Legal Village

In our workshops we run for less experienced in-house lawyers I ask for examples of a mismatch between expected cost and actual bill - to date the most striking is £5,000 and £25,000. This reflects badly on both the client and the law firm as there was clearly an absence of proper dialogue.

I firmly believe that it is vital at the outset to have a discussion about expected effort, likely cost and the value of what is delivered. If the client does not initiate that discussion, the law firm should. If it is pursued in the spirit of both being satisfied with the effort and cost to reach the desired result, it can only enhance relations. Some law firms do need to more sensitive to the negative impact on a client of multiple fee-earners at a meeting, some of whom are blackberrying on different matters!

Some in-housers need to make sure that spending time on having a proper preliminary dialogue is not relegatged to a 'nice to do'.

Posted by Mark Prebble | 28/02/2007

I don't think the 'win some, lose some' principle applies well in practice.

The pressure is always to get the client's instructions so estimates will always be optimistically low and the client will always accept the low quote rather than the realistic quote.

The result of trying to be predictive on cost can be seen in the conveyancing market, where cost-fixing is now common, and I really think it has resulted in a good deal of risk taking and slipshod work to keep within unrealistic budgets.

I see many highly skilled conveyancers working under huge pressure to the detriment of the work/life balance if they wish to maintain standards.

Effectively it rewards the risk-takers and punishes the conscientious.

Posted by Stephen Wilde | 23/02/2007

I think that the focus for the future has to be on how law firms can deliver fixed fees.

Budget certainty is very important in my business, but generally speaking, external lawyers are very risk adverse and are reluctant to take the risk of a fixed fee agreement.

I think they are missing an opportunity. If they are prepared to take the risk they will win some and lose some. The end result should be a significant positive because of the incremental business that they will have picked up from offering such an arrangement.

Posted by Iain Larkins | 16/02/2007

This is an interesting & welcome initiative. There may also be value in comparing practice in other consulting sectors such as management consultancy & IT. In those sectors larger pieces of work are frequently done on cost effective day (rather than hourly)rates & consultants often work those days on client sites to ensure focus on client work and efficient connection with client staff.

Posted by Bruce Macmillan | 16/02/2007

Unlike some GCs I don't see it as my personal crusade to gouge outside counsel on fees. I am happy to pay good money for good service.

But I sense that the legal services market in Europe is becoming less competitive.

Let's all work so that Europe doesn't go the way of the U.S., where it seems to me external lawyers' rates are sky high and where the services are sometimes pretty poor.

Posted by Jonathan Pearl | 13/02/2007

I welcome the C&I's focus group. Having moved from a US multinational with big buying power to a private equity start up, the issue is particularly critical. Smaller legal teams have a great deal to add to this debate and I hope they will participate. Equally there is much we can learn from the fee structures that our colleagues in larger organisations are able to negotiate. Maybe the combined and therefore enormous buying power of the C&I group members could be brought into play to achieve better deals? Firms may be prepared to “buy their way into” a pretty impressive potential client list with “preferred” fee deals. Worth a thought anyway.

Posted by Jonathan Beak | 13/02/2007

Former big-firm, specialist partners have established dedicated practices in their fields of recognised expertise. With low overheads and the efficiency of modern technology, they offer flexible billing arrangements and apply low charge-out rates, even if the work is not fee-sensitive. Currently, the suggestion of high-quality service at a low cost may be impractical in some areas of practice. In other areas, such as complex technology transactions, it is not merely an aspiration but a reality. We just need to spread the word - not the margins.

Posted by Mark Haftke | 12/02/2007

I have found that the larger the transaction (the more complexities there are) the harder it is to keep the costs genie in the bottle. This in part happens as a result of the fact that many firms have strong departmental divisions and that the client can end up negotiating fees with various people at the same firm.

To point out the obvious, when a deal is a success, then the client takes more kindly to the bills ...perhaps lawyers working on the larger transactions should be quoting for the work with a bonus payment for success - like many of the investment banks?

Posted by Dawood Pervez | 9/02/2007

We are are a small litigation boutique, undertaking large litigation, usually against the big City firms.

From costs schedules for summary assessment and detailed assessment, it appears that our fees are 1/3 to 1/2 of those of the large firms.

We do not have hourly billing targets, but bill by the hour.

We use technology aggressively and manage all our cases electronically. This makes us very efficient and extremely cost-effective.

We usually have 2 or 3 fee earners on a case in which the other side has 5 -10 fee earners.

Result - happy clients and very reasonable fees.

Posted by steven loble | 9/02/2007

I think that Deepak's comments are measured and helpful and no doubt the C&I Group's new focus group will generate some interesting thougts. There may be various perceptions, suspicions and views but existing assumptions will need to be balanced, to avoid them getting in the way of a rational and sensible debate.

Posted by Christopher Arnull | 9/02/2007