More companies are paying their outside counsel off the clock, according to the Hildebrandt 2009 Law Department Survey.
Just over half of the 231 companies surveyed by the Hildebrandt consulting firm said they either have started or will start negotiating non-hourly billing arrangements with their outside counsel. Just over a quarter said they are considering them. And only 18 percent said they have no plans to abandon the billable hour.
The results weren't surprising to Lauren Chung, director of Hildebrandt's law department consulting practice and the survey's editor. "Everyone wants to do it," she says. "But the question is: to what extent? Will they make up 5 percent of legal spending or 100 percent? It will be interesting to see to what extent they will be utilized."
What did surprise Chung was how many companies are not only getting firms to freeze their rates. A significant number are getting firms to cut them, too.
Of the companies surveyed, 64 percent said they either have or will implement rate freezes with their outside counsel. Meanwhile, just under half said they're either getting or will get rate reductions from their outside counsel, while 26 percent are considering them. Only 29 percent said they have no plans to negotiate for reduced rates.
But rate reductions won't keep legal costs down for companies over the long-term, Chung says. "You can only go so far with discounts," she says.
And that's going to push even more budget-conscious companies to start negotiating alternative fee arrangements in the years to come, Chung says. "Alternative fees might not work for every type of matter or case," she says. "But I think the number will certainly increase going forward."
The survey includes responses from 231 public and privately held companies. Of those, 22 percent are Fortune 500 companies. The survey reports 2007 and 2008 data and reflects the period leading to the economic downturn, which began September 2008.