For surveyed companies with $100 million or more in revenue, the median percentage of total expenses that went to outside counsel and other external providers of legal services was 58 percent.
So why aren't GCS waving their measuring sticks at outside counsel? Nilanjan "Nicky" Mukerji, chief information officer at the consulting firm Legalbill, says in-house lawyers "don't want to spoil" the relationships. But outside counsel may actually be craving such feedback. "They want objective feedback they can really use," Mukerji says, adding, "When outside counsel know what's going on, there is more satisfaction."
WellPoint Inc.'s law department is an exception to the finding. Interim GC Ray Umstead says his "hands-on" legal department interacts with outside counsel daily. "We regularly share feedback with the firms working on our behalf," he says. "Additionally, we work closely with our procurement department to complete a yearly evaluation process of each of our panel firms."
The company has managed to work those reviews into the operations of a very lean department. Its budget has decreased year over year, as its workload has gone up. Chung predicts that more departments will be moving in WellPoint's direction in the near future prioritizing formal protocols despite their high activity levels. "We're probably going to see an increased focus on that area," she says.
Moving forward, 59 percent of survey respondents predicted that they'll also do more business with firms using alternative fee arrangements. In fact, 52 percent of total respondents said they'd used AFAs in 1-20 percent of billing arrangements, but 70 percent said their use hadn't increased over the previous year. The most-cited reason for not employing more AFAs was a lack of time and resources. Noticing a pattern yet?
With every new year comes a renewed opportunity for change. Findlay says that, if companies have a high volume of work to offer firms, they can make AFAs work for them. He's found that virtually all firms these days are flexible about entering into alternative billing arrangements. "A key to it is getting good data," he says. "It helps both sides trust each other." A lawyer from one of the best-known firms in the country recently said to him, "It's a great buyer's market for you right now. No reasonable offer will be refused."