90% of Legal Fees Still Flow Through Hourly Billing as AI Compute Costs Complicate Fixed-Fee Math

Despite the five-year trend toward fixed fees — ELM Solutions benchmarking shows fixed and capped-fee arrangements climbing to 31% of outside counsel spend (up five percentage points since 2021, driven by employment separations, routine contract review, trademark prosecution, and residential real estate) — roughly 90% of legal fees still flow through standard hourly arrangements, a structure essentially unchanged since the 1950s. Thomson Reuters/Georgetown's State of the US Legal Market framed this as an "absurd tension" against the AI spending surge now accelerating through BigLaw overhead. Wells Fargo's Q1 data showed a 13.1% first-quarter revenue jump across the Am Law 200, but collections cycles slowing more than 3% as unbilled work stacks up — a signal that realization is being squeezed even as rates climb. In funded litigation, Burford Capital's portfolio data shows that 44% of arrangements approved since January 2025 include a "compute cost carve-out" clause, treating documented AI platform costs as a reimbursable disbursement rather than firm overhead — what one Deminor analyst called "the GPU problem": firms cannot fix fees when their largest variable cost is priced by inference call.