Billable hours. Inefficient service. Yearly increases in legal rates. The arguments between in-house legal departments and law firms over how best to pay for legal work has raged for decades. And even in these weak economic times, an American Lawyer survey of Am Law 200 managing partners found that 98 percent of participating firms plan to raise billing rates in 2009 (page 93). But one group of lawyers is determined to reshape the billing landscape. In September the Association of Corporate Counsel, which represents 24,000 in-house lawyers, launched the ACC Value Challenge. This novel initiative is bringing together law departments, law firms, and academics to analyze the problem and find ways to restructure the law firm-client relationship. ACC is offering programs, best practices, and electronic toolkits to spur the project. Susan Hackett, ACC’s general counsel, recently spoke with Sue Reisinger, a senior reporter at sibling publication Corporate Counsel, about how ACC hopes to convince legal departments and law firms that they are the change they’ve been waiting for. Here are excerpts from that interview.

Define value in the way you are using it.

Value from the corporate perspective means receiving a solution that addresses the client’s problem-for an appropriate cost. That doesn’t mean it’s cheap. Many in-house people tell us about the law firms they value most; for instance, Wachtell [Wachtell, Lipton, Rosen & Katz], which is probably one of the most expensive firms there is. But these [in-house counsel] never have a sense that Wachtell is wasting their money. So the problem isn’t the $1,000-an-hour partner who’s worth it; the problem is the $350-an-hour associate who isn’t worth it. Too often the cost of counseling is disconnected from the value received.

What’s causing the disconnect?

Take a look at the cost of legal services and the fact that they’ve been rising 6, 7, 8 percent a year, for as long as anyone can remember. But the services remain pretty much the same. And at the same time that outside firms’ costs are rising, the in-house law departments are getting better at their efficiencies and at lowering their costs. But they don’t see the law firms with any motivation to increase their efficiency.

Who is to blame for this situation?

In-house counsel have enabled law firms to get away with this. When in-house counsel talk about the need to reduce costs, what outside counsel hear far too often is “You charged me too much,” or “I want a 10 percent discount.” You don’t hear people truly talk about the way to restructure the relationship. The minutiae of examining and auditing the bills after they’ve been received is not the way to lower costs.

We need to change the way the relationship is formed and managed and “costed” and billed out. And that’s what this challenge is about. The way to lower in-house costs and protect law firm profits-because no one is saying they shouldn’t profit-is for people at the beginning of a relationship to set the terms so that the outside firm clearly understands what it is that the client defines as value.

What is ACC going to do besides just talk about it?

The talking is actually more important than it sounds. When people are arguing about what went right or wrong, they don’t really have a meaningful dialogue about how to do things differently. This dialogue is important because it gives people an opportunity to talk about how to change the big stuff, the way they do their work, in a context not charged with arguing over a specific bill. We’ve created some models for “discussion platforms,” for firms and departments to talk more openly about their relationships and how to change them. There’s obviously more beyond the dialogue.

More? Such as?

One thing we’ve done is to create a resource library that’s intended to pull together a lot of material, and put it onto a free Web site that is easily searched [acc.com/advocacy/valuechallenge/index.cfm]. It’s a mixture of best practices, techniques, forms, and policies that [lawyers] can adapt for their own use.

And we’ve been creating new resources that help people focus on processes. Too much of what’s out there doesn’t give you the tool in your hand to answer, “Okay, how can I do this in my department or in my law firm practice group?” There’s a toolkit, and we’re trying to put very practical tools there.

Give me an example of a useful tool in your online toolkit.
There are some wonderful tools to help evaluate services. There is literally a map of the evaluation process, and it offers samples of what an evaluation form might say that a law firm [could give] to its client, and one the client [could give] to the law firm, and one that goes to in-house lawyers. It discusses how to use the information to change the way you do things the next time. Because if you just evaluate and put [the findings] in a drawer, you haven’t done much to move your practices into a new direction.

And we have documents assessing how companies that do alternative fees have figured out what they think their matter is worth. Several law firms are already participating in the project and have been very generous about sharing their resources [law firms taking part in the launch included Dechert; DLA Piper; Eversheds; Gibson, Dunn & Crutcher; Greenberg Traurig; Howrey; McKenna Long & Aldridge; Seyfarth Shaw; Wilmer Cutler Pickering Hale and Dorr; and Womble Carlyle Sandridge & Rice].