Published on:

Disbursements of firms at about 10 percent of fees (data from large consulting firms)

In project after project, I see that the disbursements charged clients by law firms hover around ten percent of the fees charged (See my post of Dec. 1, 2006 generally on disbursements and seven references cited.).

Consulting Mag., Vol. 9, Jan./Feb. 2007 at 17, presents data from 10 major consulting firms on client reimbursements as a percentage of sales. If sales are roughly the same as law firm professional fees and reimbursements equal what law firms consider disbursements (costs of travel, lodging, meals, etc.), then this data should be a ballpark guide for law departments as to what law firms pass through. The range for the consulting firms was between 2.9 percent for Hewitt and 12.0 percent for CRA International, the median was 8.2 percent, and the average was 7.4 percent.

Five conclusions follow from this generally comparable set of metrics: (1) my ten-percent rule-of-thumb for law firm disbursements is corroborated, but may be generous; (2) wide differences in expenses passed through, amounting to tens of thousands of dollars on large matters, are likely to be seen between equivalent law firms; (3) even the most miserly controls on out-of-pocket expenses still only whittle away at a small portion of the total costs of law firms; (4) to whatever extent your law department can wrap costs into fees, the law firm has an incentive to pinch its own pennies; and (5) bulk-purchase agreements with large vendors, which law firms in turn must use, can save money.