Article 1.2 · From Hours to Outcomes: Alternative Fee Arrangements in Practice

T3PS Legal Dynamics · Series 1: The Billable Hour Under Siege ·

Written by Will Whawell. Human intelligence throughout; AI assisted with the drafting.

The conversation about alternative fee arrangements has been happening in legal circles for at least twenty years. Conferences have been held. Reports have been written. Thought leadership has been published, appreciated, and filed. And the billable hour has, largely, survived.

What is different now is not the quality of the argument for change. The arguments have always been good. What is different is the pressure. AI has made the billable hour structurally indefensible in a way that rhetoric never managed to achieve. When the technology itself exposes the gap between time spent and value delivered, the case for outcome-based pricing stops being theoretical and starts being urgent.

The alternatives exist. They work. The question is whether firms have the courage — and the internal discipline — to implement them properly.

Fixed Fees: More Than a Discounting Exercise

Let us dispose of a common misconception first. Fixed-fee pricing is not simply undercutting the competition. It is not the legal equivalent of a price war, and it is not appropriate for every type of work. Fixed fees work well for defined, repeatable, process-driven matters where the scope is clear and the variables are known. They work less well — in fact, they can be actively harmful — where the matter is genuinely unpredictable and the risk of scope creep is real.

A residential conveyancing transaction is amenable to fixed fees. Wills and probate — despite being standard practice areas — carry enough variation in estate complexity, family disputes, and HMRC involvement that a pure fixed fee without careful qualification can expose a firm to losses on the more complex end of the spectrum. The same is true for contested employment matters, regulatory investigations, and anything that touches on human behaviour in a dispute context.

This is not an argument against fixed fees. It is an argument for doing them properly — which means understanding your cost base, your risk profile, and your scope definition before you commit to a number. Fixed fees set without that analysis are not pricing strategy; they are guesswork with a confident face.

The good news is that the profession is, belatedly, getting this. Clio's 2025 data shows that 54% of UK firms expect fixed-fee billing to increase, and over half are already shifting in that direction. Across the AmLaw 200 in the US, alternative fee arrangements grew 60% year-on-year — a signal that even the largest and most traditionally-structured firms are recognising what their clients have been asking for.

The Phased Approach: Litigation Budgeting Done Properly

For matters where a pure fixed fee is unsuitable — particularly litigation — the most practical alternative is a phased approach: fixed fees for each defined phase of the matter, with proper scoping at the start of each phase before committing to the next.

This is, in essence, what Precedent H should be. The litigation budgeting regime already asks lawyers to think in phases — pre-action, issue and statements of case, CMC, disclosure, witness statements, experts, trial preparation, trial. Each phase has identifiable work, definable outcomes, and estimable resource requirements. The architecture for phased pricing already exists within the CPR framework. We have simply not been using it as a pricing tool.

A properly run phased fee arrangement looks like this: before commencing any phase, the lawyer and client agree the scope of work, the anticipated outcomes, and the fixed fee. At the end of the phase, both parties review — was the scope delivered? Did anything change? What does the next phase look like in light of what we now know? The client has certainty, the lawyer has clarity, and the relationship is built on defined mutual obligation rather than open-ended time accumulation.

I have been working this way for years. The single most common reaction from clients when I explain the approach is relief. Not surprise — relief. Because what clients want, fundamentally, is to know what they are buying and what it will cost. The billable hour denies them both.

The administrative infrastructure for this kind of pricing has also improved enormously. Cloud-based matter management systems with real-time cost tracking, budget dashboards, and automated notifications when a phase is approaching its ceiling are now standard features in platforms that did not exist a decade ago. There is no longer any technical excuse for handing clients a badly-scanned PDF of time recordings three weeks after the month end. Interactive, self-calculating dashboards that clients can access in real time are not a luxury. They are a client expectation.

Value-Based Pricing: Outcome as the Unit of Measurement

Beyond fixed fees and phased arrangements lies the more demanding discipline of value-based pricing, where the fee is set not by reference to time or even to scope, but by reference to the value the client derives from the outcome.

The best analogy I have encountered is the Porsche configurator. When you sit down to specify a Porsche, you are not asked how many hours the factory will spend on your car, or what the cost of the steel is. You are presented with a set of choices — engine, specification, options — and the price reflects the desirability of the outcome, the rarity of the expertise, and the value you place on the result. The price is set before the work begins, and it is set by reference to your preferences, not the manufacturer's time sheet.

Legal work is not assembly-line manufacturing. But the principle applies. A corporate restructuring that saves a client £10 million in tax liability is worth more than the six hours of legal time that devised it. An expert negotiation that preserves a long-term commercial relationship and avoids a £2 million dispute is worth more than the three meetings and the resulting correspondence. The value is in the outcome. The time is just the mechanism.

Value-based pricing requires, above all else, that the lawyer is confident enough in the value they deliver to price it accordingly. This is, in my experience, the hardest part. The legal profession trains for technical competence and then struggles to articulate commercial value. The lawyer who negotiated that restructuring will often say "well, it was really just a drafting exercise" rather than "I saved you ten million pounds." That instinct for self-deflation is the enemy of value-based pricing.

The data supports the shift. One client conversation I return to often: the first thing most clients say when asked about their experience with a matter is not "what a brilliant piece of drafting" or "the legal analysis was superb." It is "can you believe what they charged us?" Cost is the default frame of reference for clients, because cost is what they can see. Value-based pricing forces a different conversation — one in which the price is agreed upfront, by reference to the outcome, and the client never has to open an invoice with a sense of dread.

The Litigation Bastion: Where the Billable Hour Digs In

None of this is easy to implement in contentious work, and it would be dishonest to pretend otherwise. Litigation remains the bastion of the billable hour, for reasons that are partly structural and partly cultural.

Structurally, the uncertainty of litigation — the other party's conduct, the court's timetabling, the emergence of new evidence — makes absolute fixed-fee commitments genuinely risky for firms. No competent litigator will quote a fixed fee for a trial without extensive qualification, and nor should they. The risk allocation in pure fixed-fee litigation tends to favour the client, and firms that absorb too much of that risk without appropriate scoping will, eventually, get burned.

Culturally, the costs management regime has — perversely — reinforced the hourly model. Because Precedent H is built around phase-by-phase hourly rate estimates, it has given litigation departments a court-approved justification for thinking about cost in hourly terms. Breaking out of that framework requires both a willingness to think differently and a client willing to engage in a different kind of conversation.

The practical proposal here is not to abolish the hourly structure from litigation overnight. It is to use the Precedent H architecture as a foundation for client-facing phase-fixed-fee arrangements, with appropriate contingency and a clear change-control process. Use the budget as the client deliverable, not just the court filing. Use the costs management conference as an opportunity to review scope with the client, not just the judge.

This is different. It is more work. It requires better project management discipline than most litigation teams currently apply. But it is possible, and it is what clients are increasingly asking for.

Charging by Value: A Personal Note

My own approach has, for many years, been to charge by value. That means agreeing upfront what the client is trying to achieve, what success looks like, and what that success is worth. It means sometimes charging less than my hourly rate would justify because the work was straightforward and fast. And it means sometimes charging more, because the value delivered far exceeded the time involved.

The emergency budget example crystallises this well. A client in a dispute that has gone off the rails needs a revised costs budget produced within 48 hours to file ahead of a costs management hearing. The work might take four hours. But the stakes — the difference between recoverable costs being capped at a figure that destroys the economics of the case and a figure that makes it viable — are enormous. The value is not in the four hours. The value is in understanding what those four hours mean for the case.

That is what the billable hour cannot capture. And it is why the alternatives matter.

Questions for Reflection

1.    If you were to agree fees with your next client based entirely on the value of the outcome rather than the time spent, what would you need to know before setting the price — and do you currently have that conversation?

2.    Is the Precedent H costs budgeting process a constraint on value-based litigation pricing, or is it actually the framework that makes phase-fixed-fee arrangements possible?

3.    When did your firm last ask a client what a successful outcome was worth to them — rather than presenting an hourly rate and waiting for them to accept it?