The cost-per-hour gap between internal and external lawyers normally bandied about appears large, at 40-50 percent, but the comparison tends to be partner-heavy on the outside and less-veteran on the inside. About half the bill of most law firms for most matters consists of partner fees. After all, the law department has hired the firm for its prior work and expertise.
The inside lawyers who are responsible for the matter do not have the experience of partners at a firm, so the straight comparison of costs per hour tilts undeservedly to cast the firm as more expensive. Even a 20-year in-house lawyer may be such a generalist that on many issues, that veteran is not an equivalent match to the particular practice depth of the specialized external lawyer. Even if you compare costs after adjusting for years out of law school, however, the per-hour gap will shrink (See my post July 25, 2007: calculations for highly-paid general counsel.).