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A massive request for information (RFI) by Marsh & McLennan’s legal department regarding cost control measures

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 [2011], 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.

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One response to “A massive request for information (RFI) by Marsh & McLennan’s legal department regarding cost control measures”

  1. Jeff Hodge says:

    Marsh has taken the right approach in using data to inform rate negotiation and this freeze. Too often such decisions are a knee-jerk reaction without a foundation in the business actually being done between the firm and the client. Even so, while data can inform and automated ebilling rules can enforce such decisions, in my mind all such decisions should ultimately be founded upon the outside counsel guidelines (OCGs) agreed with firms. As sound practice examples such as those collected by Marsh may not be generally available, we have collected a fair number of OCG sound practices for download here.