Bit of a loaded question this, but if I were to ask you which groups were making the most use of Alternative Fee Arrangements (AFAs) what would your answer be?
If you’re anything like me, when answering a question like this you’d have thought of a commoditised practice or product – say property leasing or conveyancing.
Until yesterday that is, when I came across CounselLink Enterprise Legal Management’s Trends Report: ‘Update on the 6 Key Metrics‘ (published in February 2017).
Insights based on data derived:
…from nearly $26 billion in legal spending, almost six million invoices, and approximately 1.5 million matters processed through the CounselLink platform…
this report is nothing if not comprehensive. And, interestingly enough, it debunks a lot of myths surrounding the application of AFAs to legal matters – for example, that they cannot be used in litigation or mergers and acquisitions.
That’s right, what this table shows us is that some of the most “complicated, cannot tell you what will happen” work is being serviced on AFAs while other “commoditised” work, not so much.
This chart makes for quite compelling reading. Unfortunately it also tells me that only about 7.5% = on average – of all billable work is done on AFAs (without defining AFAs). Evidence like that is most likely going add to the voice that clients prefer being billed by the hour – which is a shame.
Thanks for sharing, Richard. The first CounselLink report from back in 2013 (http://www.lexisnexis.com/counsellink/documents/CounselLink-ELM-web.pdf ) sheds some light on CounselLink’s way of calculating their AFA numbers:
“Alternative Fee Arrangements (AFAs) – Invoice charges are categorized within fee structures utilized in the CounselLink solution. Those charges in non-hourly fee structures were classified as alternative fee arrangements (AFAs). Additionally, charges coded as hourly were classified as AFA if the timekeeper level was a partner and the calculated hourly rate exceeded $1500. For timekeeper levels other than partner, charges with rates of greater than $1000 were categorized as AFAs. Lastly, work for which invoiced-time narratives included terms such as flat fee, fixed fee or similar key words, was categorized as a matter subject to AFAs.”