Alternative fee arrangements (AFA) are now well-established in our profession. In-house counsel like the better cost certainty and outside counsel, well, we like to have the work. (For purposes of this discussion, an alternative fee is any deal struck for legal services other than on an hourly basis.) Let’s discuss some of the keys to a successful alternative fee arrangement.
It may seem obvious, but an important step to any successful AFA engagement is defining the scope of the project. In-house counsel set the initial scope and then outside counsel reaffirm or challenge the scope and fee around the project (especially if it is a fixed fee). From experience, especially for non-routine matters, taking a hypothetical matter with your execution team from beginning to end is a good way to anticipate scope issues. This exercise usually challenges assumptions made by all parties and can affect the final scope and expectations. It is equally important to determine what is out of scope. Be aware: in practice, the scope of an engagement can and often does change over time. Additionally, communication between the parties during a project about scope change is central to a successful AFA project.