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Surprisingly low data on law-firm chargeable hours and effective billed rates

David Bilinsky, writing in Law Practice, Oct./Nov. 2008 at 51, draws on LexisNexis’s 2007Juris Law Firm Economic Survey. “Billed hours per lawyer in the top quartile firms averaged 1,582; in the fourth quartile firms, the average was only 1,314 hours.” These figures, even if they came from firms that haven’t cracked the lists of mega-firms, tell me (a) that egregious bill padding was not underway and (b) many firms have capacity to take on more work.

The low billable hours also calls into question the assumption usually made that insure lawyers work plus or minus 1,850 billable-equivalent hours per year. If that assumed figure is too high, if in fact their time that would be chargeable to the client if they were at a law firm were lower, then the fully-loaded cost per internal lawyer hour rises. That figure across the country might be about $180 an hour. If inside billable hours are more like 1,600 per year, the cost to the company rises 15 percent to $208 an hour.

The same study offered some data on billing rates. “The effective blended standard rate (billed hours) for top quartile firms was $236; for fourth quartile firms, it was $150.” Compare those Lilliputian rates to the Brobdignagian costs per fully-loaded billable hour (after subtracting disbursements) and the cost gap between fixed internal and variable external closes significantly.

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