The traditional hourly billing model still predominates, and many legal departments are still comfortable with their outside counsel using it. But there has been a shift over the recent years to more use of alternative fee arrangements (AFAs), flat fee structures or value-based pricing.

At the Association of Corporate Counsel annual meeting, a panel discussed how law firms are working with and engaging in these various practices and meeting legal departments’ requirements to perform along the lines of a managed services provider. The panel noted right away that there is an aim for deeper engagement, better pricing, more expert advice and full integration from their firms. There also was excitement expressed that law firms were adding business professionals throughout their firms to better meet the needs of the client.

A major theme was that the firms should have a deep understanding of their client’s business. The firm should spend the necessary time and effort, without additional charges, to understand the business’ top priorities. The client wants the firm to “get to know us.” As stated by the panel, a good lawyer provides practical advice, but a great lawyer provides advice the client hasn’t thought of yet.

As legal departments continue to focus on receiving the best service and maintaining an ability to manage their outside counsel relationships, convergence was a strategy that many legal departments have used or were planning to implement. Some of the benefits of convergence for the legal department include: the ability to receive a better fees and service; eliminate conflicting advice, reducing variable pricing and unpredictable costs; ensure firms adhere to the billing guidelines; and creating a strong partnership where the firm has some skin in the game.

Additional elements that were adapted during reviews of their firm panels and as part of the request for proposals (RFPs) include: asking the firms to disclose their rates, diversity, resourcing, innovations and if the firm is a customer of the business (e.g., bank, insurance, health care).

One legal department broke down their structure surrounding their law firm panel which evolved into a few specialty panels. The largest amount of work is sent to their main law firm panel as that work is often on a global scale and those firms have a global footprint. But when there is a need for regional or niche work, they have a few firms on specialty panels that they can call upon.

A member of the audience asked the panel whether by looking to firms to act more as a managed services provider, if there was any concern about firms in turn using an alternative service provider to meet their client needs. The panel did not have any concern as they noted the firms are the ones on the hook for the work, so they would trust who the firms hire and validate the quality. If the quality is not there, the firm will feel it in the end.

The session concluded by discussing what legal departments are expecting from their firms. The panel said there is a need for a strong relationship, but legal departments are also more open than ever to explore working with different firm if their needs are not being met through delivery of quality work that is done efficiently.

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