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Survey: Fighting For Lower Fees
06 February 2009
If general counsel are to get law firms to play ball on fees, they will need to fight for it. One reason why – despite long-standing client complaints about the stratospheric level of legal fees – law firms have been able to pass on double digit rate hikes year-on-year has been the apparent reluctance of many clients to challenge rising fees by shopping around. A combination of time constraints and the so-called 'IBM factor' (nobody ever got fired for using IBM...) has meant that the leading law firms have been under relatively little real pressure to change the way they do business.
The survey shows that although all general counsel do challenge the bills they get from their external legal advisers, only 13% do so 'almost always' and a further 20% 'frequently'. See graph This is despite the apparent success of those that do attempt to renegotiate their invoices, 43% of whom manage to get their bills reduced by more than 10%. See graph
“Many in-house teams are not brave enough in fee negotiation,” says Paul Gilbert, director of in-house management consultancy Lawbook Consulting. “In-house teams are small, stretched resource-wise and it is easy for them just to return to the usual suspects when selecting their legal advisers, meaning that their leverage is poor. I don't blame them for that, but if you have the wherewithal to be a general counsel (GC) you should realise that the time to negotiate the fees is before you have to panic purchase.
“There is an inertia that is difficult to overcome – many GCs are fire-fighting and under-resourced and the opportunity to step back and take a strategic view is quite limited. If they do, they will find that they can survive with fewer firms. As long as they don't get screwed by their law firms, it's easier for them to remain with the status quo. It's very easy to criticise firms for being expensive, but it is up to the purchasers to negotiate a better deal.”
For survey demographics, please click on graph 1 and graph 2.
The survey shows that although all general counsel do challenge the bills they get from their external legal advisers, only 13% do so 'almost always' and a further 20% 'frequently'. See graph This is despite the apparent success of those that do attempt to renegotiate their invoices, 43% of whom manage to get their bills reduced by more than 10%. See graph
“Many in-house teams are not brave enough in fee negotiation,” says Paul Gilbert, director of in-house management consultancy Lawbook Consulting. “In-house teams are small, stretched resource-wise and it is easy for them just to return to the usual suspects when selecting their legal advisers, meaning that their leverage is poor. I don't blame them for that, but if you have the wherewithal to be a general counsel (GC) you should realise that the time to negotiate the fees is before you have to panic purchase.
“There is an inertia that is difficult to overcome – many GCs are fire-fighting and under-resourced and the opportunity to step back and take a strategic view is quite limited. If they do, they will find that they can survive with fewer firms. As long as they don't get screwed by their law firms, it's easier for them to remain with the status quo. It's very easy to criticise firms for being expensive, but it is up to the purchasers to negotiate a better deal.”
For survey demographics, please click on graph 1 and graph 2.
