Rates just not fees-ible
Legal Week reports
March 27, 2002 at 07:03 PM
3 minute read
Dissatisfaction is growing rapidly among in-house counsel about the level of fees they are shelling out to their external law firms, research by Legal Week's sister title Legal Director has shown.
This should come as no surprise with charge-out rates for top partners touching the £500 per hour mark and the firms – at least until the past 12 months – reporting record profits year-on-year.
So if the law firms are sharing the pain many of their clients are feeling, then they are doing a very good job of hiding it. But what, apart from grumbling, are general counsel doing about it? Not very much, it would seem.
For example, the hourly rate, which is accepted as a pretty inefficient measure, but one that general counsel feel most comfortable with, remains king. The appetite for alternative billing arrangements remains small.
There are of course a number of constraints on a general counsel's ability to drive down costs. Not least is the lack of a real choice when all the top firms set their rates at broadly the same level. Even with the now widespread use of tenders, beauty parades and panels as a means of introducing competition, reports of a fierce battle between firms over price are relatively few and far between.
Law firms are also becoming increasingly adept at 'institutionalising' their major clients. This means that they look to develop links at a number of different levels and across a range of areas of expertise.
The costs of switching from one firm to another, which include the time spent for the new advisers to get to know the company, becomes that much greater. As a result taking your business elsewhere in a fit of pique is all very well, but it is unlikely to deliver much in the way of cost savings.
General counsel will, rightly, point out that it is as much a question of value for money as cost. The problem, however, is that more and more of them are coming under pressure from senior management, often from the chief executive, to get a grip on fees.
This will particularly be the case at the one in four legal departments that went over budget last year. Once CEOs find that there are savings to be made in this arena, they are unlikely to let go. And if their general counsel cannot deliver them, then their bosses may well try and find one who can.
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