A report a few years ago had data for a group of law departments about “the largest expense item incurred by” the participants. The median figure for that big ticket item was fairly consistently about eight percent of the total legal spending of the departments, whether you looked the participants as a group, by a revenue range, or by certain industries.
What came to mind was that somewhere near half of a department’s total legal spend comes from compensation, facilities, and internal charges that don’t vary much year from year. Therefore, the costly whopper is an external expenditure, typically stemming from a major deal or a large lawsuit.
Consider some implications if a single matter – the acquisition of a company or a class action – accounts for 16-20 percent of a typical law department’s external spend in a year. Right out of the box, you can guess that often the tsunami could not have been anticipated during the budget period months before. Then too, why play around with minnow expenses if one whale deserves the most attention. Third, if each year a budget-buster comes along, then in fact you can budget for it, even if you do not know anything about its specifics.