Rees Morrison of Altman Weil Inc. Courtesy Photo.

For the first time since 2007, more in-house legal departments plan increases rather than decreases in outside counsel spending next year, according to the 2017 Chief Legal Officer Survey from Altman Weil Inc.

This is the 18th year that Altman Weil, which provides management consulting services to legal organizations, has conducted the survey. Respondents included 280 law department leaders from companies of all sizes.

The report said 40 percent of respondents plan to increase their outside counsel spend in 2018, while only 33 percent anticipate a decrease. While that hasn't happened since before the financial crisis of 2008, the report said the gap between internal and outside counsel spend has been narrowing over the last three years.

“After years of belt-tightening, perhaps some of the [financial] pressure is easing,” said Rees Morrison, an Altman Weil principal and co-author of the report. “And perhaps some people are just being more honest. For years it's been politically correct to say they were doing more with less every year.”

Morrison said one of the most important takeaways for general counsel from the report is a range of techniques for managing both internal efficiency and spend on outside counsel. “The range has different applicability, depending on your department's size and personal philosophy of management,” he explained.

About 79 percent of the legal departments said they provide billing and expense guidelines to their outside counsel. When asked what techniques were most effective in managing outside counsel, enforcing these guidelines was the top answer.

But despite respondents' enthusiasm about this tactic, only 60 percent said they routinely enforce their guidelines.

“To set standards and then fail to enforce them is an obvious and unnecessary omission—and one that should not stand in any law department that is serious about effectively managing law firms,” the report chastised.

Asked what percentage of outside counsel fees last year were for work that could have been done by many different law firms, the median response was 41 percent to 50 percent. This suggests “that law departments have considerable negotiating power,” the report added.

Morrison noted, “It may be that many law firms can do a fair portion of your work, but you still have to find them and get comfortable with them. It doesn't mean we know who they are.”

The report also found:

• Some 45 percent of law departments increased total spend in 2017; 36 percent decreased spend, and for 19 percent it stayed the same.

• But in larger law departments—with over 50 lawyers—only 22 percent increased their total spend in 2017 while 50 percent made cuts.

• The top cost control technique last year was price reductions from outside counsel, reported by 64 percent of all respondents and by 78 percent of the larger departments.

• The most frequently used efficiency tactic was a greater use of technology tools, cited by 58 percent of all respondents and by 81 percent of the larger departments.

• Outsourcing to non-law firm vendors scored highest in effectiveness to achieve efficiency and cost control, but was one of the least-used tactics.