Mistaken ideas about inside counsel as fixed costs at one-third the cost of outside counsel

A columnist in ACC Docket, Vol. 30, March 2008 at 20 (Ron Pol), confesses “10 little secrets of working in-house.” His second secret begins with a sentence that I dispute — “You represent one of two choices for the business: Fixed costs for the legal department, or outside counsel at three times the cost.”

Wrong on four counts, Ron. Count one is that legal departments have considerable play in using temporary or contract lawyers, so the department’s cost is not completely fixed (See my post of Feb. 18, 2006: fixed and variable costs; and Feb. 28, 2008: law firm compared to law department costs.). Count two is that outside counsel charge approximately 50 percent more per hour, not 300 percent more (See my post of Sept. 25, 2005: confirming the gap inside to outside; Oct. 18, 2005: inside to outside hourly cost.). Count three is that a company might shrink its legal department and decentralize the location and reporting of its lawyers to the business or staff units that use them the most. Fourth, companies staff for the valleys of work, so there is always too much to do and some lawyer, somewhere, has to do it.

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