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Law firms coping with alternative billing

Alternative billing arrangements – everybody talks about them, but how much are people actually using them?

New data comes from a recent Litigation Trends Survey of senior corporate counsel, primarily in companies headquartered in the U.S. The international law firm Norton Rose Fulbright commissioned the survey.

The insurance industry is most likely to use alternative fee arrangements, or AFAs, with 71 percent of the responding companies reporting their use, followed by financial services at 67 percent and energy and manufacturing at 61 percent each.

The larger the client, the greater the leverage. The survey reports that companies with over $1 billion in gross revenues are the most active users of AFAs, with 71 percent using them.

Fixed-fee, capped fee and blended rate are the three most commonly used AFAs reported, with use of blended rate AFAs falling significantly during the past year. The highest approval rating for fixed fees came from mid-sized companies.

Law firms have made big strides in making their clients happy, according to survey responses. In 2012, nearly one in four U.S. companies were unsatisfied with the quality of work provided under AFAs, but only 3 percent of companies reported dissatisfaction during 2013.

Over half of the smaller and mid-sized companies reportedly were satisfied with the quality of work performed under AFAs, and larger companies reported the highest level of satisfaction with work quality.

Overall use of AFAs was down somewhat in 2012, according to the 2013 annual survey data released last month, but in 2013, use had recovered to 2011-levels.

But the majority of respondents using AFAs use them for 20 percent or less of their outside counsel spend, the survey reports.

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