Michael Caplan, the financial coordinator for Marsh & McLennan’s law department, commented recently in a column about his department’s efforts at outside counsel cost control.
“Back in June , we ran a request-for-information on what were the best-in-class outside counsel billing guidelines and how to utilize technology to align to our billing guidelines. We put 48 firms—large, medium and small—in the RFI …[who] represented about 85% to 90% of our spend. We put some rules in place that were not previously standardized, such as stating that we will no longer pay for first-year associates to work on our matters.”
It sounds as if Marsh used its request for information to learn from many of its law firms how to improve management of firms (See my post of Jan. 5, 2010: survey your firms, but judiciously.).
“But we also looked at blended rate analysis, and when we would accept rate increases, and what you need to do to get a rate increase in the system. In those ways, we let the law firms know that not only is Marsh & McLennan standardizing its usage of law firms but that our business partners should be focused on these standardizations as well. If you’re going to do X-dollars of business with us, you must give us a 10% fee discount. We are keeping firms at 2010 rates.“
So, this huge department has frozen rates and generally tightened its cost-control practices.