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Alternative Fee Arrangement Pricing

Legal pricing software for alternative fee arrangements that restates the firm's closed matters to today's cost and shows how often a fixed fee would have lost money.

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The problem

A fixed fee priced off old matters and a cushion, then cut in the bidding

A client asks for a fixed fee and wants the proposal within days. The pricing team pulls closed matters out of the billing system, adjusts them for rate increases in a spreadsheet, adds a cushion to the hourly estimate and calls the total a fixed fee. Those matters sit at old rates and old staffing, so they look cheaper than the same work costs the firm now.

Nobody sees the spread. A median says nothing about the handful of matters that cost far more, and those set the loss. The assumptions clause is lifted from the last proposal, and when the client runs an online bidding round the pitch partner cuts the fee with no idea where the floor is.

Built forPricing directorsPitch partnersBusiness development teamsChief financial officers

The Problem Today

Firms back into fixed fees from hourly estimates, never seeing how often that price lost money before.

90%: of legal dollars are still billed hourly published
26%: average saving clients report from online fee bidding published

Assembled in spreadsheets today

Old matters
Rate cards
Clauses
Memos

Old matters look cheapPast costs sit at old rates and old staffing
No floor in the biddingPartners cut the fee without a walk-away price

The Solution

Scope read from the requestEach cost driver cited; unclear wording comes back as a question
Past matters restatedEach comparable brought to today's cost rates and staffing
The fee drawn through themMargin and the share of matters that would have lost money, live
Clause, memo, approvalTerms drawn from past overruns; the pricing director approves the price

Built-in controls

Below the margin floor, the chief financial officer decides
The person who prices a quote never sends it
Leaving a comparable out takes a logged reason

What You Get

Pitch partners walk into a bidding round knowing the price, the margin and the lowest fee they can accept.

1 hour: of analyst time per quote, down from about 6 our estimate

Hourly, fixed, capped, phasedSide by side, each with its margin and its floor check
Assumptions that protect the feeEach term cited to a past matter that overran
Outcomes learnedWins, losses and actual cost written back to history

From request to approved price

Nine screens that price alternative fee arrangements against closed matters

Taken in the order a quote is built: what each screen does, how, and which person it answers to.

01Scope read from the request
Each cost driver in the client's request, cited to its paragraph
How it works
- Reads the request for proposal and the regulator's letter together
- Highlights each cost driver where it was found: 9 drivers, each cited
- Counts 412 complaint files to re-review, 3 corrective actions to reopen and one site
- Asks where the wording leaves the cost open, and a person answers
Pricing directorPrices the scope the client actually wrote, with nothing assumed and the open questions settled before a number is drawn.
02Comparable matters, restated
Closed matters restated to what the same work costs today
How it works
- Searches 1,906 closed matters and keeps 27 comparables
- Multiplies each cost by its year's rate factor and a staffing factor
- The closest match cost $303,000 in 2024; ×1.11 and ×0.96 restate it to $323,000
- Each row shows similarity, fee type and realization; leaving one out takes a reason
Pricing analystStops old matters from looking cheap, so the expected cost reflects what the same work costs the firm this year.
03Costs as billed then
A toggle showing how cheap old matters look before restatement
How it works
- Moves each dot back to its cost in the year the matter closed
- Seen as billed, $385,000 shows only 15% of matters losing and a 24% margin
- A warning says a 2019 hour costs the firm 41% more today
- Pricing runs on the restated view
Chief financial officerSees in one click why fees quoted off old matters lose money, and why the restated view is the one that prices.
04Fee line at the opening number
The fee as a line through past matters, losing ones marked
How it works
- Each dot is one closed matter, sized by how similar it is
- Matters to the right of the line would have lost money at that fee
- At the $385,000 opening number: 38% lose money and the margin is 16%
- Under the 20% floor, the next step becomes a request to the chief financial officer (CFO)
Pitch partnerLearns before the bidding round that the hourly estimate less a little sits under the floor, with 10 of 27 matters showing why.
05Recommended fee and walk-away
A walk-away price for the bidding round, set at the margin floor
How it works
- Drag the line, type a fee or pick a preset
- At $425,000: 19% of the matters lose money and the margin is 24%
- The walk-away, the lowest fee at the 20% floor, is $404,000
- A curve below traces margin against loss share as the fee moves
Pricing directorHands the pitch partner a number to defend and a floor not to go under when the client bids fees down.
06Four fee options
Hourly, fixed, capped and phased fees against one expected cost
How it works
- Each option carries its own small distribution, margin, loss share and floor check
- Expected cost is $323,000 in all four
- The capped fee earns 12% and fails its 15% floor
- The pricing team ticks which options go in the proposal
Pitch partnerOffers the client a real choice, knowing which option leaves the overrun with the firm and which leaves it with the client.
07Assumptions and exclusions
An assumptions clause written from the matters that overran
How it works
- Seven terms, each citing the closed matters behind it
- Six months of updates covered, then $9,500 for each further month
- Complaint re-review covered to 450 files, then $140 a file
- Each term is accepted, edited or rejected; a rejection needs a reason
Pricing analystSwaps the clause copied from the last proposal for terms that protect this fee exactly where similar fees broke.
08Pricing memo and approvals
A pricing memo with every figure cited, approved before it is sent
How it works
- Recommendation, request, comparable costs, risk and history, each figure linked to its source
- A risk table sets the opening number, walk-away and recommended fee side by side
- The pricing director approves; the pitch partner alone sends
- The CFO step reads not needed: $425,000 is above the walk-away
Pricing directorApproves a price that can be traced figure by figure, and gives the partner a memo that answers the finance questions first.
09Quoted fee against actual cost
Each closed fee's quote set against what the matter actually cost
How it works
- 118 proposals over the last four quarters, 52 of them won
- 9 of 37 fixed and capped fees closed since 2024 lost money
- Twelve closed matters plotted, quote against cost, gains and losses apart
- When the firm lost on price, the gap was 6–14%
Business development managerCan say why the last bids were lost and which fees overran, from the record rather than memory.

At $425,000 the fixed fee clears its floor, and the cap fails its own

Four options for one request, each against the same expected cost: $323,000, the median of the 9 closest matters.

Option	Price to the client	Expected margin and floor	Matters that lose money
Hourly estimate, after an 8% client discount	About $401,000	12%, realization target 90%	None: the client carries the overrun
Fixed fee, recommended	$425,000	24%, floor 20%: passes	19%
Capped fee	Hourly, at most $460,000	12%, floor 15%: fails	11%
Phased fee	$96,000 response and $236,000 remediation, fixed; readiness hourly, about $86,000	22%, floor 18%: passes	15%

Where similar fixed fees broke, and the term each one added

Each term in the clause traces to a comparable matter where a fee like this one broke.

New observations at re-inspection

A surgical robotics matter took three new observations inside its fixed fee, about $61,000. The clause now prices new observations separately.

The consultant's work, done by the firm

On another device maker's matter the firm performed the gap assessment the client's consultant was engaged for, about $44,000. The clause says the firm directs and reviews that work.

Updates that ran past six months

Two matters ran monthly updates for 11 and 9 months against a median of 6 across the comparables. Six months are covered; each further month is $9,500.

Client documents seven weeks late

An endoscopy matter waited on the client and had to re-sequence its work. The clause asks for documents within 5 business days and lets the firm re-sequence after 10.

Around the quote

The rest of the pricing file: questions, records, the cap and the trail

What the pricing team, the finance office and the partners open around the fee line.

Two scope questions, both answered: the reporting review sits inside the fee, and updates are covered for six months, then $9,500 a month — **A scope question, answered**The request said updates until close-out. Across the comparables they ran 4 to 11 months, so the pricing director covers six, then $9,500 a month.

Closed matter record opened from the chart: cost to the firm in 2024, the rate and staffing factors, the restated cost and its similarity — **One dot, opened**A click on a dot opens the closed matter: $406,000 in 2024, ×1.11 for rates and ×0.97 for staffing, $437,000 restated, 81% similar.

Dialog stopping a $385,000 fixed fee under the 20% floor: a written reason for the CFO, or the $425,000 recommended fee instead — **Under the floor, the CFO decides**At $385,000 the margin is 16%, under the 20% floor. Only the CFO can approve it, and the request will not go without a written reason.

Capped fee view with the cap line at $460,000, 3 of 27 matters past it, and a 12% expected margin below the 15% floor for capped fees — **The cap, plotted**As a cap, $460,000 collects about $367,000 for a 12% margin, under the 15% floor: the client gets a ceiling and the firm keeps the overrun.

Roles and approvals table: pricing director, pricing analyst, pitch partner, business development, chief financial officer and systems administrator — **Who may do what**The pricing director approves prices over $100,000. Analysts model but cannot approve, partners send but cannot change a price, and the CFO approves below-floor quotes.

Read-only audit trail of agent runs and people's decisions on one fee request, filterable by people or agents, with entries kept 7 years — **A trail nobody can edit**Agent runs, scope answers, the opening number and each send, in order, with people and agents told apart and the entries kept 7 years.

The person who prices a fee does not send it, and the CFO owns the floor

Agents prepare the quote. Each decision below belongs to a role the firm names in its settings.

A quote below the margin floorOnly the chief financial officer approves it, with the distribution, the memo and a written reason in front of them.

Sending the proposalThe pitch partner accepts the approved quote and sends it. Business development assembles the proposal but cannot change the price.

Leaving a comparable outA person gives a written reason, which is logged, and the expected cost, loss share and walk-away move with it.

Scope the client did not writeWhere the request leaves the cost open, the agent asks and the pricing director answers.

Rates and margin floorsThe systems administrator proposes changes and the CFO approves them. New floors apply to new quotes only.

Alternative fee arrangements: floors, factors and walk-away prices

What is pricing for alternative fee arrangements?

It prices alternative fee arrangements (fixed, capped and phased fees) from the firm's own closed matters. Agents read the client's request, restate comparable matters to today's cost rates and staffing, draw the proposed fee through them, and show the margin and the share of matters that would have lost money. The pricing director approves the price.

How are old matters made comparable to today's cost?

Each matter's cost is multiplied by a rate factor for the year it closed and a staffing factor that compares its mix of partners, associates and paralegals with today's model. The CFO approves the factors in settings.

How does it set a walk-away price for an online bidding round?

The walk-away is the lowest fixed fee that still meets the margin floor on the expected cost, which is the median of the closest matters. The pitch partner goes into the round knowing that number, and a fee below it needs the CFO.

Where does the assumptions and exclusions clause come from?

From the comparable matters that overran. Each term cites the matters behind it, such as new observations at re-inspection or late client documents, and the pricing team accepts, edits or rejects each term with a reason.

Does it handle capped and phased fees as well as fixed fee pricing for law firms?

Yes. A switch moves the chart between fixed, capped and phased, and the options screen sets all four side by side, each with its own margin, loss share and floor check.

Who sees the matter data, and where does it stay?

Pricing files are open to the pricing team, the pitch partner and finance. Client matter data stays in the firm's workspace, where no model learns from it; the audit trail records each agent run, edit, approval and send.

Law Firm Finance & Operations