Managing Alternatives to Hourly Rate Billing

Total fees under an hourly rate system are frequently not limited by efficiencies, but rather by client controls, the size and scope of the matter, the lawyer's desire to be reasonable or at least not to alienate the client, and competition among firms. It is easy for law firms to price legal services on the basis of hourly time charges. Such pricing requires only the ability to set a rate, to accumulate time entries, and to do the math. But it is not easy to price legal services on a basis other than straight hourly rates. Lawyers are generally not trained in the art of estimating legal fees for particular matters, and many engagements do not lend themselves to easy prediction as to total time.

Litigation of complex cases, for example, is fraught with so much uncertainty that it is really anyone's guess in most cases how much time will be required to get through trial. Organizational systems that make perfect sense if the law firm is handling straight hourly work may become dysfunctional when the firm suddenly begins pricing for legal services on a fixed-price or some other basis in which there is risk and reward sharing with the client.