Managing Total Legal Spend

The costs of legal services increase every year because the demand for service increases, the nature of the work becomes more complex, and unit prices keep climbing in every market. Legal departments call on a broad range of measures to address the economic challenges that accompany legal services. Our experience is significant with

	budgeting internal & external costs
	convergence and partnering with law firms
	alternative pricing for external counsel
	litigation management
	workflow management systems

For further information on reducing total legal spend, contact Richard Stock at rstock@catalystlegal.com or (416) 367-4447.

Articles on Reducing Total Legal Spend

"Alternative Fees are on Their Way"
Lexpert, Vol 11, No 3 (February 2010)

Less than 10% of legal fees are generated on other than an hourly basis. Even though many corporate counsel experiment with alternatives, they remain too risk-averse to adopt non-traditional methods in the face of the global financial crisis. Law firms are seldom taken up on their offers to innovate in pricing when legal departments can leverage multi-year partnering agreements and project management techniques to reduce external legal spend by at least 15% - and still retain hourly billing.

"In-House Needs a Reality Check on Value"
The New Lawyer, August 20th, 2009

A 7-point "reality check" on legal department efforts to mitigate the costs of external legal counsel is presented. Barriers to change, such as procurement processes and project management practices, and discussions about rates appear to be antithetical to relationship-based, collegial service delivery. In other instances, legal departments do not make the time to become familiar with the tools and processes essential to innovation in working cost-effectively with law firms.

"Who Is Responsible for the Cost of Legal Services?"
CCCA Magazine, Vol 2, No 4, Winter 2008

The Canadian Lawyer / Catalyst Consulting September 2008 survey of law departments found that the number one way (43.5 % of responses) a law firm can improve its working relationship with the company is “to be more concerned with costs”. An Australian / New Zealand survey had 62 % of respondents citing cost management as the number one way. Surveys show little movement in the management practices of legal departments: only 32 % run formal procurement processes, most prepare no multi-year forecasts for services, few refer to standards for staffing complex legal work, 40 % pay full hourly rates, only 30 % use detailed matter budgeting, and fully 90 % of work is still billed on a variation of the hourly rate.

"Billing Practice Alternatives"
Lexpert, Vol 9, No 4, February 2008

The focus of additional measures to reduce external legal spend is on matter budgeting to recalibrate teamwork and delegation of tasks to competent, less expensive lawyers in law firms. Alternative pricing arrangements designed to reward law firms for concluding matters satisfactorily but with fewer hours are presented. Quarterly monitoring and flexibility in pricing due to significant variances in actual volumes and file complexity are essential. Law departments will need to conduct and act on quarterly or semi-annual analyses of practice patterns and fees from law firms as they apply to individual matters.

"Risk Aversion in Retaining Outside Counsel"
Lexpert, Vol 8, No 8, June 2007

Corporations are turning to procurement professionals for help with innovative programs to manage their legal costs, especially those related to external counsel. Flexible, independent, cost-effective operating practices of legal departments are less tenable than they were several years ago. Corporations must now make longer term commitments to fewer law firms in exchange for stable costs and the guaranteed availability of legal teams in the future. Experience with case and matter budgeting and familiarity with other workflow management practices must be built up over time within the law firm. legal departments must learn to gauge law firms' ability to innovate in legal services pricing and delivery. But they must do so less experientially and more objectively.

"Achieve Success with Partnering"
Lexpert, Vol 8, No 6, April 2007

legal departments underestimate the time and effort it takes to manage innovative arrangements such as task-based budgets or risk/ reward based pricing for legal services. Leadership in decentralized legal departments and companies is required to ensure partnering with law firms goes beyond managing a list of preferred suppliers.

"The Legal Department as Informed Purchaser"
Lexpert, Vol 8, No 4, February 2007

Corporate counsel surveys reveal that the second greatest challenge cited is controlling legal spend. The article describes the application of the "informed purchaser" concept to legal services. The competencies of a select number of individuals in the legal department must include strengths in legal procurement, risk management, quality control and general procurement processes. In particular, demand forecasting, the inter-dependency of law firm profitability variables, non-hourly pricing and matter budgeting protocols require experience and skill to master

"New Ways to Keep Client Costs Down"
Lexpert, Vol 8, No 1, October 2006

There is a measurable difference in the world view of law firms and of legal departments when it comes to pin-pointing the sources of friction between them. Corporate and institutional legal departments must identify the best configuration of increased volumes, targeted leverage, and expense reduction as a way to reconcile cost reduction in legal fees with increased profitability for law firms. Three case studies suggest that adjustments to law firm business models and to legal department buying habits do contribute to mitigating much of the friction in the economic portion of the relationship between law firms and their clients.

"Negotiating Long-Term Fees"
Lexpert, July/August 2005

Two corporate legal departments are profiled as they try to secure stable, medium-term economic arrangements with their preferred law firms across the country. Leading law firms were able to adjust their staffing/delegation practices in over a dozen specializations thereby contributing to savings that approach 20% when combined with other measures. The article concludes with three suggestions to guide fee negotiations.

"Saving Money: Location and Buffers"
Lexpert, October 2004

Some law firms are proposing legal teams for national and international clients by tapping lawyers from their offices which carry lower billing rates. The corollary is that corporate and institutional clients will ask their preferred firms to use lawyers from their less costly venues. Buffers of non-chargeable time form part of an incentive to law firms to develop case plans and budgets. This is a first step to streamlining work flow, billings and payment process.

"The Cost of Choice"
Lexpert, March 2004

This case study describes how TD Bank Financial Group improved the quality of legal services to the bank and balanced the cost-effectiveness of its work flow practices with the business relationships it wanted to protect. The number of law firms was reduced from 850 to a little over 100. Stable legal teams and 3-year price structures were negotiated with every firm. The bank is projected to save more than 20% on its legal costs across a 3-year period.

"Best Practices for Partnering Between Corporate Counsel and Law Firms"
Report to Legal Management, September 2002

Law firms seldom take the initiative to migrate beyond pricing initiatives and service programs. However, some have formalized long-term partnering programs with key clients. This requires a willing client, a lot of unbillable time, and steadily improving data.

"Keeping the Lid on Legal Costs"
Lexpert, June 2002

Corporate counsel all reported a concern with rising legal costs. Case planning / budgeting and preferred staffing profiles are explored as techniques to keep legal costs in line. Service levels are not compromised and the quality of legal work remains intact.

"Three Reasons Why RFPs Fail"
Canadian Corporate Counsel Association Handbook, Spring Edition, 1999

There are several instances where legal departments prepare requests for proposals ( RFPs ) for legal services from outside counsel. In the face of these imperatives, many RFPs fail for three main reasons — poor data, unclear expectations, and insufficient preparation time.

"Make Your Selection of Outside Counsel More Than a Beauty Contest"
CCC Practice Manual, Release 3 (December 1998)

Practical guidance and a sequence of issues counsel should address when customizing long-term relationships for services with outside counsel. Included topics: performance, best practices, scope of legal services, cost of legal services, finding support within the organization, managing the process, selection methods, selection criteria, third parties, fees, performance and evaluation.