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Term periods for fixed fees, panels, and discounted rates: typically 12-24 months

When law departments place all their work in an area with a single firm for a period of time, or when departments ask for law firms to hold their billing rates constant, or when departments choose a panel of firms for certain services, the departments decide the period of the commitment.

It is rare to see one less than one year because it takes both the law department and the law firms some time to settle in to the new arrangement. Less than one year make little sense unless the law department decided to transition its pending matters immediately (See my posts of Aug. 14, 2005 on the costs of transferring matters underway; July 21, 2006 on points to the contrary; and Sept. 3, 2006 and Dec. 4, 2006 generally on the transition of pending matters.).

More commonly, in my experience as a consultant, the law department and its law firm agree to an 18-month term.

When they consider a 24-month term, both sides can fret that they are unable to forecast the flow of work sufficiently accurately that far out. Still, two-year deals happen. As reported in the Wall St. J., May 2, 2007, at B1, Cisco signed two-year, fixed-fee deals with Fenwick West, for securities and corporate work, and with Morgan, Lewis & Bockius, for litigation.

If, however, the arrangement does no more than fix billing rates or discounts to them, we sometimes see three-year commitments. GE’s latest round of proposals features four-year commitments.