Survey: Corporate counsel use buying power to control costs

Corporate chief legal officers are using their buying power to get lower fees or alternate fee arrangements from outside counsel, and they’re also keeping more work in-house, according to the 15th annual Altman Weil Chief Legal Officer Survey. 
 
The survey found that in the last year, 36 percent of corporate legal departments reported receiving discounts of at least 10 percent from outside counsel. In the 2013 survey, just 28 percent of chief legal officers reported such savings.

“The impact of the recession on in-house law departments has been twofold,” said Altman Weil principal and survey author Daniel J. DiLucchio.  “Internal department resources have been constrained in many cases, but at the same time law departments have gained more leverage over external resources. Chief legal officers are buyers in what is currently a strong buyers’ market.”

Along with targeting outside counsel pricing, CLOs also are controlling costs by managing the distribution of work to law firms. This year, 40 percent of those surveyed have shifted law firm work to in-house lawyer staff; 36 percent shifted work to lower-priced firms; and 34 percent reduced the total amount of work sent to outside counsel. Of all cost-control efforts undertaken in the last 12 months, CLOs report shifting work in-house yielded the greatest cost reduction.

“Law departments usually can do work less expensively in-house if they have the resources in place,” DiLucchio said.  “And when they do it themselves, they can also inject staffing and process efficiencies that their outside counsel may not offer.”

The survey also asked what law departments have done in the last 12 months to increase efficiency in the delivery of legal services. Two-thirds indicate they have increased their departments’ use of technology. More than half have undertaken a restructuring/reorganization of internal resources, and 45 percent have made greater use of paralegals and other paraprofessionals.  The in-house effort that yielded the greatest improvement in efficiency was the reorganization of internal resources.  

The survey found just 4 percent of CLOs are satisfied with the traditional legal service delivery model. “Chief legal officers may have mixed opinions about the best model for the inside-outside relationship, but the fact that only 4 percent are content with the status quo is an unambiguous indicator that the old model is not sustainable,” says DiLucchio.

Forty-three percent of CLOs say they don’t really care about a law firm’s delivery model as long as they get the results they want at a competitive price. Forty-two percent of CLOs say they like to work with firms that offer innovative service delivery, although other selection factors may take precedence. An additional 9 percent of respondents actively seek out law firms that offer innovative approaches to service delivery.  

The survey also indicates a mixed picture for in-house counsel staffing. Among respondents, 42.6 percent said they plan to add in-house staff in the next 12 months, slightly higher than last year. However, 11.5 percent reported plans to decrease their legal departments – more than twice the number who reported planned cuts in 2013.