How I think about — AFA Design
A good AFA is built for the matter that actually happens.
Alternative fees are not just different wrappers for the same work. At their best, they make the bargain clearer: what is known, what might move, and how uncertainty will be shared.
Principle
An alternative fee arrangement is only useful if it changes the way risk is understood.
The tension
Fixed fees, caps, collars, blended rates, and success-linked structures can create predictability. They can also become hourly billing in a different wrapper if scope, assumptions, and change points are not clearly designed.
Where I lean
Toward AFAs that are specific about what is included, what could move, and what each side is trying to protect. A good fee structure should make the commercial bargain more visible, not less.
Where I hesitate
Around alternative fees that are sold as innovation but built on vague assumptions. Predictability is not the same as certainty. If the model does not explain how scope creep, timing changes, or complexity will be handled, the risk has not disappeared. It has just been relocated.
Working note
The best AFAs do not pretend uncertainty is gone. They decide how uncertainty will be shared.
§ ReferencesWhere this thinking comes from
- ACCValue-Based Fee Design
- BigHandAFA Playbook
- Thomson ReutersAlternative Fee Trends
Synthesised from publicly available reports and commentary. All views my own.