April 2016

Last week, BTI Consulting reported that alternative fee arrangements have “soared to an all time high,” noting that AFAs generated savings of nearly 14%, or an average of $2.7 million for law departments.   These savings are significant, but as I have often said, much greater savings are possible if AFAs are deployed with other important tools.

As part of BTI’s research to develop the data on AFAs, BTI identified 22 law firms that are “best at delivering Alternative Fee Arrangements.”  The 22 firms were identified by corporate counsel “in an unprompted manner.” Here is how BTI described the 22:

Clients identify 22 of the 650 law firms serving Fortune 1000 and large clients as absolutely best at developing and implementing alternative fee arrangements. Clients share 6 reasons these firms stand out:

  1. Partners have authority to enter an AFA quickly. These partners do not have to wait for committee meetings or partner reviews of agreements. The negotiating partner also knows the parameters the firm will accept and approval is all but assured, and swift.

  2. Confidence, comfort and enthusiasm in pursuit of the AFA. The firm’s enthusiasm and commitment to AFAs is contagious.

  3. Flexibility. The firms who stand out listen to the objectives and offer to change the approach as the objectives evolve and are agreed upon by all concerned.

  4. Willing to take some risk. The outstanding AFA firms have convinced clients they have skin in the game. Clients love the idea of risk sharing they can see and understand.

  5. Focused and efficient. The firms have learned to make a beeline for the client’s goal. Much of the strategizing and planning has been done as the fee is negotiated—and clients see their law firms operating like an Olympic swimmer—no wasted strokes.

  6. Stick to the agreement and never complain. The law firms don’t go back and ask for changes and live with whatever outcomes occur. Apparently many law firms ask for changes when things don’t go well—the best don’t. And the best have tight project controls to ensure they don’t need to ask.


Here are the 22:

Law Firms Best at Delivering Alternative Fee Arrangements:

Armstrong Teasdale
Baker Botts
Bartlit Beck Herman Palenchar & Scott
Blake, Cassels & Graydon
Covington & Burling
Fish & Richardson
Foley & Lardner
Husch Blackwell
Kirkland & Ellis
Lee Tran & Liang
Littler Mendelson
Morgan Lewis
Orrick, Herrington & Sutcliffe
Quarles & Brady
Schwartz & Ballen
Seyfarth Shaw
Simmons & Simmons
Thompson Hine
Valorem Law Group
Wilson Sonsini Goodrich & Rosati



We feel pretty good today, thrilled to be in such elite company, one of the 3% of the 650 firms to be recognized by the clients we are so fortunate to partner with. This recognition is particularly satisfying given the incredible leap of faith we took 8 years ago to build a new firm model to deliver AFAs that work for clients while providing unwavering client service in the process. We look forward to continuing the leap.

Michael Rynowecer of BTI Consulting had a great, must-read post today on his Mad Clientist blog. In the post, which I strongly recommend, Michael makes these points:

  • Spending on AFAs is way up—nearly 20% CAGR over 4 years
  • Outside counsel spend under AFAs jumped to over 35%
  • Almost 70% of companies
  • The reported savings from AFAs are 13.9%
  • The savings from AFAs add $2.7 million to the average client’s legal budget.
  • The AFA-of-choice, by a wide margin, is the fixed fee.

I get a picture of Samuel L. Jackson staring out from the TV saying “What’s in your wallet?”  Except he is saying “Why aren’t you using more AFAs?”

I have two points to add to those made in Michael’s post.  First, what has taken so long?  Just kidding, the last 8 years since we launched Valorem and became “the alternative fee firm” have flown by.  Ok, mostly flown by.  But it is gratifying to know the market is moving decisively to where we thought it should be when we started.

Second, there is room for so much more savings.  AFAs are not the end game for delivering value.  They are but one of a serious of tools that combine to deliver the greatest value.  Think about a Swiss Army knife.  If you just use the short blade and none of the other tools, you are not getting the most value from it.  As clients focus on these other tools, some firms will do so too, or at least say they do.  Which leads to the second reason there is significant room for more savings: Most AFAs are still calculated based on estimate hours x hourly rates, so the AFA is really a wolf in sheep’s clothing, or as a friend from Australia prefers, hourly billing in drag.  If firms are not radically reducing their cost structure, basing fees on cost of production rather than the amount they would earn if billing hourly, they are not doing the things that create real savings for clients.

What firms say and what they do remain very different things, and clients must insist that firms do the things that create savings.  Or vote with their wallet.