Pros and cons of guaranteeing a law firm a certain amount of work

The Canadian Corporate Counsel Association (CCCA) surveyed its members for the 2005 In-House Corporate Counsel Barometer. It’s heavy weather to make sense out of the result, stated in Canadian Lawyer Inhouse, Vol. 2, Feb. 2007 at 28, that “38 per cent of those surveyed … said they or their organization have dealt with alternative billing structures.” The phrase “have dealt with” could mean almost anything, so the Barometer’s reading is, dare I say, cloudy.

The article continues with the comment that to make flat fees or budgets “more attractive to law firms” law departments “often guarantee a certain amount of business to law firms that offer reduced or fixed rates.” What, firms can’t be persuaded to provide legal services other than at hourly, standard rates unless the carrot is thick and red enough?

Only two advantages come to mind for law departments that assure a firm a minimum amount of business. One is that the firm graciously accedes to something other than standard full rates, while the second is that perhaps the law department then uses the firm more, and benefits of familiarity and transactional ease accrue.

These minor boons give way under the weight of heavy negatives. The department handcuffs itself to some extent; the department may give work to the firm that should not really go to it, whether because of lack of expertise or slow turnaround or some other malaise; the firms’ expectations are elevated, which almost inevitably leads to dissatisfaction; and negotiations and data presentation are bogged down.

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