The difference between a rebate and a discount surfaced in a previous post (See my post of April 23, 2006 on the economic point of the distinction.). What I didn’t write about then was the sheer administrative hassle of rebates. Here is a comment to that point from a British bank’s law department: “Barclays gave up asking for rebates, say at above a million pounds. It was too hard to calculate when the rebates kicked; how to get money back to the client; how to give rebates back to a bank customer. One firm was unwilling to give up rebates, because they had higher rates than the other firms and would reach the rebate points more quickly!”

The quote comes from Morrison, Rees W. (ed.), Lessons from Leaders (Law Department Administrators) (Hildebrandt Inst. 2005) at 99, and were the comments of Barclay’s quondam legal administrator, Bjarnie Anderson. Rebates from law firms create administrative nightmares.

Very roughly, fully-loaded inside lawyers in the US cost their companies about $200 an hour as a fixed cost. As roughly, the effective rate paid outside counsel reaches about $300 an hour, a premium in the vicinity of 50 percent for that variable service (See my posts of Nov. 16, 2005 on fully-loaded costs per lawyer hour; Jan.10, 2006 that offers an estimate of $150-170 an hour; Oct.18, 2005 on calculating a fully-loaded cost per lawyer hour; and Aug. 14, 2006 with its estimate of $270 an hour outside.)

It distorts our judgment to get caught up in the stratospheric rates ($1,000 an hour!!) of some prominent partners. Look at the mix of time charged to a matter by various lawyers and rely more on the effective rate for a matter (See my posts of June 13, 2006 and its comparison of blended and effective billing rates; Sept. 10, 2005 and Oct. 25, 2007 on the correlation of rates to firm size; and Dec. 28, 2006 on differentials between partner and associate rates.). Then give thought to the gap between your internal lawyers’ costs and your external law firms’ costs.

In the future, an efficient method to locate counsel for some specialty might be an internet search. With the advanced capabilities now available on various search engines, and with the advent of law-focused portals (See my post of April 1, 2007 on general law portals.), a general counsel might by-pass such alternatives as directories (See my post of Jan. 25, 2008 on four Martindale-Hubble capabilities.), rating systems (See my post of Feb. 7, 2007 on several of these.), associations (See my posts of May 30, 2005; and Dec. 19, 2005 about associations and networks of law firms), and referrals (See my post of Aug. 5, 2007 as to international firms.). Not yet, however. The chaff overwhelms the wheat.

To prove the point, I tried “Des Moines environmental lawyer with more than 15 years experience.” I ran that search on Jan. 26th and had 214,000 hits on Yahoo!; 92,600 on MSN; and 35,900 on Google. We have a long way to go before internet searching helps us find lawyers at that level of specificity.

The Association of Litigation Support Professionals, “the only nonprofit organization whose members comprise the full spectrum of individuals involved with litigation support,” publishes a monthly newsletter for its members. Hundreds of service providers could be members of this group (See my post of Oct. 29, 2007 on this cottage industry.) as could be law-firm specialists. Law departments should be aware of the group and its benefits because those who are in-house and do litigation support are welcome.

One benefit of membership is the ALSP monthly newsletter. My friend Joe Howie sent me a copy of the ALSP Update, Vol. 1, Dec. 2007. It has 21 pages and covers a range of topics about the association, its activities, members, and concerns.

More and more law departments have their own litigation support staff or team (See my post of Nov. 13, 2007 on internal e-discovery groups.). This Association could be an excellent resource.

A downside of any competitive bid process is that several firms lose. They are all disappointed and crave some explanation or lesson to be learned – other than the evident fact they may conclude that the selection was wired (See my posts of Sept. 3, 2006 about sham competitions; Oct. 29, 2006 about the unfounded belief; and Feb. 15, 2006 about the incumbent advantage.) Let me offer seven actions that will slightly appease the spurned partners.

1. Treat them during the process just the same as every other firm is treated.
2. Assure them after they are cut that the process was objective.
3. Explain the rating and culling process.
4. Tell them as specifically and usefully as possible why they were not selected.
5. Suggest what they can do better with your department next time, or with other departments.
6. Make sure they had equal opportunity to learn about the work and muster arguments in favor of themselves.
7. Hold out prospects of future work, if that work is realistically available for them.

If you treat the firms considerately and open the mystical black box, they will do their best in the next competition (See my post of Aug. 9, 2006 on polite treatment of vendors.).

In-house lawyers usually like to work some days from their house. Telecommuting has obvious advantages: flexible working hours, less lost time in commutes, lower parking and gas costs, and, arguably higher productivity. These reasons in favor or working at home come from a study by Lexmark International, cited in Bus. Law Today, Vol. 17, Jan./Feb. 2008 at 6.

Drawbacks to the arrangement also surfaced from the survey. The top three included “working more hours overall, dealing with frustrating technology issues, and feeling isolated from coworkers.” Another one I would add: not knowing which location has that book, report, paper or tool you need (See my posts of Jan. 3, 2008 on how to make a success of telecommuting; and May 30, 2006 for several references cited.).

From New Nation News Jan. 14, 2008, comes this slice-of-life career progression that is highly unusual for US lawyers.

In 1994 Karina Dashko entered Moscow State University to study law. She also worked with the State Duma to develop programs for disclosing corporate information and protecting minority shareholders, and helped draft plans for the Russian security exchange regulatory body. Dashko also served as a legal consultant to the International Finance Corporation.

Upon graduation in 1998 she found work with Coudert Brothers, an international law firm. With this experience, in 2000 she entered New York University School of Law's yearlong LLM program.

In 2002 she returned to Russia, reluctantly, and began working for VimpelCom, where she remained until 2006. "They have a Western work ethic and corporate culture," Dashko said. Dashko worked there as the head of the corporate law department, secretary of the board and chief compliance officer.

During that time she was accepted into the Yale World Fellows Program, where she studied for six months in 2004 with other business leaders from all over the world. On her return, she began working for RusAl, right before the aluminum giant's merger with SUAL and Glencore last year. Whew!

Ron Friedman attended the ACI Legal Process Outsourcing conference on January 17th in New York City. He posted on his blog the comments of Donna Webber, Chief Counsel, CIT Capital Markets, who was speaking about the experience of CIT in using Indian legal service providers.

”Law department headcount was frozen but we had new tasks we had to do. So outsourcing was natural to evaluate. But American lawyers are innately skeptical of lawyers elsewhere to do the work. When we first approached offshoring, we were skeptical. When we saw quality, we were relieved. Given the offshore savings, making the decision was easy.

The other offshore project is to conduct surveillance of e-mail. They sort out junk from 500 to 600 e-mails a day so that fewer need review in-house.”

The new function for me in this pair is surveillance of email.

Compensation makes up three quarters of the typical inside budget of a US law department, so the fully-loaded cost of the lawyers in a given law department is a result mostly of paychecks. According to Bus. Law Today, Vol. 17, Jan./Feb. 2008 at 6, data from Hildebrandt’s 2007 Law Department Survey shows that law departments are spending more than 80 percent of their inside counsel dollars on compensation (See my post of July 31, 2005 about compensation rising 7% a year, including equity awards.).

Of that compensation driven budget, I have seen in benchmark surveys and consulting projects that the compensation of the lawyers accounts for three quarters of the total departmental compensation.

Going one metric further, it may well be that base comp – salary -- accounts for three quarters of the total lawyer compensation.

I am attracted to such Russian-doll metrics, where each one you open contains a comparable, but smaller metric. So, 75 percent of the inside budget is compensation; 75 percent of that compensation is for lawyers; and 75 percent of the lawyer compensation is salary (See my post of Oct. 24, 2007 on a possible progression of 60% metrics about litigation support costs.).

Have you ever tried this question with your clients who ask you to do work that drains your time from more pressing tasks or tasks that they or others should do: "If we charged you $200 an hour for our time, would you ask us to do it?" It could be that the rates vary according to the likelihood of legal risk (See my post of Oct. 22, 2006 on inside lawyers with multiple rates.).

This approach means you charge internal time only for particular, pre-defined services. Inside lawyers, for example, might charge for time spent on quasi-legal services (See my posts of Sept. 10, 2005 and its discussion of such tasks; July 21, 2005 with definitions; and Feb. 23, 2006 on how to identify them.).

Commodity work, such as reviews of ordinary advertisements, might deserve an hourly chargeback. If there is so much of it, clients should have an incentive to handle the easy stuff or standardize much of what is needed.

Services you have repeatedly shown clients how to handle might also justify a charge (See my post of Sept. 10, 2005 for more on this idea about charging for help if the answers are on the company intranet.). Ordinary non-disclosure agreements could fall into this category.

The message to clients is, “Don’t use us for lower-value drudgery!”