Total spending by legal departments in Texas increased by 10 percent over the last year— double the national increase of 5 percent, according to HBR Consulting's 2018 Law Department Survey.

The increase in both outside and in-house counsel spending was higher in Texas than nationally, according to the survey. Outside counsel spending increased by 20 percent in Texas over the last year, compared with a smaller 3 percent increase nationally. In-house counsel spending in Texas increased by 7 percent, compared with 3 percent nationally.

“Texas is trending with the national data in terms of where the law departments are investing, but also inside legal spending is up at a healthy level, which shows Texas companies are trying to build internally,” said Lauren Chung, managing director at HBR Consulting.

The 15 Texas companies that participated in the survey — 40 percent are in the oil and gas sector — reported median revenue of $18 billion and legal spending of $31.9 million. For the 208 companies nationally, revenue was a median of $9.5 billion and legal spending came in at a  median of $30.6 million. The survey results were published in late November, but Texas results were just available this week.

Demand is up by a greater margin in Texas as well, with 93 percent of the 15 Texas companies reporting that their legal needs increased over the last year, compared with 81 percent of 208 companies nationally.

Lauren Chung

Chung said the increased spending and demand in Texas is due in part to the mix of companies in the survey.

“If you look at that base, 40 percent of the companies in the Texas region are in the oil and gas sector. There are some industry factors that play in the activity,” she said.

Chung said legal departments were surveyed from April through September. The results cover 2017.

While Texas companies spent more than the national average on outside counsel in total, the average hourly fee they paid outside counsel was lower. Texas legal departments paid an average of $497 an hour to outside counsel. The national average was $530 an hour.

Cost control and management was the top challenge for legal departments in Texas and elsewhere. In Texas, 92 percent of companies identified it as a top challenge, compared with 60 percent of companies nationwide.

To manage outside counsel spending, 100 percent of the Texas legal departments said alternative fee arrangements are the top way to keep costs down, compared with 81 percent of companies nationwide.

Chung said cost control is a concern for all legal departments but may be more of an issue for those in Texas because outside counsel spending is up.

“Texas companies are probably seeing the reality that their spending probably has spiked and they do need to be tighter on cost controls. It's becoming more real perhaps,” she said.

Looking ahead, the vast majority of the Texas legal departments — 93 percent — expect their legal needs to continue to increase over the next year, compared with only 81 percent of companies nationally. Nearly half of the legal departments identified their top priorities as automating routine tasks and increasing the number of in-house lawyers.

In Texas, the top three technologies legal departments plan to consider over the next year or two are legal spend real-time technology, document management and e-signature technology.

Chung suggests the survey results are useful to firms because they help outside counsel understand their clients' priorities. Results also provide a “check” for legal departments when assessing operations and focus, she said.

Further Reading:

Law Departments' Legal Spend Up as Needs Increase: Survey