Pressure Mounts as More Corporate Clients Favor Flat Rates over Billing by the Hour

We have heard the battle cry before, and the wires are abuzz again about having law firms abandon the billable hour, according to Slate.

Though few companies openly discuss alternative billing arrangements, there is ample evidence to show that alternative billing is overwhelmingly favored over the hourly rate model.  Companies favor flat fees and discounts for volume legal work to control costs and more succinctly forecast legal spending.  Most critically, perhaps, a fixed rate model engenders risk sharing and trusting relationships.

Chief legal officers under pressure to lower overhead cannot treat litigation engagement costs as a wild-card on the balance sheet any longer.  Chief executives expect law departments, most of which include compliance and records management on the portfolio, to have strategic plans and budgets. The use of alternative fees and availability of collaborative technology, make litigation expenses more predictable than ever before.

Notwithstanding these benefits, the economics of supply and demand will ensure that not all legal engagements end up with a fixed fee billing standard any time soon. Top dollar lawyers and firms who offer specialized legal work will continue to find a line at the door of clients willing to pay top hourly rates. 

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