Rees Morrison, Esq., is an expert consultant to general counsel on management issues. Visit his website, ReesMorrison.com, write Rees@ReesMorrison(dot)com, or call him at 973.568.9110.
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    « Another dragnet of definitions for the law-department management glossary | Main | Dueling support groups (bureaucratic challenges to internal change) »

    Discounts on hourly rates, easy pickin’s but tasteless fruit

    Most general counsel who profess to control their outside counsel costs admire rebates or discounted hourly rates (See my post of April 23, 2006 on rebates compared to discounts; Oct. 31, 2005 on British practices and low-balling; but see my post of Sept. 10, 2005 on the scarcity of discounts in real life.). Discounts on standard hourly rates are as low-lying fruit as they are low value.

    Nevertheless, general counsel persevere:

    even though it is not possible to prove savings (See my posts of May 4, 2005; and Aug. 24, 2005 savaging discounts on hourly rates.);
    even though the assumed benefits slip away over time (See my post of Dec. 19, 2005 on UTC’s experience.);
    even though other methods have more effect (See my post of Sept. 5, 2005 on Citicorp’s GC and discounts.);
    even though tiered discounts can warp usage of a firm (See my posts on tiered discounts of March 24, 2005; Aug. 13, 2006 on tiers not based on volume of fees; Nov. 22, 2006; and both Nov. 27, 2005 and Aug. 8, 2006 on retroactive application.);
    even though discounts for volume favor larger law firms, which have higher base rates (See my post of Aug. 9, 2006.);
    even though “standard rates” may be very slippery, like room rates in hotels (See my post of Sept. 4, 2005 and GE’s auctions.);
    even though lawyers and others in law departments still have to carefully review bills (See my post of Sept. 14, 2005 on the time demands.);
    even though firms continue to work on what remains essentially a cost-plus basis (See my post of May 26, 2006.);
    even though law firms might seek compensatory concessions for granting a discount (See my post of Oct. 29, 2006.); and
    even though the readiness with which firms concede discounts might cause general counsel to wonder about the actual savings that result (See my post of July 30, 2005 on 5-10% discounts being normal.).

    It’s just too easy to command discounts and then bestride the aircraft carrier and crow “Mission accomplished!”

    Posted on November 26, 2006 at 09:02 PM in Outside Counsel | Permalink

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