Notional cost per hour to calculate value delivered by a law department (DaimlerChrysler UK)

Iain Larkin, group general counsel at DaimlerChrysler UK, describes in LegalWeek, Sept. 21, 2006 at 18, one of the methods his team uses to show the law department’s value. When a matter ends, the in-house counsel estimate the time they spent on it and multiply that time by a “notional hourly rate.”

The notional rate comes from the hourly rate charged by local commercial law firms for a lawyer of “equal qualification and status.” (The subjectivity of status troubles me a bit.) At the end of the year, the department adds all those notional hours and calculates what the cost to the business would have been if the work had been sent to outside firms rather than done inside.

Beyond the status determination, doesn’t this system encourage in-house lawyers to estimate their time generously?