AI-Ready Billing: Rethinking Legal Pricing in the Age of Automation

As generative AI accelerates the pace of legal research, drafting, and diligence, clients are growing increasingly savvy—and expect their law firms to keep up. The traditional billable-hour model is under pressure, and the firms best positioned for the future are the ones reimagining pricing through the lens of technology-driven efficiency.

This is where AI-informed Alternative Fee Arrangements (AFAs) come in. By embedding clear automation metrics into legal pricing, firms can build greater trust, unlock new client segments, and demonstrate value in ways that go beyond hourly billing.

Why AI Demands a New Pricing Paradigm

Three trends are converging to redefine how legal services are valued:

• Transparency Around Efficiency: Recent benchmarks show that AI-enabled associates can draft NDAs up to 70% faster than their non-AI-using peers. When those gains are visible, clients expect to benefit from them.
• Procurement Pressure: “AI discounts” are fast becoming a fixture in legal RFPs, especially for 2026 panel reviews. Procurement leaders want to see that firms are aligning price with tech adoption.
• Client Comparisons: Legal departments now benchmark outside counsel against other AI-optimized providers—think e-discovery vendors or financial analytics consultants. If value isn’t evident, clients will look elsewhere.

Four Metrics to Make Legal AI Adoption Tangible

For firms looking to bake automation into AFAs, the key is to choose metrics that are both meaningful to clients and easy to validate. Consider this framework:

1. Cycle-Time Reduction: Measure the time from matter intake to final deliverable. Shorter timelines—especially when verified by matter-management timestamps—translate directly to faster deal velocity, which clients can quantify in bottom-line terms.

2. AI-Assist Penetration: Track the percentage of tasks that interact with AI tools. Drawing this from time-entry activity codes helps illustrate that your AI adoption is systemic, not anecdotal.

3. Quality Delta: Showcase improvements in error rates before and after AI implementation. Quality audits and peer reviews can ease concerns about AI “hallucinations” while also spotlighting how AI enhances—not replaces—attorney judgment.

4. Cost per Outcome: Shift the focus from hours to outcomes. By tying fees to results—like completed contracts or diligence sets—you reinforce a value-based approach that resonates with in-house legal teams.

Together, these metrics tell a compelling story about speed, consistency, reliability, and value.

Expanding Access: The Market Opportunity Behind AI-Empowered AFAs

Alternative fee structures aren’t just for enterprise clients. When thoughtfully constructed, they unlock entirely new segments of the legal market.

According to the Legal Services Corporation, nearly half of Americans who need legal help cite cost as a barrier. The same goes for early-stage companies, community lenders, and growth-minded middle-market businesses—all of whom may avoid traditional law firm pricing.

AI-enabled workflows make fixed-fee, subscription, or outcome-based pricing viable for this audience. The result? Firms can offer competitive rates while maintaining strong realization and creating recurring revenue—without sacrificing quality or profitability.

A Growth Strategy, Not a Discount Model

Industry analysts forecast that AFAs will rise from 20% of law firm revenue in 2023 to over 70% by 2025. That shift isn’t about discounting—it’s about smarter pricing and better client alignment.

In practice, many AI-informed AFAs become strategic “gateway” relationships. A flat-fee diligence project today can pave the way for a complex transaction or litigation matter tomorrow. And with data-rich metrics in place, firms can continuously recalibrate fee structures to balance margin protection with measurable client value.

Getting Started: A 90-Day Roadmap for Leaders

Week	Action Item	Outcome
1–2	Add AI-assist activity codes to time entry	Enables data tracking and visibility
3–4	Configure dashboards for cycle-time metrics	Real-time performance insights
5–6	Draft AFA templates with automation triggers	Ready-to-deploy client exhibits
7–8	Train billing and pricing teams on value messaging	Consistent, client-facing language
9–12	Launch pilot program and iterate	Continuous improvement and learning

Final Thoughts: The Leadership Imperative

AI is changing how legal services are delivered—and how clients expect to pay for them. But embracing this shift isn’t just about technology adoption. It’s about building pricing models that communicate value, align incentives, and deepen client trust.

By grounding AFAs in automation metrics, forward-thinking firms can lead this evolution. The result is not only a stronger competitive position, but a more inclusive, responsive, and future-ready legal practice.

At Fennemore, these principles are more than theory—they’re embedded in our firmwide initiatives like Project BlueWave AI and our commitment to innovation that redefines how legal work is delivered and priced. Learn more how Fennemore is leading the conversation on our Innovations page.

Adrian D’Amico is a Director in Fennemore’s Emerging Technology and Innovation group. He helps lead the firm’s technology vision across strategic initiatives, including Project BlueWave AI, Essential Law, the adoption of Artificial Intelligence, and developing opportunities for automated legal processes. He can be reached at adamico@fennemorelaw.com.

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