It wasn't the most productive morning, but at least Jack could put the time down on the client file.
In-house lawyers want firms to move away from time-based billing and towards fixed fees, according to results so far in the RollOnFriday In-house Lawyer Survey.
"Please kill the billable hour," said a senior in-house lawyer in the technology sector. "Start offering alternative fee models which share risk for large transactions (not just paying lip service to the idea)."
One GC working in transport/infrastructure pondered: “How can our lawyers really be on my side if I want to close things down, keep my bills low and concentrate on delivering our strategy when the partner is incentivised by supervised billings and the fee earner is measured on chargeable hours?" They concluded that firms need to "change their internal incentive model."
"Give fixed fees and drop time billing," agreed a GC in financial services. "After a hundred years of using time based pricing even the most backward of firms must have some data on what is need to cover almost all projects."
"Be better at proving alternative cost solutions," said a GC in Telecoms/Media/Technology. "The hourly rate has to go. It encourages inefficiency."
Tied in with this, clients also want better value for money: "Tighten up on cost control," said a GC in retail. "I expect a little research when necessary, but billing me for hours and hours of research and internal conversations when I'm paying you to be the expert in the first place takes the piss."
Respondents also wanted lawyers to provide accurate and prompt quotes. "Hidden surprises in bills aren't welcome," said one client, "this comes down to communication and being up front about fees."
"We want regular billing, rather than having to wait for ages, only to be then sent an eye-wateringly massive invoice in one go," said another client.
"Improve billing transparency," said an in-house lawyer in the transport sector. While a GC in a bank called for "no more fee overruns."
Many in-house lawyers felt that they were being overcharged. One respondent complained of "vague narratives for big chunks of times, which seemed questionable as to the work actually done."
In a recent RollOnFriday poll, more than a third of lawyers admitted to inflating their time sheets.
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Comments
65
6
Good luck trying that for litigation.
80
4
Whenever I suggest value-based billing, my clients suddenly realise that the value I provide exceeds the time-based metric and decide that they don’t want to pay more than the time it took.
It’s almost as if lawyers want to maximise bills and clients want to minimise them. Whoda thunk it?!
89
8
This is the same old story:
"We think it'll cost X".
"Okay, but we want it to be X minus 50% if the deal doesn't go ahead / isn't on time, so that you're sharing the risk".
"Sure, and X plus 50% if it goes through on time?"
"Oh no we couldn't do that...Show us how much time you've spent"
67
2
Accountants use fixed fee pricing because they tend to do fixed scope work to a fixed timetable. Something outside of scope? Sorry, we can't help you. Need it urgently? Sorry, we can't help you. When was the last time a lawyer said that?
You can't have fixed fees and an on demand, open scope service provision.
27
6
Fixed fees = recipient abusing the cap + provider getting screwed. Want to keep lawyers motivated, pay them properly for their work and don’t be cheeky requesting lots of add ons / variations and think it’s free. Lawyers, drop the hourly rates, they are outrageously high in most cases to justify inflated wages and shining offices.
A good client who values your time should be happy with an estimate and hourly rate combination with proper scoping.
67
3
Give me a complete set of facts and a detailed list of questions/tasks you want answered and happy to give fixed quote.
Give me a half formed question, half the information, change the instructions half way through, raise additional questions and its complicated...
I mean if you go to a builder and ask for a fixed price for an extension and then say "by the way, I'll give you the plans and specification at a later date and change them repeatedly during the build" they will probably tell you to stick it where the sun doesn't shine.
48
5
Share the risk if it doesn't pan out, oh but can I get a breakdown of the time spent if it does.
Heads I win, tails you lose.
Amazingly, external counsel remain stubbornly resistant to the idea.
31
3
This message is always the same: dRoP tHe BiLlAbLe HoUr
But never giving a solution or suggesting that maybe clients are part of the reason why the billable hour exists. You want the best lawyers and brook no possibility of mistakes, so they are going to be well paid and they are going to take their time. You run panels and compete us against each other, that's fine, but then you screw us when we complain about scope creep.
If you want it cheaper, then go to a smaller firm that will charge you less. Stop instructing the magic circle and US firms for god's sake, look elsewhere for innovative solutions and forget the idea of "nobody got fired for instructing Slaughter and May".
32
6
Show me a GC who wants "fixed fees" and I'll show you a GC who is only willing to sign up to a cost cap and not a genuine fixed fee arrangement. Or alternatively, they'll agree a fixed fee and when the initial work is done will be "how much budget have I got left - is there room to add in X?" - once again, that's not how fixed fees for a quoted piece of work operate sunshine.
I have sympathy to some extent but the number of clients that nickel and dime - I had one client who gets a 15% discount, we then wrote off another 5% for some things which weren't billable and/or didn't offer value for money (and we told them we were doing this), and they ultimately had the audacity to complain that they didn't think some of the stuff on there was billable - I pointed out that we had taken this into account in the additional write off but we have done it line by line and the items that aren't billable came to less than the amount we had written down so we could adopt the forensic approach and re-issue the invoice for the higher amount if that was there preference. Shockingly they didn't take me up on that offer.
30
18
Working as a senior in-house lawyer myself, our organisation (FTSE 100 entity) doesn't accept time based billing, full stop. Our panel firms acknowledge that and lawyers who struggled with the idea were removed. You'd be surprised how many firms suddenly get creative and can do alternative fee arrangements when you tell them that otherwise there won't be work at all.
So the deal is simple: counsel are told to provide us realistically priced fixed or capped fee quotes, based on their wealth of data and experience around what things usually cost. As a client, we in turn stick to the agreed scope - no attempts to pack more stuff in, demand freebies, query invoices at nauseam. If matters get out of scope (or we can foresee that they probably might), we have a conversation to ensure the extra work is quoted for separately, ringfenced or we agree a fair figure afterwards.
Alternatively, sometimes the law firm takes a hit on one matter but gets instructed on another nice piece of work to make up for it.
I'm pleased to say that we have few invoice disputes overall - as long as everyone feels treated fairly and you have grown-up conversations and attitudes, the model works (including for litigation).
Key to this working is to have good relationships - we invest a good bit of time to interact in person with our lawyers, get to know them and they get to know us. If you have a good and close working relationship, the majority of issues can be resolved before they even become a bone of contention.
49
4
WTF is the problem with paying for "research"? I have had clients say this and it is mental. Do you want us just to guess at the answer? Do you think that your situation presents no vaguely novel issues?
I get that you aren't paying to have the trainee learn how to do everything, but some clients say that they will cross out and not pay for any timelines that have the word "research" in them.
In what universe does this make sense?
27
2
Lolling at "share risk on large transactions". I'd love to price a transaction at a sensible fixed fee that preserves some upside and downside for my firm. Only trouble is I've yet to find a client that is willing to share upside as well as downside.
I think this may cost £2m. I will do it for a fixed fee of £3m. I may make out like a bandit if it comes in at £2m, but I lose my shirt if it balloons to £5m. That's fair, but no one wants to go for it. Weird, eh?
24
5
if you ever, ever provide an accurate scope of a job I'll consider ditching time based billing
30
6
Perhaps when you lot stop hiding relevant information from us and key documents that would materially affect our view of the work at the outset, we'll be able to give you a more precise fee proposal up front. Until then, suck my hourly rate.
7
4
News flash @ "Office Drone" - we're still calculating your fees (and annual increases to our quotes) by reference to our hourly rates.
26
3
It's not a joint venture
It's not a joint venture
It's not a joint venture
It's not a joint venture
35
6
By "fixed fee", they mean, "capped fee with massively discounted hourly rates".
I've got a client that has taken to including the following (I paraphrase) in the "scopes of work" it puts out for tender:
"anything else we might need doing that we didn't mention"
"we accept no assumptions"
"each line item must have a capped fee. Savings from one line item may not be applied where the cap is exceeded on another line item"
"we don't pay for trainee time"
"if the project is abandoned before you incur USD 75k of fees, you will not charge us anything"
...
No, I'll do someone else's work instead, thanks. Enjoy working with whichever sucker agrees to it.
4
13
Office Drone is right.
You'll all be replaced by AI soon anyway
16
8
"The billable hour is so outdated" said one GC "It's high time they replaced it with something more progressive" added another senior in-houser. Many respondents suggested "Perhaps they could all just work for free and wear little leather gimp harnesses while they do it" as a new model for the profession to aspire to.
Quality journalism from RoF here.
8
9
@ 0.1 03 May 24 11:08
I don't care how you calculate your fee. That's for your firm to decide - whether you use an hourly rate or some other metric to value time/expertise/whatever else your charges are based on.
What I care about is that the fee is agreeable to my client (i.e. the company that employs me) and that it's a fixed, predictable expense on our budget.
It's like going to the tailor - you discuss the suit you want and the tailor will price materials, working time, expertise, staff necessary to make it, pressures added by expected delivery time (if any) + a reasonable profit on top and tell me what the suit will cost. If I want further alterations later, I may to pay extra but otherwise I know what I'll pay and the tailor knows what they'll get. Win-win.
5
11
who the hell bills for “research” these days fgs
19
7
Sharing the risk.
Firm: So, it will cost £50k for the work you’ve asked for.
Client: but if it doesn’t complete, you will cap your charges at 25k.
Firm thinking: Ok, so what is the upside for us here? If we have properly done the work you have asked for, it is properly billable to you, and you want us to shave 50% off our costs if for reasons outside of our control, your transaction doesn’t complete?
As you are making it dependent on the outcome of your transaction, how about, we do the work, we charge you 50k. Then if you want to flip a coin on your outcome, let’s say if you don’t complete, you get 25k back, if it does complete, you pay an extra 25k so that we feel like you’re sharing potential risk and benefit?
No takers? Of course not. That’s not how business works. You don’t buy in stock to resell, and then try to recover your cost from the supplier if you fail to sell. That’s your problem. Not something to pawn off on your service provider. Maybe that’s where the rethink is needed.
Don’t want to pay?
Then use your in house legal for your own legal needs? Are they too busy? Too generic rather than specialist? Then you can either do without the advice or you go external for it.
12
2
In private practice, I wasted countless hours coming up with "creative" fee arrangements - every possible way of doing it - and only on two occasions (in 20+ years) did the client actually accept. And then, in one of those two, when the client realised time-and-materials would have worked out cheaper, they tried to renegotiate back to time-and-materials.
Now I'm inhouse, I honestly struggle to find a way to agree alternative fee arrangements because there is too much uncertainty in most of our deals.
3
7
LOL at all the PP lawyers being so angry about the idea of ditching the billable hour despite the overwhelming feedback from their clients. It's going to happen - it already is in some companies, as Office Drone has said. Are you really this indoctrinated that you can't possibly see any other way? Yes, obviously the alternatives are imperfect but in the long run it'll free you. Embrace it!
10
4
We've been reading articles about the death of the billable hour for 30 years,...and it is still very much alive. I can't it see it going away.
6
4
Sounds like the in house counsel want to have their cake and eat it.