Corp. Legal Depts. Looking In-House More

By Michael Greene

Nov. 10 — Corporate legal departments are finding ways to reduce spending by using “their buying power to drive down expenditures on outside counsel and innovating from within to further control costs,” according to Altman Weil, Inc.'s “2014 Chief Legal Officer Survey.”

Released in early November, the survey found that the impact of the recession caused internal departments to suffer pinched resources, but also allowed them to gain “more leverage over external resources.”

“Chief Legal Officers are buyers in what is currently a strong buyers' market,” Altman Weil noted.

Reducing Costs

When asked what they have done to control legal department costs during the last 12 months, the most frequent option that chief legal officers picked was “received price reductions from outside counsel (62.4 percent),” followed by “used alternative or fixed fee arrangements (59.5 percent)” and “improved efficiency of internal procedures (57.8 percent).”

Almost all of the CLOs reported that their law departments received a price reduction from outside counsel during the last 12 months.

The most common price reduction from outside counsel during this time was between 6 and 10 percent, according to the survey.

Additionally, more than a third of the surveyed legal officers received an average price reduction of more than 10 percent this year, “a jump from 28 percent in the 2013 survey.”

Also of note, a significant number of CLOs are controlling costs by managing the distribution of work to law firms. Of those surveyed, 39.9 percent shifted law firm work to in-house staff, 35.8 percent shifted law firm work to lower priced firms and 33.5 percent reduced the total amount of work sent to outside counsel.

The BTI Consulting Group recently remarked on the “pervasive trend” of moving legal work in-house.

Law Firm Improvement

CLOs also were also asked which service improvements and innovations they would most like to see from outside counsel, and the top response was greater cost reduction (58.2 percent), followed by more efficient project management (57 percent) and improved budget forecasting (56.4 percent).

Almost half (43 percent) of the CLOs surveyed said they don't really care about a law firm's service delivery mode as long as they get the results they want at a competitive price.

However, only 4 percent of the CLOs surveyed said they are satisfied with the traditional legal service delivery model.

The survey also examined how CLOs allocate their time, finding that they spend almost a third of their time (32.3 percent) advising their organizations' executives, almost a quarter (22.7 percent) of their time practicing law and 22.7 percent of their time managing the law department.

The Chief Legal Office Survey has been conducted annually since 2000. This year's survey drew from the responses of 168 chief legal officers.

To contact the reporter on this story: Michael Greene in Washington at mgreene@bna.com

To contact the editor responsible for this story: Ryan Tuck at rtuck@bna.com

The survey is available at http://www.altmanweil.com/CLO2014/.