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A single rate structure imposed on multiple law firms; sensible?

I heard an unusual question about discounts from standard billing rates. The standard rates of law firms vary, with the result that law firms A and B may be doing identical work, but law firm A charges 10 percent off a $500 an hour billing rate while law firm B charges the same 10 percent discount but off a $400 an hour billing rate. Why aren’t GCs asking all firms to work for a specified rate, rather than asking for a discount off widely divergent rates?

Law departments would realize that a single-rate for lawyers at a certain level – such as $400 for 15 year partners – would lop off the top echelon of law firms. It would effect a regionalization or second tier policy under the guise of reducing billing rates. (See my rant of Oct. 30, 2005 on most favored nation rates and the posts cited there.)

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One response to “A single rate structure imposed on multiple law firms; sensible?”

  1. Bill Heinze says:

    I’m not sure that managing billing rates is a very effective way to control costs. Theoretically, rates are supposed to increase with the billing entity’s efficiency for the type of work that they are performing. However, the higher rates often lead to the most-senior practitioners being very good at doing as little as possible to keep the client happy.
    A better approach is to use standardized billing codes ( so that the cost and quality of equinalent tasks can be compared across a variety of projects and service providers. Once the simple cost comparisons are made, the client can then go back and compare the value received from providers in a similar cost range. Then, hopefully, they can use that information in order to objectively refine their service specifications in order to all providers to compete at the same level. Medical service clients (insurers) have been using this model for years.