Time-based billing is still the preferred method for corporate legal spending, according to a recent survey completed by Mallesons Stephen Jaques.
According to the survey, which included 374 respondents of which 44 per cent were general counsel, 50 per cent of respondents said fees billed at an hourly rate make up over 90 per cent of their total legal spend.
"It is a little surprising to see such strong support for hourly billing, given our own experience of the number of clients who are interested in exploring alternative arrangements," said Mallesons managing partner Tony O'Malley.
"While I believe the pricing paradigm is changing, the survey results suggest to me that in-house teams and external law firms need to work more closely on developing win-win alternatives if we are to see a genuine shift over time."
In addition, almost two thirds of respondents (66 per cent) said they were happy with their current billing arrangements.
According to the firm's general counsel survey partners, including those from National Australia Bank, Wesfarmers, AMP and Westfield, the reasons for retaining the billable hour could simply come down to inertia and a lack of time and effort required to regulate and monitor any alternative arrangements. They also referred to the difficultly involved in implementing alternative billing arrangements for more complex matters.
When asked to nominate their top three alternative billing arrangements, respondents ranked fixed fee arrangements as the most preferable, followed by capped arrangements and volume-based discounting.
More than half of respondents to the survey (54 per cent) also said they expect the size of their in-house legal team to increase over the next three years, naming cost reduction as the main driver for the growth. Forty per cent said they expected no change, while only 6 per cent said they thought the size of the team would decrease.
However, the general counsel survey partners argued that larger in-house teams do not necessarily equate to reduced costs, and said an equally effective approach would be to maintain a small in-house team of senior lawyers to work in conjunction with numerous firms.
A desire to reduce legal spend was also evidenced by the fact that 52 per cent of respondents said their organisation had undertaken a review of legal advisors during the past year, with 25 per cent doing so in an attempt to reduce legal costs.