Managers of law departments take it on faith that alternative fee arrangements (billing terms other than straight hourly, AKA AFAs) at least result in better value for money spent if not reduce total external expenditures. Perhaps that credo is illusory.
According to Managing Ptr., July-Aug. 2010 at 14, and an international survey of law firms by Kerma Partners, “The majority of firms view AFAs as being just about as profitable (within a 10% variance in either direction) than (sic) hourly fee arrangements. One-third deem AFAs to be less profitable by between 10% and 25%, and only 8% deem AFAs as being at least 10% more profitable than hourly fees.”
Law firms should know about their own profitability, so these findings should douse some of the cost-saving claims put forth for AFAs.