Updates and advice for attorneys and law departments.

Corporate Law Departments Turn to Cost Control

As 2014 dawns, corporate law departments are maintaining their focus on cost control.  According to a survey of chief legal officers (CLOs) conducted by Altman Weil, the focus in the coming year will likely shift to internal change.  Corporate law departments are looking at the skills possessed by in-house counsel and staff, renegotiating relationships with outside law firms, and seeking out new technology and new non-law-firm vendors.

Renegotiating Prices

According to the survey, 78 percent of CLOs had negotiated price reductions with outside counsel in order to control costs.  While price reductions ranged from one percent to 15 percent, just about half of the legal departments surveyed managed to reduce costs by 6 to 10 percent through renegotiation.

The preference for price reductions in the middle part of the range is explained, in part, by a clear CLO preference for transparent pricing, guaranteed pricing, or value-based pricing over the lowest price available.  Although controlling costs is a priority, most CLOs balance this concern with other concerns, such as how to get the best value for the price or for pricing data that is easy to understand.

Shifting the Balance of In-House and Outside Legal Counsel

Meanwhile, corporate law departments are also re-balancing their own staff and resources.  In the survey, 42 percent of corporate legal departments said they planned to hire one or more in-house attorneys in 2014; 82 percent of departments who are reducing their reliance on outside legal counsel plan to do so by adding in-house staff.  Only 5.4 percent of departments reported a plan to outside counsel budget in 2014.

As a result, about half of legal departments surveyed said they plan to decrease their outside counsel budget in 2013.

Changing The Relationship With Outside Service Providers

Although most CLOs surveyed most want to see their outside service providers provide better budget forecasting, greater cost reduction, more efficient project management, and pricing that is not hourly-based, few seem to believe their outside law firms will take these steps.  Instead, CLOs are focusing on changing their relationships not only with outside law firms, but also with other outside services.  Among the plans mentioned by many CLOs were a plan to shift more work from attorneys to paraprofessionals in order to reduce costs.

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