, cost-effective utilization of outside counsel, while increasing valuable internal competencies. Learn how you can get a handle on the corporate law department’s highest cost areas — maintaining litigation budgets, improving matter management, and controlling e-discovery costs.

There is no charge to register.

CT TyMetrix 360 releases vendor management and robust alternative fee arrangement (AFA) support

As regular readers of this blog are aware, CT TyMetrix has been hard at work developing and launching release 10.0 of CT TyMetrix 360, adding robust vendor management capabilities, including the industry's most comprehensive support of alternative fee arrangements (AFAs), to our integrated legal e-billing and matter management platform. From the press release:

"The economic downturn has underscored the value of strategic spend management. In order to better predict and manage their legal spend, corporate law departments are looking increasingly beyond the billable hour. These alternatives to the billable hour, commonly known as AFAs, can better align law firm compensation to the corporation's interests. The latest release of CT TyMetrix 360° is the first comprehensive solution for AFA management that provides end-to-end support for the creation, administration, tracking and measuring of AFAs.

The AFA module is the result of in-depth research among the CT TyMyetrix user base. Included in the module are the commonly used and requested AFA templates, such as blended hourly rates, deal-based billings, fee caps, hourly rate discounts, hourly rate volume discounts, matter-based rates, task-based billing caps, and others. In addition to AFA management, Release 10.0 introduces an advanced timekeeper rate management, another integral part of vendor management. Highly configurable, the advanced rate management functionality gives users more control over how timekeeper rates are created and maintained."

See the CT TyMetrix site for the full announcement, or see previous discussion of alternative fee arrangements on the CT TyMetrix Legal Spend Management blog, or listen to the archived webinar we recently conducted on AFAs.

Webinar: Predictive Modeling in Litigation Management

For more than a decade, insurance companies have been leveraging technology to better manage their claims and the costs associated with litigation, including (by the early 90s) e-billing, which streamlined processes and automated enforcement of guidelines. This evolved (by the late 90s) into collaborative, web-based systems handling case management, and later into today's systems offering reporting tools to better understand law firm performance and other trends in litigation.

The missing piece has been advanced analytics to optimize this wealth of information into streamlined business processes and guided decision-making. Moving forward, predictive modeling will play a greater role in litigation management, promising significant improvements in process and total claim outcomes.

CT TyMetrix, in partnership with Deloitte and Claims/TechDecisions magazines, will present a webinar on this topic on June 16 at 2:00 p.m. ET. Our discussion of The Future of Predictive Modeling in Litigation Management will discuss the impact of system-aided guidance in matters including:

• Selecting the most appropriate defense law firm based on case details
• Providing guidance on resolution strategies given the carrier's and industry data
• Early automated identification of case severity

To learn more about this webinar or to register, visit www.claimsmag.com/cttymetrix.

CT TyMetrix to present ILTA product briefing webinar

CT TyMetrix is participating in the ongoing product briefing webinar series organized by the International Legal Technology Association (ILTA). We will present on Law Department Tools 2.0, or in other words, discuss how the next generation of law department tools can manage cases, reduce legal spend and accurately forecast the future, all of which are critical for attorneys operating in today's challenging business environment. This practical demonstration for ILTA members will show how your legal team can accomplish these goals with CT TyMetrix 360°, a comprehensive legal spend management solution incorporating legal e-billing, matter management and dynamic reporting functionality.

Webinar on Alternative Fee Arrangements

As pressures to manage legal costs mount, there's a renewed interest in alternative fee arrangements (AFAs) as a way to align the value delivered by an outside law firm with the amount billed for services (as Craig Raeburn discussed in his post on this blog about AFAs and how CT TyMetrix 360° supports alternative fee arrangements with the AFA module).

In our webinar, we discussed considerations to address when creating AFAs, and how a law department's e-billing system can support and enforce these arrangements. The webinar is available as an archived recording if you missed the live event or would like to review the topics we covered:
CT TyMetrix Alternative Fee Arrangement Webinar Archive

The presenters:

• Keith Brown (Consultant, Law Department Service Line, Baker Robbins and Company)
• Craig Raeburn (Vice President of Product Development, CT TyMetrix)
• Jennifer Pearce (Manager of Legal Operations and Records Management, International Paper)