Estimated savings on services provided by law firms on a fixed fee: up to 15% (Pitney Bowes)

Back in 2005, Pitney Bowes began to study its outside legal spending. As reported in the Wall St. J., May 2, 2007, at B2, with assistance from its strategic sourcing group the legal department analyzed its matter-management system data and decided to change the economic basis on which it paid some of its law firms.

“Pitney Bowes is now using fixed-fee arrangements for employment matters, small M&A deals and real-estate work” said the director of strategic sourcing for the company who worked on this project – interesting that it is not someone from the law department who is quoted – and estimated “the company saves up to 15% on fixed-fee matters.”

As important as is the amount of savings projected from a fixed-fee arrangement, it is also important that the law department be able to prove the savings. Say the department has three years of spending data. It can extrapolate that data for the period of the fixed-price deal and show the difference, convincingly and clearly.

This blog has noted many other law departments that have negotiated fixed-fee arrangements with law firms (See my posts of Jan. 25, 2006 [American Express]; May 19, 2006 #2 [American Greeting]; Nov. 25, 2005 [Bell South]; Sept. 14, 2005 [Cisco]; March 4, 2007 [Coachmen Industries]; Sept. 10, 2005 [Duquesne Light]; March 9, 2007 [GE]; March 9, 2007 [Intel]; and Nov. 6, 2005 [Walmart].).