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October 19, 2009 6:55 PM

Study: General Counsel Really Want to Control Outside Legal Costs

Posted by Brian Baxter

A study by the Association of Corporate Counsel has found that for the first time in three years, controlling the costs spent on outside counsel is a top priority for in-house legal chiefs.

The collaborative survey between the ACC and Serengeti Law found that compliance concerns are second to cost concerns, a sign that the economic downturn has affected how in-house counsel do their jobs.

Almost 70 percent of in-house respondents offer up specific suggestions to outside counsel on how to increase the value of their services. While hourly billing rates remained the norm for outside lawyers, use of alternative fee structures rose to 61 percent of in-house counsel and fixed fees about 38 percent. Project retainers (15.4 percent) and contingency fees (10.5 percent) were also increasingly popular alternatives, states the ACC report.

More ominous for outside lawyers: In-house counsel predict no increase in hourly rates next year, a first in the nine years the ACC survey has been conducted.

"The tough economic times have added urgency to the continuing client push for better value from their firms," said ACC president Frederick Krebs in a press release. "In-house counsel and law firms must communicate about how to improve service and explore new ways to efficiently manage legal costs."

Banging the cost hammer home: When asked about the top five most pressing issues facing in-house legal departments, "reducing outside legal spending" was listed by 80.5 percent of respondents as their top concern. Rounding out the top five: Sarbanes-Oxley and other compliance requirements at 78.2 percent, reduced budgets and resources for more legal work at 60.3 percent, keeping management apprised of legal developments at 60 percent, and keeping current on changes in the law at 54.1 percent.

The survey's results were released at the ACC's annual meeting, taking place this week in Boston.

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The results of this study is a sign the controlling legal fees and expenses have now reached the top of the priority list. But how you accomplish this is another step in the process and by far the most important. All the steps mentioned in the study did not mention the most important method and that is developing comprehensive billing guidelines. Then you need to engage the services of a professional legal cost management company to make sure all the law firms are simply adhering to your guidelines. Since a e-billing company co-sponsored this study I can see why there was know mention of this process since all these type of companies attempt to handle this through an automated process. This simply will not get the job done and is kind of an insult to the law firms who have to submit to this type of program. I thoroughly believe that whatever process you use it has to include in the review process experiened lawyers and accountants. In this way you law firms have a real person to communicate with and work out any problems that arise in the audit process.

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