TIMEKEEPER RATE REVIEW A TOOL TO CONTROL TIMEKEEPER RATES

Transcription

1 TIMEKEEPER RATE REVIEW A TOOL TO CONTROL TIMEKEEPER RATES

2 TIMEKEEPER RATE REVIEW: A TOOL TO CONTROL TIMEKEEPER RATES Overview Timekeeper Rate Review (TK Rate Review) is a powerful tool for controlling your firms proposed timekeeper rates. The tool allows: A new workflow whereby you standardize how and when your firms propose rate increases. Enhanced enforcement of your policies regarding rate increases. Reportable savings. Timekeeper Rate Review was developed in conjunction with the American Express corporate legal department one of the world s top legal departments. Here is what one Serengeti client had to say about this tool: Serengeti s Timekeeper Rate Review allowed us to instantly see that one of our firms was proposing an overall 10% rate increase. We rejected the rate sheet and successfully negotiated a 1% rate decrease with this firm. Timekeeper Rate Review really helped us negotiate much quicker with our firms without having to do our own calculations. This guide provides the specifics behind implementing this tool and tips for best practices. By following this guide, your legal department can fully harness the power of Timekeeper Rate Review. Contents Step 1: Review current practices and develop a plan... 2 Step 2: Enable Timekeeper Rate Review functionality... 3 Step 3: Send an internal notice within your legal department... 5 Step 4: Send an external notice to your firms... 5 Step 5: Review the accuracy of the rate sheets your firms submit... 6 Step 6: Use index and forecast data to negotiate with firms... 8 Step 7: Modify (as necessary) individual timekeeper rates and submit/reject the rate sheet Step 8: Monitor firm compliance with and internal enforcement of your rate policies Step 9: Report savings Appendix A: Timekeeper Rate Review Implementation Timeline Appendix B: Internal Notice Appendix C: External Notice Appendix D: Proper LEDES Invoicing Under Various Fee Arrangements May 10, 2012 Page 1

3 Step 1: Review current practices and develop a plan Before implementing any changes, it is imperative that you review your current policies and workflows regarding rate proposals from your firms. Here are some questions to ask: What is our current process when a firm proposes a rate increase? Who currently negotiates and approves proposed timekeeper rates? After we agree on a rate, how are negotiated rates communicated to invoice reviewers? How do our invoice reviewers enforce these negotiated rates against pending invoices? How do we currently monitor invoice reviewers to ensure enforcement of our rate policies? What reports do we currently generate to report savings from negotiated timekeeper rates? What documentation do we have regarding these processes? The following changes may be necessary to maximize the power of Timekeeper Rate Review: Standardize processes: To maximize use of this tool, you will need to standardize when your firms can submit proposed rate increases, how rates are negotiated (and by whom), and how your policies will be enforced. Educate firms: You may need to educate your firms on how to properly submit a rate sheet. You may also need to monitor and enforce proper LEDES invoicing throughout the year. Enforce policies: Exceptions often undermine the rule. To maximize the value of Timekeeper Rate Review, rate sheets should include all timekeepers expected to bill you in the upcoming year. Also, the agreed rates must be enforced throughout the upcoming year. Set the tone from the top: Change is challenging in many organizations. Some firms will resist this new workflow. The voice from the leadership team in your legal department will be critical to the effective implementation of Timekeeper Rate Review. You should also review the Serengeti timekeeper rate review tutorial located at Now, create a plan to roll out or improve your current use of Timekeeper Rate Review. See the proposed implementation schedule in Appendix A. May 10, 2012 Page 2

4 Step 2: Enable Timekeeper Rate Review functionality 1. Log in to Tracker and click System Setup. Note: You must be a Company System Administrator to access System Setup. 2. In the Invoicing, Budget & Financial Setup section, click Timekeeper Rates and Reviewers. 3. In Yearly Timekeeper Rate Review, for Enable Yearly Timekeeper Rate Review, select: Yes. 4. In Rate Reviewers, select at least one rate reviewer who will be responsible for approving your firms rate sheets. BEST PRACTICE: You can select up to five rate reviewers. Your rate reviewers should be individuals in the legal department who have authority to approve timekeeper rates (not just individuals who serve an administrative function). Ideally, your rate reviewers should plan on logging into Tracker to review the rate sheets (rather than having an administrator print the rate sheet information for their review). This will allow more efficient rate sheet review and better collaboration among rate reviewers. May 10, 2012 Page 3

5 5. Under Timekeeper Rate Approval, you will select who must initially review and approve/modify the audit flags for timekeeper rate increases and new timekeepers. Notes: If you select TK Rate Reviewers only, each audit flag for a new timekeeper (a timekeeper that was not included on the approved rate sheet) or timekeeper rate increase (an existing timekeeper, but now with a rate higher than on the rate sheet) will be delivered to your rate reviewers first. The invoice will then pass to your invoice approvers only after your rate reviewers have handled all audits. Your invoice approvers will see a yellow audit flag but have no ability to make additional modifications. If you select TK Rate Reviewers and Invoice Approvers, each audit flag for a new timekeeper or rate increase will appear on the dashboard for both your rate reviewers and initial invoice approvers (e.g., Billing Guideline Reviewer or Lead Company Person). Note that if the initial invoice approver clears the audit, it will no longer be available to the rate reviewer, but not vice versa. BEST PRACTICE: These two options create different workflows. It is critical to understand the difference between these options and the context in which they should be used. TK Rate Reviewers only: This option centralizes (or bottlenecks) the review of audit flags for rate increases and new timekeepers. By restricting the review of these audit flags to a few (maximum of five) individuals in your legal department, you ensure the greatest enforcement of your policies regarding these audit flags. A few cautions: a. If rate reviewers are not sure how to handle an audit flag, they will need to get clarification from a decision maker (an additional process). May 10, 2012 Page 4

6 b. As noted above, if rate reviewers clear an audit flag, subsequent invoice reviewers will not be able to override the rate reviewer s decision regarding that audit flag. c. If rate reviewers are absent for an extended period of time, invoices with audit flags would be stuck in the rate reviewer queue during that time. TK Rate Reviewers and Invoice Approvers: This option allows your existing invoice approval workflows to remain (and does not bottleneck the invoice review process with rate reviewers). If you are confident that your current invoice approvers will enforce your policies regarding rate increases and new timekeepers, you may want to use this second option. Step 3: Send an internal notice within your legal department A document template is provided in Appendix B, which you can customize to your requirements. This notice should be used to set expectations within your legal department as you implement this tool. Step 4: Send an external notice to your firms There is no system requirement for your firms to submit rate sheets, so you must notify your firms outside of Tracker of your policies regarding Timekeeper Rate Review. A document template is provided in Appendix C, which you can customize with your requirements. This document is also available at: May 10, 2012 Page 5

7 Step 5: Review the accuracy of the rate sheets your firms submit 1. Your rate reviewers can view rate sheets by clicking on the dashboard alert for Timekeeper Rates/Sheets, which will open the TK Rate Review page. 2. On the TK Rate Review page, note that there are three sections: Rate Sheet Review, New Timekeepers, and Timekeeper Rate Changes (you may want to expand/collapse/scroll to the bottom of the page to see all three sections with their contents). In the Rate Sheet Review section, you can do any of the following: a. View the rate sheet; b. Change the effective date of the rates in the rate sheet; or c. Download the data file submitted by your firm. BEST PRACTICE: double check that the effective date is the date you want the proposed rates to become effective. Note that if you are reviewing a rate sheet, you cannot backdate the effective date to a date that has already passed. Also, if you approve a rate sheet and the effective date passes, you can no longer edit the effective date. So, this date should be one of the first things you review! May 10, 2012 Page 6

8 3. Missing Timekeepers. When you first view the rate sheet, note the view selector at the top left of the screen. Set the dropdown to Timekeepers (with missing Timekeepers). This will expose all missing timekeepers in gray at the bottom of the rate sheet. BEST PRACTICE: A missing Timekeeper is a timekeeper who has billed in the past but is not on the firm s current rate sheet. When the view selector is set to Timekeepers (with missing Timekeepers), missing timekeepers will appear at the bottom of the screen in dark gray. As all timekeepers who are expected to invoice you next year should be on the firm s rate sheet, you should view the list of missing timekeepers to determine whether the rate sheet is complete. If the rate sheet appears incomplete, contact the firm. This is a good opportunity to reinforce with the firm that the rate sheet will be used to determine which timekeepers can bill you during your upcoming fiscal year. May 10, 2012 Page 7

9 Step 6: Use index and forecast data to negotiate with firms The rate sheet provides powerful information for fee negotiations with your firms. This information can be divided into two categories, each discussed below. Projected cumulative impact on the proposed rates The first thing you should notice on the rate sheet is the projected cumulative impact of the firm s proposed rates on next fiscal year s spending. In the example below, the cumulative impact of the proposed rates next year will be $1,321,470, as opposed to $1,239, last year a 7 percent spending increase if historical trends continue! BEST PRACTICE 1: Use this information in rate negotiations. As an example, your firm may only be proposing an average 3 percent rate increase, but the projected impact to your spending could be much higher (e.g., 7 percent in the example above) due to how the firm actually staffs your matters. Using this information, a conversation in a rate negotiation could go something like this: Your proposed rates are forecasted to result in an overall 7 percent increase in our legal department s spending next year. Our legal department budget is only increasing by 2 percent this year, so we cannot sustain such a large increase. As a result, we can talk about four things: (1) rate reductions, (2) different matter staffing, (3) alternative fee arrangements, or (4) we give more work to another firm. Which of these four should we talk about? BEST PRACTICE 2: Note that the forecast breaks down if your firms are allowed to submit invoices next year with many new timekeepers that were not in the firm s rate sheet before the start of the fiscal year. Therefore, it is imperative that the rate sheet is complete and includes all of a firm s expected timekeepers for next year. Benchmarks and forecasts related to individual timekeepers. Demographic Information. Note the demographic information in the Timekeeper Data section, which includes the timekeeper s metro area, most predominant matter type invoiced historically, classification, and years of experience. May 10, 2012 Page 8

10 Default vs. Matter-Specific Rates. A default rate is the system-wide rate for a timekeeper. A matterspecific rate is a timekeeper s rate for a specific matter only. You can determine whether a rate is default or matter-specific by looking in the Matter Data section. If the column contains a matter name (shown as Yessler Agreement for Brian Boyd below) against which only invoices for that matter will be audited. If the column is blank (shown in the screenshot for Cortney Boitano below), the proposed rate is the default rate against which all other invoices will be audited. Rate Proposal. Here, you can see the Current Rate (if any), proposed Effective Rate for the upcoming year, and Index. You can also view the fees billed by a timekeeper last year and the projected fees next year (based on the hours billed by a timekeeper last year multiplied by the Effective Rate). BEST PRACTICE 1: The proposed Effective Rate should be the after-discount rate (if applicable). Otherwise, the rate you approve in the rate sheet would be the pre-discount rate (or rack rate ) and your audit flags would only appear for invoices submitted with rates above the base rate, not the agreed-upon discounted rate! BEST PRACTICE 2: The index is determined by a timekeeper s metro area, matter type, and classification. The index DOES NOT take years of experience into account. So, your rate reviewer(s) may want to take years of experience into account when comparing the proposed rate against the index. May 10, 2012 Page 9

11 Step 7: Modify (as necessary) individual timekeeper rates and submit/reject the rate sheet To modify individual timekeeper rates: 1. Next to the name of a timekeeper, click change. 2. In the new text box that appears, enter a new rate. 3. Press Enter or click Save. Note: You can undo changes for individual timekeepers, or, under What You Can Do, click Undo all changes to the rate sheet. To submit or reject a rate sheet: When reviewing a pending rate sheet, you have four options: Submit the entire sheet of proposed rates. Reject the entire sheet of proposed rates. Undo all Changes to remove any changes you have made to the rate sheet. Cancel to leave the page without saving changes. Notes: An message is sent to your firm if you reduce or reject a rate sheet (but not if you approve a rate sheet without any changes). When you submit or reject a rate sheet, it is listed under All Other Rate Sheets on the TK Rate Review page. Step 8: Monitor firm compliance with and internal enforcement of your rate policies Your invoice approvers should know what to look for on an invoice, which varies based on your fee arrangements with your firms (e.g., standard hourly rates, discounted hourly rates, blended fees, or flat fees). See Appendix D for additional detail on what your invoice approvers should be looking for. You may need to educate your invoice approvers on what to look for in an invoice. On at least a quarterly basis, your Tracker Coordinator should be running two reports, Audit Override Export and Timekeeper Rates, to be reviewed by your legal department s leadership team. Audit Override Export This report displays how your invoice approvers have handled each audit flag on the invoices selected in your report criteria. To run this report: 1. Navigate to Reports, and then select the report Audit Override Export. 2. Select the report criteria for the invoice audits you want to review under Step 2 - Criteria. 3. For Step 3 Generate Report, select Export CSV. Note: You can also save your report criteria by clicking the checkbox next to Save Report Criteria and providing the name of the report in Save Report Criteria As. 4. Review the CSV file. BEST PRACTICE: Pay close attention to columns A (Firm), G (Audit Type), H (Expense or Timekeeper), I (Audit Approver), and R (Total Difference). Note that the Total Difference is the variance between the guideline amount in Tracker and the amount approved. This report tells you which firms have submitted invoices with rates (and expenses) that do not confirm with your billing guidelines. It also tells you which invoice approvers have allowed non-conforming rates (and expenses). Review this report regularly! May 10, 2012 Page 10

12 Timekeeper Rates This report shows what your current timekeeper rates are, who approved those rates, when those rates were approved, and whether the rate is the Tracker default rate or a matter-specific rate. This report also shows how the rate was approved (during rate review or on an invoice). To run this report: 1. Click the Reports button, and then select the report Timekeeper Rates. 2. Select the report criteria for the invoice audits you want to review under Step 2 - Criteria. 3. For Step 3 - Generate Report, select Run. Note: To save your report criteria, select Save Report Criteria and name the report in the Save Report Criteria As box. 4. Review the report, noting the following columns: Edit Rate: If you are a Company System Administrator or TK Rate Reviewer, you will see [Edit Rate] in the first column of each row. You can click this link to edit the rate in Tracker. Timekeeper/Classification/Timekeeper ID: View the timekeeper name and classification (partner, associate, paralegal, other timekeeper, etc.). Firm/Office: View the firm and office from which the timekeeper bills your company. Current Rate/Prior Rate: View the current and prior timekeeper rate. Approver/Approval Date: View the invoice approver who approved the timekeeper s current rate and the date when the current rate was approved. Matter Name/Matter Type (Template): Note that there is a difference between the gray and white rows in the report. The gray rows display the timekeeper s default rate (or system rate), if any, and the white rows display the timekeeper s matter specific rates (and the associated matter type). BEST PRACTICE: You can edit any rates that have been improperly increased here, which will reset the threshold for invoice audits on invoices your firms post moving forward. This may be easier than asking a firm to submit a whole new rate sheet to adjust a few timekeeper rates that may have crept up throughout the year. Review this report regularly! Step 9: Report savings One pre-configured report you should run on a regular basis is the Invoice Reduction Export. This report shows amounts for reductions to fees (Column K), expenses (Column L), and taxes (Column M) for invoices during a given time period. You can also see who made the reduction (firm or company in report criteria, see Column H in the report) and the basis of the reduction (see Columns N P). This report is a great starting point for measuring savings captured by your invoice reviewers. You can now create your own savings reports because the rate sheet data is now available in Report Builder! You should contact your Client Relations Manager with any reporting questions or feedback. May 10, 2012 Page 11

13 Appendix A: Timekeeper Rate Review Implementation Timeline The following is a proposed implementation timeline for a client that intends to enforce new rates beginning January 1 of the upcoming year: Review current policies and workflows July August Document your processes Develop an implementation plan, including internal and external notices Enable functionality (if you have not done so already) September Send internal and external notices October Send follow-up reminder to your firms toward the end of the month re: window opens November 1 Review rate sheets submitted by your firms November Follow up with all firms that have not submitted rate sheets December Negotiate rates and approve rate sheets Monitor enforcement of timekeeper rates by invoice approvers January End of Year Report savings Prepare for next year May 10, 2012 Page 12

14 Appendix B: Internal Notice The following is a template for notifying your legal department about Timekeeper Rate Review: For the upcoming fiscal year [2013], we are implementing Serengeti Tracker Timekeeper Rate Review functionality. Timekeeper Rate Review will provide for better rate negotiations with our firms, enhance our ability to monitor the rates our firms bill us, and assist in reporting savings from negotiated discounts. Timekeeper Rate Review creates a new workflow for rate negotiations with our firms. Moving forward, our firms will be given from [November 1 through November 30, 2012], to propose their rates for fiscal year [2013]. Our firms will submit these rate proposals in Serengeti Tracker. Then, from [December 1 through December 31, 2012], we will review, negotiate, and ultimately approve these rates, which will become effective [January 1, 2013]. These rates will then be locked into place and enforced throughout fiscal year [2013]. In fiscal year [2013], we will continue to audit our LEDES invoices in Tracker for rate increases and new timekeepers (individuals who are billing us but were not included in the firm s rate proposal). As we review these audit flags, invoices will modified. Any approval of rate increases or new timekeepers must be pre-approved by a legal department manager. The leadership team in our legal department will receive regular reports on how the legal department is handling these audit flags. PLEASE NOTE: any firm that does not submit proposed rates per the guidelines above will experience delayed rate increases and could become ineligible to receive a rate increase during fiscal year [2013]. This new workflow is projected to result in tremendous savings for the legal department and more accurate financial forecasting. We appreciate your cooperation in this undertaking. Any questions should be directed to [name of General Counsel]. May 10, 2012 Page 13

15 Appendix C: External Notice The template below is a suggested message you can send to your firms to introduce the new process and requirements for reviewing rate sheets. One of the most important things to focus on in communication with your firms is the effective date. The effective date is the date your firm s proposed rates will be applied to that firm s invoices. Note that Tracker compares the billing period end date on the invoice with the effective date for a rate increase. BEST PRACTICE: the effective date should be the first day of your fiscal year (e.g., January 1, 2013). Note that any LEDES invoices posted during your upcoming fiscal year (e.g., the month of January 2013) with a billing period end date falling during the prior fiscal year (e.g., December 2012) will be audited against the 2012 rates. In other words, your firms will not receive 2013 rate increases for work performed in 2012! Timekeeper Rate Review Firm Notice Template To: Law Firm From: Company Re: Annual Timekeeper Rate Sheet Upload Requirement Our company will now be using Timekeeper Rate Review in Serengeti Tracker to review your firm s proposed timekeeper rates for the upcoming fiscal year. This tool will allow our law department to see the impact of the proposed rates on our projected legal spend for the upcoming fiscal year, as well as provide index information with which we can compare your firm s rates to those of similar timekeepers. In order to implement Timekeeper Rate Review, your firm will be required to submit your proposed rates in Tracker using one of these methods: Upload a data file (rate sheet) into Tracker. Use the Rate Sheet Generator in Tracker to manually create a rate sheet. Please note: After we approve the rates in the rate sheet, they will be enforced throughout the upcoming fiscal year. The rates submitted in your rate sheet must correctly reflect the rates you expect to bill our company in the next fiscal year. Any timekeeper that you expect to submit invoices for during the upcoming fiscal year should be included on your rate sheet. Without complete information in the rate sheet, we cannot accurately predict the impact of your proposed rates on our legal spend for next year. Deadline and effective date Your firm must submit a timekeeper rate sheet in Serengeti Tracker between [insert start date] and [insert end date]. The rates should be those you propose to take effect on [insert effective date]. If proposed rates are not submitted in Tracker by the deadline, your timekeepers will not be eligible for a rate increase during the upcoming fiscal year. May 10, 2012 Page 14

16 Information about creating and submitting rate sheets Please refer to online Help for Serengeti Tracker for detailed information about creating and submitting rate sheets or about using the new Rate Sheet Generator. To access Help, click the question mark in the upper-right corner of any Tracker screen. Serengeti Tracker Plus: available for law firm purchase Note: Your firm is not required to purchase anything in order to submit rate sheets in Serengeti Tracker. When your firm submits the timekeeper rate sheet for review, our company will see details about how your proposed rates will affect our projected legal spend, as well as valuable index data (which allows us to compare your proposed rates to the rates of similarly situated timekeepers). As a Serengeti Tracker customer, our company receives this valuable data and additional benchmark data as part of our Tracker subscription. Your firm can also access this data with a separate subscription. Tracker Plus includes three modules: Timekeeper Rate Evaluator: Your firm can have access to the rate analysis table described above, including access to the same information we will use to evaluate your new rates. With this information, your firm can enter fee negotiations with access to the same index information we access in Serengeti. Audit Flag Preview: Your billing clerks can see our audit flags before your invoice is delivered to our invoice approvers, so they then have the option to correct any invoice discrepancies before finally submitting the invoice. Audit Flag Preview is designed to assist your billing clerks in submitting invoices that comply with our specific billing guidelines. In other words, this functionality helps reduce the administrative burden on both your firm and our company. Note: Even if your law firm does not subscribe to Tracker Plus, your billing clerks will still be alerted when an invoice will produce audit flags during our review they simply won t see the audit details. While this alert accurately indicates that there is a billing guideline discrepancy, it will not impact the delivery of your invoices. Analytics: This provides your firm with unprecedented access to aggregated data (not survey results) relating to your firm s effectiveness, financial trending, invoice trending, and timekeeper rates and trends. Once again, if your firms have access to this data, it will add an accurate, real-time statistical element to our fee negotiations. More information about Tracker Plus can be found at. Conclusion We appreciate your firm s cooperation in submitting timekeeper rate sheets in Tracker for our review and approval. Please contact [insert company contact name e.g., Tracker Coordinator] if you have questions about this new process. Sincerely, [insert name / signature] May 10, 2012 Page 15

17 Appendix D: Proper LEDES Invoicing Under Various Fee Arrangements The general principle behind using the rate sheet as a tool during invoice review is that the effective rate in the rate sheet should be the hourly rate billed by your firm. This principle applies to many different fee arrangements, but a few examples are described below. Note that as a general rule, firms that submit rate sheets should not include line-item adjustments to their invoices. Standard Hourly Rate Agreement A standard hourly rate agreement is an agreement to pay a timekeeper s off-the-rack or base hourly rate. Under this fee arrangement, a firm should submit a rate sheet. The base rate in the rate sheet should be equal to the effective rate, with no discount percentage. During invoice review, your invoice approvers should see individual timekeeper fee line-items, billed at the standard hourly rate (or the effective rate submitted in the rate sheet). Any increased rates will produce audit flags. Discounted Hourly Rate Agreement A discounted hourly rate agreement is for a reduction in a timekeeper s hourly rate. Under this fee arrangement, the discount percentages could vary among timekeepers. Again, the firm should submit a rate sheet showing the calculations that resulted in their effective rate. During invoice review, your invoice approvers should see fee line-items for individual timekeepers, billed at the discounted hourly rate (or the effective rate submitted in the rate sheet). Note: if your firm submits an invoice with line items billed at standard hourly rates and also incorporates an invoice level adjustment to get to the discount, this will produce an audit flag for each fee line item! There is no need for this, and this invoice should be rejected for the firm to correct and repost with discounted hourly rates only (no line item adjustments). Discounted Invoice Agreement A discounted invoice agreement is for a reduction to all fees in an invoice. Note the difference between discounts to individual timekeeper rates (previous section) and a straight discount to the entire invoice. Again, the firm should submit a rate sheet showing the calculations that resulted in their effective rates. During invoice review, your invoice approvers should see fee-line items for individual timekeepers, billed at the effective rates submitted in the rate sheet. However, your firms should also incorporate an invoicelevel adjustment equal to the discounted invoice percentage (10 percent in the example below). May 10, 2012 Page 16

18 Blended Hourly Rate Agreement A blended hourly rate agreement is for an average rate for multiple timekeepers. Again, the firm should submit a rate sheet. However, the rate sheet calculations should show the difference between each timekeeper s base rate and their effective rates (which are equal to the blended hourly rate). During invoice review, your invoice approvers should see fee line-items for individual timekeepers, all billed at the same blended hourly rate (or the effective rates submitted in the rate sheet). Fixed or Flat Fee Agreement A fixed or flat fee agreement is for payment of a pre-set amount to the firm for its services. Many Serengeti clients want to track whether a fixed or flat fee amount actually resulted in any savings. There are two ways of accomplishing this, but both require the use of Timekeeper Rate Review. One Invoice Method Firms submit a rate sheet containing timekeepers effective hourly rates. Firms submit one invoice with fee line items for work performed, but incorporate an invoice level adjustment making the invoice balance equal to the fixed or flat fee amount. Two Invoice Method (or Shadow Bills ) Firms submit a rate sheet containing timekeepers effective hourly rates. Firms submit a shadow invoice with fee line items billed at the effective rates, but incorporate a negative invoice level adjustment that results in a zero balance on the invoice. Firms also submit a second invoice with one positive invoice level adjustment equal to the amount of the flat fee. May 10, 2012 Page 17