By one rule of thumb, inside counsel are far too costly in relation to outside counsel

A supplement to Chapter 4 of Robert Haig’s Successful Partnering Between Inside and Outside Counsel (West) at 4.3 note 1, quotes an article from GC California Magazine (May 14, 2008). The article’s author, a former general counsel, wrote that “[s]ome businesspeople use a rule of thumb, based upon experience in other areas, that the cost of doing something inside the company should be approximately one-third the cost of obtaining the services outside the company.”

If that guideline holds, inside lawyers – at approximately $200 per hour fully loaded in US law departments – would be expected to use outside counsel who bill at something like $600 an hour (See my post of April 21, 2010: little change after inflation over several years in inside full costs; July 1, 2010: $214 an hour fully loaded.). Research shows that $350 an hour after discounts comes closer to the blended billing rate of outside counsel (See my post of June 2, 2010: CTTymetrix Real Rate Report.).

Put bluntly, for those who see the one-third rule as a baseline, either inside lawyers cost too much, outside lawyers bill too little per hour, or the economic relationship contravenes the rule of thumb.