Cost overruns remain a persistent challenge for in-house legal teams, with Gartner finding that only one in five legal matters referred to external law firms come in on or under budget.
Global research and advisory firm Gartner has found that in-house legal departments continue to struggle with controlling outside counsel spending, with legal matters staying within planned budgets only about 20 per cent of the time.
The findings are based on a Gartner survey of 200 in-house and law firm lawyers conducted through December 2024.
Excess spending on outside counsel is pulling critical resources away from innovation and growth, according to Rosemarie Griffin, senior principal of research in Gartner’s legal and compliance practice, who warns that legal teams must take a more hands-on approach to matter management to stay in control of costs.
“Excess spending on outside counsel is a pressing challenge for legal departments because it diverts resources away from innovation and business growth,” Griffin stated.
“Passive oversight doesn’t drive cost-effectiveness; general counsel must help their teams adopt an active approach to matter management that sets clear expectations, provides continuous oversight, and evaluates performance at every stage.”
More than half of survey respondents said in-house lawyers “lack effectiveness” in key aspects of managing outside counsel, including setting expectations, monitoring progress, and assessing performance throughout a legal matter.
This gap in effectiveness comes with real financial consequences.
According to Griffin, Gartner estimates that the average legal department spends roughly $162,000 annually paying in-house lawyers to partially duplicate work already handled by outside counsel.
“This lack of in-house effectiveness at managing outside counsel is driving overspend,” Griffin said.
“Further, without proper guidance, outside counsel work can fail to meet expectations and incur additional cost: Gartner estimates the average legal department spends $162,000 a year paying lawyers to duplicate, at least in part, the efforts of outside counsel.”
Historically, in-house teams have attempted to curb external legal spending by reducing the volume of outsourced work, negotiating lower fees, or shifting matters to lower-cost providers.
While these approaches may offer short-term relief, Gartner argues they fail to address the underlying causes of budget overruns.
Instead, Griffin highlighted “active matter management” as a more effective way to control costs, enabling both in-house lawyers and outside counsel to align on expectations and collaborate efficiently.
Yet, she pointed out that fewer than half of in-house lawyers know the budget range, and just over half understand the timeline or goals at the start of a matter.
“Lawyers who are effective at active matter management are twice as likely to keep matters within budget,” Griffin said.
“Yet, our survey data shows that less than half of in-house lawyers understand the budget range, and slightly over half understand timeline or goals at the start of a matter.”
As in-house lawyers often rely on their own individual approaches to managing outside counsel, Gartner urges general counsel to “codify a process” that ensures consistent oversight throughout the entire matter life cycle.
But standardisation alone isn’t enough. Griffin advised general counsel to equip their teams with practical tools and resources that support active matter management, including budgeting templates, scoping checklists, process maps, and annual training.
“Budgeting templates help both parties align financial parameters from the outset, while scoping checklists enable lawyers to communicate critical details to outside counsel, such as timeline, risk tolerance, and objectives,” Griffin said.
“These resources will also help lawyers clarify their own expectations before engaging external firms, reducing rework and cost overruns, and ensuring alignment from the start.”
