Combat Rising Law Firm Costs by Managing Outside Counsel Expenses

February 3, 2025

Combat Rising Law Firm Costs by Managing Outside Counsel Expenses

According to industry leaders at the Wolters Kluwer ELM Amplify 2024 conference, corporate legal teams are seeking innovative ways to manage outside counsel expenses due to the rising cost of legal services. From 2022 to mid-2024, partner rates increased significantly, and litigation rates rose 23% at larger firms. To address these growing costs, legal departments are turning to strategic negotiations and alternative fee arrangements. 

A key strategy is centralizing rate negotiations within legal operations teams. By leveraging data, legal operations can ensure that firms understand the impact of their pricing decisions and negotiate more effectively. Additionally, discounts for quicker payment terms offer mutual benefits. Law firms can improve cash flow while legal teams achieve immediate savings. 

Multi-year rate locks provide stability, preventing sudden cost spikes, while volume discounts scale savings with increased work. Another approach involves incorporating procurement into negotiations, adding leverage to negotiate for better deals while maintaining collaborative relationships with law firms. 

Beyond negotiations, legal teams are exploring AFAs such as fixed fees and blended rates to ensure predictable costs. Including blended rates in requests for proposals (RFPs) can streamline budgeting and align with overall cost management objectives. Technology also plays a significant role, as legal management systems help track rates, enforce discounts, and streamline payment processes.

Ultimately, controlling outside counsel expenses requires a combination of data, negotiation expertise, strategic partnerships, and innovative technology use. By focusing on these areas, legal departments can balance cost management with maintaining high-quality legal representation.

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