More companies are paying their outside counsel off the clock, according to a new survey by consultants Hildebrandt.

Just over half of the 231 companies responding to the Hildebrandt 2009 Law Department Survey said they either have started or will start negotiating non-hourly billing arrangements with their outside counsel, while more than a quarter said they are considering them.

Only 18% said they have no plans to abandon the billable hour.

Lauren Chung, director of Hildebrandt's law department consulting practice and the survey's editor, commented: "Everyone wants to do it. But the question is: to what extent? Will they make up 5% of legal spending or 100%? It will be interesting to see to what extent they will be utilised."

Chung was surprised by the number of companies getting firms to freeze their rates, with a significant number also obtaining rate cuts from their advisers.

Of the companies surveyed, 64% said they either have or will implement rate freezes with their outside counsel. Meanwhile, just under half said they are either getting or will get rate reductions from their outside counsel, while 26% are considering them. Only 29% said they have no plans to negotiate for reduced rates.

Chung said that rate reductions will not keep legal costs down for companies over the long term. "You can only go so far with discounts," she said.

That will push even more budget-conscious companies to start negotiating alternative fee arrangements in the years to come, said Chung. "Alternative fees might not work for every type of matter or case," she said. "But I think the number will certainly increase going forward."

The survey included responses from 231 public and privately held companies. Of those, 22% are Fortune 500 companies. The survey reports 2007 and 2008 data and reflects the period leading to the economic downturn beginning in September 2008.

This article first appeared in Corporate Counsel, a US sister title of Legal Week.