Australian in-house counsels are being advised to get stricter with their law firms when it comes to fixed prices. International professional services consultant and author Ron Baker, who recently visited Australia as part of the Firm of the Future Forums, says U.S. legal clients are “more aggressive” in asking for certainty in pricing than their Australian counterparts. “Clients could stop asking for billable hours in tenders and ask for fixed prices,” he said. “Pfizer, Microsoft, among others, demand them [fixed prices].”

Baker has been pushing for law firms and their clients to abandon the billable hour in favour of more “value driven” pricing mechanisms. “The economy has changed since 1919 (when timesheets and the billable hour were introduced in the U.S.). We no longer live in an industrial economy; we live in a knowledge economy. And smart knowledge workers don't want to have to track their day in six-minute increments, especially since the value of what they create has nothing to do with the time they spend,” he told ALB.

While a variety Australian law firms have introduced fixed fees for certain types of work, very few offer it across the board. According to one general counsel ALB spoke with, even when a firm does give a fixed price for a piece of work, getting them to stick to that price can be a challenge.“I find that they are fairly good with quoting fixed fees, but historically they are not as good at keeping to the quote,” said Nerilee Rockman, vice president legal, commercial and supply chain at AngloGold Ashanti Australia.

However, while clients can be the driver for a change in billing methodology, Baker says real change can only occur within a firm. “Ultimate responsibility for killing the billable hour rests with the firms, not the clients,” he said. “There are thousands of professional firms that don't use it, or timesheets. Law firm leaders who say that, or believe it, are Luddites.”

Even firms which operate across multiple jurisdictions on single projects are not exempt in Baker’s opinion from resorting to the billable hour. “Fixed pricing works no matter what country, because it comports with the laws of economics, marketing, and customer behaviour – that is, we want to know the price of something before we buy it,” he said.