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Alternative Fees

By John F. Brown Jr.

The desire among senior corporate counsel and management to control costs has pushed consideration of alternative fee arrangements (AFAs) to the forefront. Respected industry press, independent consultants, and law firm client surveys all concur that utilization of AFAs is at a tipping point ' with some estimates suggesting that within five years, as much as half the Am Law 200 revenue might come from AFAs.

In the conventional hourly rate engagement the client assumes the full risk of adverse results and budget overruns, both cost and legal expense. At their core, AFAs seek to transfer some part of those risks to the law firm. Not surprisingly, how much of that risk a firm is willing to accept depends on how much the client allows the firm 'to price' that risk before moving its business elsewhere to a more entrepreneurially minded firm.

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