Alternative fee arrangements

Alternative fee arrangements (AFAs), in the practice of law, occur when payments to a law firm are based on a method other than billable hours.

The classic example of an AFA is the contingent fee, sometimes called contingency or conditional fee, in which a law firm collects its fee as a percentage of the money won at trial or on settlement; the client generally pays nothing unless the legal action is financially successful. However, AFAs—especially in the practice of corporate law—encompass a large variety of arrangements in addition to contingent fees:

• Fixed fees, where the firm handles a single case (or portion of a case) for a pre-specified, negotiated amount.
• Flat fees, where the firm handles a "book" of cases (multiple similar cases) for an agreed negotiated total. There may be a specific number of cases, or the agreement may be for all cases of a specific type that occur during a set time period.
• Bonus arrangements, where the firm receives an extra payment that depends on case resolution, such as level of success, speed of resolution, or cost savings.

Various firms and corporations are credited with leading the way in AFAs. Leading the charge are corporate clients such as Du Pont,^[1] Cisco,^[2] and FMC.^[3] Corporate clients are looking for a combination of cost savings, cost certainty, and alignment of law-firm interests with corporate interests in avoiding an excess of hours worked—and billed. Law firms such as K&L Gates and Valorem^[4] are taking the lead in proposing AFAs.

Firms are learning that succeeding without cost overruns in AFAs means treating the cases as projects, mapping project management concepts onto the legal world.^[5]

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