At the ELM Amplify 2025 user conference, legal operations professionals gathered to discuss the evolving landscape of legal spend management. One standout session, "The Art of the Ask: RFPs, AFAs, and the End of Hourly Negotiation," provided strategies for companies looking to move beyond traditional billing models. The discussion focused on how requests for proposals (RFPs) and alternative fee arrangements (AFAs) are reshaping the relationship between corporate legal departments (CLDs) and outside counsel for the better.
What are the benefits of moving beyond hourly billing?
Transitioning away from the hourly billing model helps CLDs establish cost predictability and align outside counsel incentives with business outcomes. Speakers at the "Art of the Ask" session emphasized that while hourly billing has been the standard for decades, it often falls short on fostering strategic partnerships. AFAs and competitive bidding encourage firms to focus on efficiency and value delivery.
The session outlined several critical components for successfully implementing these strategies:
1. Building strategic partnerships
Legal services are a market, and relationships should support functional, strategic partnerships rather than transactional ones. By analyzing how firms bill and what invoices reveal about the relationship, departments can identify opportunities to align goals.
2. Empowerment through panels
Creating a curated list of pre-approved law firms empowers legal teams to deepen relationships with a smaller group of vendors. This consolidation leads to better volume negotiation and establishes clear partnership expectations.
3. Data-driven decision-making
Using historical data on hourly rates serves as a benchmark for setting AFAs. This data ensures that new arrangements are fair, grounded in reality, and competitive. Even when using AFAs, hourly rates remain relevant as a baseline for determining the value of specific bodies of work.
4. Leveraging technology for competitive bidding
Implementing tools for competitive bidding can initially be a culture shock but ultimately streamlines the process and ensures compliance. Technology enables departments to efficiently manage RFPs and track the performance of their outside counsel panels.
Success stories from the field
The session featured examples of companies that have successfully navigated this transition. These stories illustrate that while the path may have challenges, the results are worth the effort.
Case study 1: Reducing spend while maintaining relationships
One large company with a high volume of litigation successfully transitioned long-standing partner firms to an RFP process. By asking trusted partners to bid, they maintained deep institutional knowledge while significantly reducing spend. In addition, for one specific matter with escalating costs, issuing an RFP introduced new firms and fresh strategic perspectives.
Case study 2: Consolidating firms via top-down mandates
A general counsel at a second company mandated cost reductions to address unsustainable spend. The department engaged regional teams to identify "must-have" firms, significantly reducing the active vendor list. They then implemented technology to facilitate competitive bidding, which is now embedded in the department's culture.
The importance of change management
A recurring theme throughout the session was the necessity of change management. Transitioning to RFPs and AFAs is often met with resistance from attorneys who fear damage to their relationships with outside counsel. As noted by one panel member, without a true champion providing top-down support, these initiatives are likely to fail.
Success requires:
- Top-down support: A true champion in leadership is essential to drive the initiative.
- Clear communication: Explain why the change is happening to set expectations.
- Incentive alignment: Incorporating cost reduction contributions into performance reviews can help align legal team incentives with the new strategy.
Our session "The Art of the Ask" made it clear that the era of unquestioned hourly billing is drawing to a close for forward-thinking legal departments. As the success stories from ELM Amplify 2025 demonstrated, those who master the art of the ask gain not only savings but stronger, more aligned relationships with their outside counsel.
Frequently asked questions
Q: What is the difference between an RFP and an AFA in legal operations?
A: An RFP is a process used to solicit bids from law firms for specific work, while an AFA is a billing structure that replaces hourly rates with fixed fees, capped fees, or contingency models.
Q: How do AFAs improve legal spend management?
A: AFAs improve spend management by providing cost predictability and encouraging efficiency, ensuring that legal departments pay for value and outcomes rather than just the time spent on a matter.
Q: Why is data important for setting alternative fee arrangements?
A: Historical data provides a factual baseline for how much specific legal matters typically cost, allowing legal operations professionals to set fair, competitive, and realistic fixed fees or capped rates.
