The dance and trip of expectations when fee discounts are tied to future amounts of work

Law departments often negotiate or demand discounts from their law firms. Sometimes the amounts of the discounts rise, according to the volume of work received from the law department (See my post of Aug. 8, 2006 on tiered discounts from hourly rates.). Because these arrangements are arrived at prospectively, neither side has assurance of what the actual spending figures will turn out to be.

The negotiating lawyers may go back and forth on figures but eventually settle on some discount schedule for some volume of work expected. The disappointment is usually on the side of the law firm because it has visions of golden sugarplums while the law department dreams of higher-level discounts and praiseworthy savings. Insufficient volume disappoints both.

It might be possible for both sides to revisit the discount schedule, say quarterly, or agree to a more sophisticated algorithm. Perhaps the discount rate would be based each month on a rolling three month figure and therefore would automatically correct as the year goes by (See my post of Jan. 6, 2006 on rolling averages.).