Alternative Fee Arrangements, Lesson II of the Primer


So after all of the hype concerning Alternative Fee Arrangements, you are reluctantly getting ready to drink the Kool-Aid and are preparing to propose an AFA to a client. You have read the basis premises of AFA’s, and you have been following the public discussions. Based on all of the propaganda you have been reading, you know that clients seem to love them and law firms can generate significant profits from an AFA. Apparently, all you need to do is make an educated guess as to what the fees on a project will be, provide a discount and then slap on a sizeable success contingent fee and everybody walks away happy, assuming, of course, a successful result. Not quite.

We first must draw from decades of experience acquired in other professions which routinely do not perform services on an hourly fee basis, but rather routinely perform services on a project basis. These include, among many others, building contractors, IT engineers and consulting firms.

Before a firm can "slap on a contingency fee," law firms must first undertake a far more detailed risk assessment. The need for this risk assessment cannot be overemphasized. In scoping out an analogous consulting fixed fee construction project, IT project or indeed, any engineering project, the basic assumption is that the desired result is always capable of being accomplished, the principal question being the amount of engineering and design effort that will be required to achieve the result.

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Jerome Kowalski
Kowalski & Associates

Jerry Kowalski is the founder of Kowalski & Associates, which provides law firm management... View Profile »

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