HOW TO PRICE LEGAL SERVICES

The full-fledged arrival of artificial intelligence gives the impetus to reconsider how legal services should be priced. We are experts with experience as corporate and individual clients and managing partners of prominent law firms. Here are our views on the new rules of how lawyers should charge, considering the canons of ethics, fairness, and equity.

1. Senior lawyers who accept the engagement should do the work. Work may be delegated to junior lawyers only if the client is not billed. Artificial intelligence should be required as a tool for the senior lawyer.
2. Clients should prepare a written proposal request, and lawyers should submit proposals. Those documents include statements of work and pricing, at a minimum. The hourly rate remains a measure of value. But it should consist of direct costs (including AI), indirect costs, out-of-pocket expenses, and profit. When appropriate, the senior partner's hourly rate can be used to measure the price. However, it should only be utilized when all other methods are not feasible.
3. The hourly rate can be used for transactional work but only with a not-to-exceed ceiling in every case and project.
4. Fixed price is the default setting for all legal services projects. Experienced lawyers are capable of pricing work. Fixed prices can be paid according to a schedule that tracks the progress of the work, or fairness and equity can be achieved with an hourly rate and not exceed the ceiling.
5. Target estimates should always be required with not to exceed ceilings. Or, fixed price incentive contracting can be used to provide cost-sharing for overruns and a bonus for underruns.
6. The only hourly rate, when used, is the senior partner's rate. The lawyer should not charge for any associates or for AI. Also, gone are the days when the law firm charges overhead expenses as separate direct charges. The rate includes travel and lodging expenses, court costs, court reporting costs, and all other costs. Expert witness fees should be charged separately and be passed through without markup.
7. Contingent fees bear no ostensible connection to the services conferred or received value. They are a conflict of interest. The attorney is invested in the claim, and either the client or the attorney will be mistreated.

We can estimate all legal services based on our experience. We also do not shy away from assuming the risk. The suggested changes are all designed to base remuneration on the fair value of services. The default setting is always an hourly rate with a not-to-exceed ceiling.  

If a lawyer cannot estimate the cost of the work, they are inexperienced and should not be retained.