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Too high a percentage of fees estimated to be paid based on “value-based billing”

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An article quotes Susan Hackett, ACC’s general counsel, on “value-based” billing. Hackett says that “surveys show the average client laying out between 15% and 30% of their legal spending this way.” The Economist, July 24, 2010, at 72, does not elaborate, but I doubt very much that the figure is so high. Not if value-based billing excludes discounts.

If we had data from a representative sample of US legal departments, I would go all in that close to 90 percent of all fees paid by them to law firms are based on full or discounted hourly rates. Bills paid by law departments based on value delivered are rare exceptions that prove the rule.

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2 responses to “Too high a percentage of fees estimated to be paid based on “value-based billing””

  1. Steven B. Levy, Author of Legal Project Management says:
    July 29, 2010 at 11:59 am

    Standalone metrics have little value — 74% of this, approximately 18.548% of that. The metrics that offer useful information are longitudinal studies, where you look at the *change* in a metric over time while most variables are held relatively constant.
    For example, the 15-30% figure would be more meaningful if we knew what the equivalent range was ten years ago. (The ACC may well have this info, by the way; by the time an extract of a quote from a press release earns visibility, most of the context is missing.) For example, many patent prosecutions have been fixed fee for over a decade, so they skew the 15-30% number. It’s quite possible the rise in VBB isn’t from a base of zero but, say, 10-20%. Going from 10% to 15% or even 20% to 30% in a decade is progress, yes, but it’s not a momentum shift.
    Like you, I don’t consider discounted hourly rates to be value-based billing. I can’t speak for Susan Hackett or the ACC, but I suspect they don’t consider discounted hourly rates to be VBB either.

  2. Stephen A. French says:
    August 3, 2010 at 4:48 pm

    Since Legalbill captures this “real data” in it’s process for corporate clients globally we can attest to the fact that at least 90% of of all fees paid by corporations to law firms are based on full or discounted hourly rates. Bills paid by law departments based on value delivered are rare indeed.