It sounds so simple: “Let’s get discounts from our law firms!” What all that request sets in train, however, may not occur to a general counsel.
The partner at the law firm requested to discount its rates may have to obtain approval from a management committee. The new rates may implicate a most-favored nation agreement with another client (See my posts of Nov. 21, 2005 on MFN agreements.). The firm’s accounting department must be able to handle the discounts, either by reductions in hourly rates or by applying the discount to the total bill amount. Realization rates drop and the partner must be able to defend that (See my post of Dec. 11, 2006 on the illogic of discounts.) and persuade good associates to work on the discounted matters.
On the company and law department’s side, an e-billing system may have to accommodate the discounts, as might matter management system. Someone has to track whether the promised discounts are adhered to and actually materialize (See my post of Dec. 18, 2006 on tracking improper bills.). The accounts payable system at the company must also be able to handle the new arrangement.
A law department should never discount what discounts trigger.