Value Based Pricing in Litigation

Litigation is different when it comes to Value Based Pricing (VBP)

But not because of the underlying uncertainty

There's a common argument that says VBP is harder in litigation because there are too many variables; you don't know how the other side will react, what the judge will decide, how your own client will react etc etc

Uncertainty is a non-trivial issue, but it is not an issue particularly unique to litigation

There are similar risks in transactional work; we don't know what the DD will throw up, we don't know if the deal will complete, we don't know how the buyer/seller/their solicitors will respond not etc etc

Over-focusing on uncertainty tends to a typical response of 'scope harder' to enable VBP, which can only get you so far in any case

But for litigation, there is a fundamentally different challenge with VBP beyond managing uncertainty

Value Based Pricing advocates for pricing the work in relation to the client's perceived value of that work

The complication with litigation is that simple view is muddied quite considerably by parties outside the client/firm relationship having a view on value and being able to assert that view on the fees the firm may wish to charge, and that the client might otherwise be willing to pay

For example, the role of costs lawyers and costs judges in assessing reasonableness and proportionality; the recovery of some/all costs from the losing side; fixed recoverable costs regimes; costs management conferences; the justification of fees with reference to input costs (hours x rates); and the justification of those rates with respect to HMCTS guideline rates

All of these factors impact your own client's perception of the value of the legal work performed for them by creating price anchors outside the influence or control of the law firm

And bearing in mind that a lot of those factors are adversarial in nature - calling into question 'did you really need to spend so much time on x', or 'couldn't that have been done by a band D fee earner' etc - suddenly you find yourself justifying your fees via the judgement (if not judgment) of a third party

That is the challenge around VBP unique to litigation and it requires a much more nuanced approach than 'scope harder'

Value Based Pricing in Litigation