A disproportionate amount of attention is paid to alternative fee arrangements; perhaps because they are disembodied control mechanisms (See my post of April 19, 2006 on depersonalized decisions.). It is appealing to law departments to think that a fee arrangement brings discipline and savings on its own. The cruel fact is, however, that arrangement on bills probably stands about fourth in a list of what effectively controls outside counsel costs.
From my experience, the first line of managing costs is to retain an experienced partner whose team is busy. The second most effective tool is an inside lawyer who manages the matter actively, creatively, and boldly. Budgets, carefully reviewed and thereafter enforced, are one tool of the active managing lawyer. Third is the most common source of outside counsel spending – litigation – is an effective program for the scourge of discovery. If any of these three steps are taken poorly, don’t expect the fee arrangement to bail you out.