In-house corporate lawyers are keen to explore alternatives to traditional hourly billing but struggle to gain buy-in from their external legal advisers, an industry survey has found.
In-house corporate lawyers are keen to explore alternatives to traditional hourly billing but struggle to gain buy-in from their external legal advisers, an industry survey has found.
The survey by Mahlab Recruitment and Harris Cost Lawyers found the biggest issue facing corporate counsel was reducing outside legal costs.
Harris Cost’s Perth director Michael Jones said alternative billing arrangements could help corporate counsel meet this challenge but there had been little progress in Australia.
“There is a preparedness to investigate alternative billing but they come up against a barrier of law firms that don’t know how to deliver,” Mr Jones said.
Seventy five per cent of the survey respondents said they considered alternative fee arrangements, mainly for routine matters and for large/complex commercial transactions.
In practice, the most common form of alternative billing was fixed or capped fees.
Eighty per cent of respondents said they were keen or very keen on being billed on a basis other than hourly charging.
The main barrier to alternative billing was the difficulty in negotiating another type of agreement.
Mr Jones said this reflected the inability of law firms to calculate a proposed fee and their concern about bearing increased risk.
Corporate counsel also said that tradition and the prevalence of hourly billing made it hard to adopt an alternative. The survey found that one of the biggest issues for corporate counsel was staying abreast of company issues that may have legal implications. Related to this, corporate counsel also said they struggled to manage their volume of work and battled to demonstrate their value to the business.
Even though external legal costs were nominated as the main business issue facing corporate counsel, they did not attach high weighting to billing rates or costs when selecting new law firms.
The criteria that were most important when selecting a new firm were specialist expertise, past relationships with the firm and the reputation of individual lawyers.
Similarly, corporate counsel did not attach high weighting to cost and budget issues when evaluating law firms.
The number one criterion was finding a law firm that understood the objectives of the business and planned strategies accordingly.
The most common methods of billing by law firms were standard hourly rates, followed by discounts from the standard rate.
The use of fixed or capped fees per matter were also common.
Corporate counsel said the main method used to control costs was to set budgets for each matter or case.
