Cost per hour corresponds to inside-outside mix of spending

Studies have shown that the fully-loaded cost per hour of inside lawyer time in U.S. law departments is roughly speaking about $180 (See my post of Nov. 16, 2005 on fully-loaded costs per lawyer hour.). Although the data is less reliable, the blended rate of outside lawyers – the total of their bills divided by the total of their lawyer hours (See my post June 13, 2006 and a comparison to effective billing rtes.) – is in the plausible range of $270 per hour. Equally well-researched and known is the typical ratio of a law department’s inside spending to its spending to its spending outside counsel: 40 percent inside to 60 percent outside.

Given the three numbers above, outside counsel cost 50 percent more than inside counsel on an all-in basis, and outside counsel spending exceeds inside counsel spending by 50 percent.

That parity of a 50 percent cost and spend differential means that for each inside lawyer hour there is an outside lawyer hour. That being taken as true, the 90,000 or so inside lawyers, a total which includes government lawyers (See my posts of Nov. 5, 2005 on huge government lawyer agencies; and Aug. 2, 2006 on those of Massachusetts.), rely on close to 90,000 outside lawyers who work full time in support of US law departments. The hours are accounted for largely by litigation, which sops up about half of most law department’s budget.

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