Tuesday, February 10, 2009

Supporting and Standardizing Fee Arrangements

While many arguments can be made for why Billable hours are outdated, or perhaps the value they provide (as discussed by John Weber in his prior posts on the future of the billable hour and value-based billing), it is clear the direction for many years has been toward Value Based Billing or Alternative Fee Arrangements. Unfortunately, there are no set standards for these arrangements. Fee Arrangements can vary by case, by firm and by client. In certain circumstances the parties are working off de facto standard frameworks, but the devil is in the details and with each one there are often slight variations from the others.

Supporting these “one-offs” through e-billing systems can sometimes be a challenge as you need to work within the industry-standard LEDES formats. To address some of these challenges CT TyMetrix has developed an Alternative Fee Arrangement (AFA) Module that will allow clients to set up the case-specific or law firm-specific AFA and have the system enforce the agreement.

The module will be launched with eight templates: Blended Hourly Rates, Fixed Fee, Hourly Rate Volume Discount, Task-Based Billing, Deal Based Billing, Hourly Rate Discount, Matter Rates and Years of Experience. This module was originally designed as an Add-On Module for e-Billing clients, but with the recent economic challenges and the strong shift towards AFAs , CT TyMetrix believes this module should be a standard part of all e-Billing solutions and will be offering it for no additional charge other than a nominal setup fee.

While all of this is good and exciting stuff, I still worry about the lack of standards around AFAs. The eight templates were created based on extensive client input and our 14 years of experience. But even with that we know we haven't addressed all possible AFAs (as we’ve seen, folks can get very creative with some of these agreements). The good news is the module is flexible enough to create additional templates, even client-specific ones, as necessary.

I can’t help but wonder, just as the industry saw fit to establish a non-profit group to oversee the LEDES formats, should Law Firms and Corporations considering creating an AFA Standards Committee? While the LEDES 2.1 format allows for the identification of a few AFAs, it does not (nor should it, I would say), address the specific details of how to bill and properly capture these arrangements. I’d welcome your thoughts.

Craig Raeburn
Vice President, Product Management
CT TyMetrix

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