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The 2006 ACC/Serengeti Managing Outside Counsel Survey was conducted for
the ACC by Serengeti, provider of Serengeti Tracker, rated the top
system for e-billing and matter management by the General Counsel
Roundtable. Hundreds of ACC member law departments share their
experiences in the sixth annual report, which is available at a special
discount to ACC members. This year’s report has detailed data regarding
the high, low, and average hourly rates paid by ACC members for specific
types of legal work in major metropolitan areas.
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ACC Docket Special Section:
VALUABLE INSIGHTS FROM THE 2006 ACC/SERENGETI MANAGING OUTSIDE COUNSEL
SURVEY
March 2007
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Counsel in Small
Law Departments Make Up Majority of Profession |
Although larger
law departments get much of the press, a majority of in-house
counsel (65%) are in law departments that have five or fewer
lawyers. |
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Lower Percentage
of Company Revenues Spent on Legal (In-House and Outside
Counsel) |
The percentage of
company revenues devoted to total legal spending (both law
department and outside counsel) declined for a second straight
year to .54% in 2005, down from .62% in 2004 and .67% in 2003.
This follows several years of increases, from .51% in 2001,
to.57% in 2002, to .67% in 2003. |
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Smaller Companies
Spend Much Greater Percentage of Revenues on Legal (In-House and
Outside Counsel) |
On average, small
companies (up to $100M in annual revenues) spend 2.8% of their
revenues on total legal spending. For medium companies ($100M to
$1B in revenues), the corresponding percentage is much lower at
.57%, and for larger companies (over $1B in revenues) even lower
at .30%. |
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Predominance of
Hourly Fees, Standard and Discounted |
Despite recent
attention focused on problems with hourly billing, a growing
majority of in-house counsel (87%) still use standard hourly
rates for a median of 75% of their outside legal work. In
addition, many in-house counsel (58%) use discounted hourly
rates for a median of 48% of their work. The most common
alternatives to hourly billing were fixed fee/matter, followed
by blended hourly rates, contingency fees, and retainers for
defined work during a certain time period. |
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More Discounts
for Early Payment |
A growing minority
of in-house counsel (15% vs. 11% last year) receive a discount
from their law firms for early payment of bills. However, those
in-house counsel who receive such discounts do so from only a
fraction of their law firms (on average 22%). The average
discount is 6.4% for payments within an average of 19.7 days. |
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April 2007
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New
Technology a Priority for Law Departments—Doing More Without
Adding Staff |
New
technology, both to improve the efficiency of the law
department and to work with outside counsel, was cited by
25% of in-house counsel as one of their top five priorities.
The need for efficiency is necessitated by having to do more
work without adding staff, cited as a pressing issue by 67%
of in-house counsel. |
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Home-Grown
Management Systems Still Most Common |
More law
departments track outside legal work with internal
spreadsheets and databases (33%), than use internal matter
management software (14%), or online systems that connect
them with their law firms (21%). |
Growing Use
of Online Matter Management, Electronic Billing Systems,
Overtaking Internal Software |
While the use
of internal matter management software is declining (14% vs.
22% last year), the use of online matter management systems
(including e-billing) continued to increase (21% vs. 17%
last year). Web-based systems are likely to continue to grow
in use by law departments with 25% of in-house counsel
currently considering such systems (compared with 18%
considering internal software programs). |
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Significant
Savings from Outside Counsel Management Technologies |
Average
reported savings from using matter management systems were
11% of outside legal spending. Average reported savings from
using electronic billing systems were 6% of outside legal
spending. |
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Declining Use
of Law Firm Extranets |
Perhaps
reflecting the growing use of online matter management and
electronic billing, law firm extranets have declined
significantly over the past several years: used by only 10%
of law departments this year, compared with 30% three years
ago. |
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Infrequent
Use of Uniform Task-Based Management System (UTBMS) Billing
Codes |
The number of
in-house counsel requiring UTBMS billing codes from at least
some of their law firms remains at 10%, about the same as
five years ago. However, the percentage of matters for which
such coding is required has dropped to less than half (45%)
from 73% in 2000. |
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May 2007
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Decrease in
Percentage of Company Revenues Spent on Law Departments |
After four
years of increases, this was the second year in which
companies spent a lower percentage of their revenues on
their internal law departments (an average of .18% in 2005,
compared with .23% in 2004 and .25% in 2003). Small
companies (less than $100 million in annual revenues)
continue to spend a much higher percentage of their revenues
on their law departments (1.03%), compared to medium
companies ($100 million -$1 billion in revenues: .21%) and
large companies (over $1 billion in revenues: .10%). |
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Projected
Increase for Law Departments Greater than Increase for
Outside Counsel |
The projected
increase in law department spending for 2006 is 5%,
significantly greater than the projected increase of 1% in
spending on outside counsel. |
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Competitive
Bidding |
The practice
of issuing a request for bids is used by a minority of
in-house counsel and is staying constant, with about 25% of
in-house counsel having issued at least one RFP to law firms
during the past year. Comparing the total number of bid
requests to the total number of law firm responses, there
were on average less than three responses for every bid
request issued, a reason why competitive bids are not more
common.
Minimum Associate Experience Required The costs of
inexperienced law firm associates have become a management
issue for an increasing number of in-house counsel. About
24% of law departments now require a minimum level of
associate experience. The average level of associate
experience required has leveled off at 5 years (up from 3
years in 2000). |
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Methods to
Control Outside Legal Spending |
The most
common methods to control outside legal spending used by
in-house counsel are: case/matter budgets (61%),
discounted/alternative fees (57%), billing
guidelines/spending rules (46%), re-allocation of work to
firms with lower rates (45%), and evaluations of outside
counsel (24%). |
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June 2007
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Top Retention
Terms Relate to Bills, Budgets, and Staffing |
The most common
retention terms required by in-house counsel are:
monthly/periodic bills (94%); billing formats/details (67%); no
change of attorneys without client approval (61%); preparation
of budgets and associated reports (60%); discounts from standard
hourly rates (59%); and periodic written matter updates (53%). |
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In-House Counsel
Plan to Require New Retention Terms |
The most common
retention terms that in-house counsel are planning to require
from outside counsel are: technology requirements (20%); end of
matter assessments (18%); preparation of budgets and associated
reports (17%); adherence to a diversity policy (18%); and limits
on internal charges, e.g. copies, faxes, online research, etc.
(18%). |
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Percentage of
In-house Counsel Requiring Budgets Constant—But They Require
Budgets More Often |
Approximately
three-fourths of in-house counsel (76%) require budgets from
outside counsel for at least some of their work, about the same
as in prior years. However, in-house counsel are requiring
budgets for a higher percentage of their matters (this year on
average 49%, up from 38% in 2001), indicating positive
experiences with using budgets. |
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Litigation Most
Common Type of Work for Which Budgets Required |
Budgets are most
often required by in-house counsel managing litigation (67% of
in-house counsel, for on average 72% of litigation matters),
followed by business transactions (41% of respondents for 61% of
matters), and intellectual property/patent work (33% of
respondents for 68% of matters). |
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Predominant
Reasons for Termination of Outside Counsel Just over half of
in-house counsel |
Just over half of
in-house counsel (56%) terminated work with at least one law
firm during the past year. The three most common reasons
(consistent with past years) were: poor quality work
product/results (69%); lack of responsiveness (66%); and too
high fees/costs (62%). “Personality issues” continue to be a
growing concern, cited by 48% of respondents this year (compared
with 37% last year, and 16% the previous year). |
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