“Nearly half of the law department budget is spent on outside law firms, and law firms will surely be the primary service provider to law departments for the foreseeable future,” the report read.

“However, law firms are subject to ever-greater scrutiny as CLOs refine their strategy for law firm selection and cost control.”

This perhaps explains why, last year, three in 10 CLOs shifted law firm work to lower priced firms.

“In additional survey commentary, department leaders noted that they are successfully using smaller law firms that offer quality work and service at considerable reductions in cost,” the report read.

“According to the survey, shifting law firm work to lower priced firms is the most effective cost control effort that law departments have undertaken this year. It is surprising that more departments are not making use of this tactic.”

Further, 62 percent of law departments received price reductions from outside counsel this year, with a median discount of 10 per cent off standard hourly rates, Altman Weil noted.

“Overall, law departments estimate that they have negotiating power over three-quarters of fees on matters outsourced to law firms, including significant influence over 47 per cent of fees,” it said.

VIEW ALL

“However, 55 per cent report that law firms resist greater discounting. Larger law departments are most likely to receive discounts – but they are also most likely to face resistance from outside counsel. This may be because large departments are often working with largest and most sophisticated law firms, the segment of the market where demand is most likely to outstrip supply.”

The Chief Legal Officer Survey aims to provide insights into the state of in-house legal departments from the perspective of their top lawyers, according to Altman Weil.