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The stress of doing more with less isn't just a reality for in-house counsel. In a changing industry, where legal operations and budgeting teams have put value and pricing center stage, firm lawyers who used to count on steadily increasing rates each year are now forced to adapt to new pricing strategies.

While in-house and outside counsel negotiating fees are usually seeking a win-win situation, both sides are smart to come to the table prepared with data and proof of value to give them leverage. Some legal departments have created pricing teams focused on the issue, including oil and gas company Royal Dutch Shell.

Alexandra Guajardo, Shell's pricing and analytics officer, and Vincent Cordo, its central legal operations officer, are both members of the company's six-person pricing team and will be speaking about their experiences at the Corporate Legal Operations Consortium's annual Corporate Legal Operations Institute next month in Las Vegas. The team, which started in 2010, uses historical data, shadow billing and collaboration with in-house lawyers to determine pricing.

“We're not looking to get the cheapest price, we're looking to get the appropriate price,” Cordo said. 

He and Guajardo said that pricing negotiations shouldn't become a battle—at the end of the day, outside and inside counsel will need to work together. Shell's team uses “appropriate fee arrangements” or AFAs, and has a set of panel firms for the majority of its legal work.

“We're using data analytics to have more successful AFAs, not just for Shell but for our partners,” Cordo said. “If we plan to use firms over and over again, we don't want to start with a relationship of making them feel cheated.” 

Paul Lippe, founder of Legal OnRamp and a member of the Advisory Board of Elevate Services, a global legal services provider, said it's important for both sides to approach the negotiation table with an emphasis on value before price.

“The folks who have tried to lead with price to drive value have had mixed success, but the folks who have taken a more rigorous approach to defining value are then able to get to a price that's more win-win,” said Lippe, who will also speak at CLOC. “So the opportunity for both clients and law firms is to really drill down on what is value. If you do that, you'll have less tension around the price.”

CLOC founding member and Cisco Systems Inc. vice president and deputy general counsel Steve Harmon said improving e-billing technology has provided in-house teams with more granular data, and made it easier to find and store metrics on legal value. Now, he said, legal departments can track how many hours outside counsel have spent on particular activities, and compare time and pricing of analogous cases.

“The trend is shifting to a model where there's closer collaboration about what the outcome is, so that two [sides] together can come to an agreement on what an appropriate level of compensation is for the work,” Harmon said. “I've never met a lawyer who hired a contractor to build their house depending on how long it takes to build it.”