12/10/08

Alternative Bidding?

The vast number of posts and articles on alternative billing focus on what law firms should be doing. Law firms need to figure out alternative billing. They need to figure out how to make money and save clients’ money at the same time. Especially large firms (a.k.a. BigLaw) need to offer this up to clients and just solve the big problems of hourly billing and perceived high billing rates. But where are the clients in this discussion? For years I’ve been waiting for clients to force the issue with their firms and get this ball rolling. My prior post talked about the ACC starting this dialogue. This may well drive alternative billing options, but still doesn’t address the role of the client in this process. Let’s take a hypothetical. A client instructs its law firm providers to fix-fee bill a matter or set of matters. After the panic settles, law firms are faced with a long list of questions, none of which the client would have addressed. If this is litigation: How many plaintiffs are there? How many jurisdictions? How many experts are involved? How many witnesses are expected. What is the potential exposure in terms of settlement? What level of settlement would the client accept? A related trend in the market is that of running law firms through the purchasing department of a client, at least to qualify them as accepted vendors. If you take this approach one step further, then you run into the answers our hypothetical law firms have posed. For most categories of purchasing for larger clients an RFP is a necessary part of the process. This is where the specifications for a purchase are outlined. This is where in-house counsel would list their requirements for the parameters of the matter(s) under bid. Just like their outside counsel counterparts – in-house counsels have a learning curve when it comes to alternative billing. Both groups have been splashing in the shallow end of this pool, creating budgets and breaking matters down into segments or phases, but they really haven’t applied a rigorous discipline that will draw them to the deeper waters in the pool. Of course there are always exceptions to the rule. Some firms, or more likely some practice groups in some firms have tackled this issue along with their clients. But overall I am guessing this number is low. As the dialogue continues watch for discussions on how clients will have to change to handle alternative billing. This will be a strong indicator that alternative billing’s time has come.

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1 comments:

Jackie Hutter, Intellectual Property and Patent Business Strategist and "Recovering Patent Lawyer" said...

You are so right! As someone with law firm management and senior in house experience, I have personal knowledge of the huge knowledge gulf between the players. Law firms can improve services to increase efficiencies and the ROI of their clients' legal spends, but in-house folks don't know how to specifically query them as to how to effectively achieve this (even while they might otherwise be effective communicators with their business clients). This inability to communicate sets up the inherent conflict between them and the nebulous goal of "alternative billing" which to date has been unsatisfactory to all involved. If there was a way to monetize "counseling for effective alternative billing arrangements", lead me to it!

 

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