Many law departments review law firm proposals to grant increasing, step-wise reductions in rates. Give us more work and we will agree deeper cuts. For example, if the actual hours of work by the firm during a year multiplied by the firm’s rates amounts to $3 million plus, the firm’s discount will deepen one percent per million for any services above $2 million.
More dramatically, firms propose retroactive rate reductions. For example, assume the same $2 million projected level of services by the law firm. If the actual work done exceeds that amount by $1 million or more, a higher discount will take effect for ALL work done during the 12 month period – that is, the increased discount will apply retroactively to the preceding work.
The retroactive feature strongly encourages a law department to funnel more work to that firm so that the department can reap the savings on earlier work.