A group of senior corporate counsel have called for in-house legal departments to push for more performance-based billing, reports Corporate Counsel.

The Controlling Legal Costs conference, which took place in New York earlier this week, saw several outspoken advocates of alternative billing – including DuPont GC Thomas Sager, United Technologies associate GC Chester Paul Beach and FMC Technologies GC Jeffrey Carr – discuss the challenges and rewards of alternative billing arrangements.

FMC's Carr (pictured) said that having performance measurements in place forces his lawyers to have meaningful, albeit sometimes difficult, conversations with their outside counsel about how they are doing.

Carr also said that performance should be tied to cash rewards or penalties. He explained how FMC holds back a portion of its legal fees, and once a matter is successfully completed, it pays the firm the amount that was held, plus a bonus. If the matter is not completed successfully, the company keeps what was retained.

"I've got to give people meaningful feedback," said Carr. "And meaningful feedback comes in the form of cash."

Brian Lee, senior director of the General Counsel Roundtable, presented a range of statistics about which alternative fee structures are most efficient and effective. For example, in-house lawyers might think volume discounts are the best way to reduce costs, but the roundtable found that fixed fees actually cut costs more.

Susan Hackett, general counsel of the Association of Corporate Counsel, said that law firms have a lot of work to do to make alternative arrangements more popular, but that in-house legal departments also have to start pushing harder.

"We are wealthy, powerful people," Hackett said of corporate legal departments. "Why don't we exercise the purse? Because change is hard."

Hackett also said that the relationship between clients and law firms has to change. Companies should not rely on requests for proposals any more to get the most value for their money. They have to invest in long-term relationships with law firms.

"Clients are going to have to get married to firms again," Hackett said.