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Puzzled over discounts that differ depending on the projected value of the legal services

Summarizing discussion points at a conference of the Iberian Lawyer’s In-House Club, the author wrote that general counsel “had been requesting a reduction in law firm rates for lower value work … but had not yet looked for deep discounts for the highest value work.” That quote, from Iberian Lawyer, Jan./Feb. 2010 at 13, puzzles me for several reasons.

First, rather than exact an extra pound of flesh for lower-value work, why don’t legal departments hire law firms that have lower cost structures?

Second, if in-house counsel can classify a matter early on as lower value and thus entitled to higher discounts, don’t they have the data, experience, and confidence to solicit fixed fee arrangements to such matters?

Third, isn’t the dichotomy arbitrary and crude? Even “highest value work” has swatches of tasks that are routine. If you treat an entire matter – a complex mix of high, medium, and low value work – as monolithically at one point on a value spectrum (let alone as the binary choice of high or low), you are missing opportunities to pay less for predominantly higher end work, and underpaying for some work at the lower end (See my post of May 23, 2007: fees paid vary by the complexity of a patent application; Nov. 25, 2005: clear-cut value difference between types of similar matters; Feb. 15, 2010: thoughts on software that ranks matters on value and complexity.).

Finally, why do general counsel persist in imagining that discounts materially and advantageously alter the financial arrangements they have with law firms?