AFAs

The following are the types of AFA structures that we would be happy to offer to Sanofi:

  • Fixed fee – Single price for the entire matter
    • Used when the scope is predictable and the matter cannot end prematurely (like an aborted transaction or early settlement of a litigation)
    • Excellent solution if you want budget predictability and risk sharing between the firm and the client.
  • Fixed fee by phase – fixed fee for each phase of a matter
    • Excellent choice when the scope is clear as above, but the matter can end at unpredictable times.  In these situations the fixed fee by phase assures a set budget and cost risk sharing but because you only pay for the phases worked, it self corrects for truncated matters
  • Budget assurance – set discount for the matter with a larger discount for work above the budgeted amount.
    • Works best when the scope is reasonably clear but there are still some unknowns that could cause the matter to go slightly over budget. 
    • The additional discount on over budget work provides a risk share between the client and the firm
    • Should not be used if the scope is so unpredictable that it is impossible to set a reasonable budget and range of overruns  
  • Fixed fee with collar – fixed fee within a range of outcomes but provision to charge addition fees if the work greatly exceeds the top end of the collar or provide a discount if the work is significantly less than the lower end of the collar
    • Works in situation where the cost would be more or less than the budgeted amount due to scope changes but the range of outcomes are still within a reasonable window.
    • Shares the risk by having a symmetrical set of outcomes where the additional fees or additional discount amounts are symmetrical around the expected budget.
  • Success fee – agreement where some amount of the total fees are tied to the outcome of the matter
    • Works best where there is a measurable outcome like the completion of an M&A transaction or limitation of damages in a litigation matter
    • Success fee amount can be set as a percentage of the total fees paid or a percentage of the outcome (litigation judgment)
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