Law firm rate hikes have caused shock and awe in corporate legal departments from time immemorial. The latest rounds have been a doozy, especially taking into consideration macroeconomic trends and a shift in leverage from client to firm. Law departments can, however, take proactive steps to minimize the impact of law firm rate hikes, as this article from the Thomson Reuters Institute indicates. Outside counsel guidelines, rate management mechanisms and other tools can be deployed to avoid price surges and associate billing rates that have topped $1,000 per hour.
“When law firms inevitably try to raise their rates, there are cost-containment actions that corporate law department leaders can take to mitigate the impact. The significant social, economic, and inflationary pressures that have been building for the past year or more have created a new dynamic in law firm pricing structures which has resulted in a tectonic pivot that has moved pricing leverage away from clients and in favor of law firms and alternative legal service providers (ALSPs). Consequently, many corporate law departments (CLDs) will remember these past 12 months as the great pricing reset in which law firms required significantly higher hourly rate increases over and above anything the legal marketplace has seen in at least a decade. The new year finds both the buyers and sellers of legal services having to grapple with the economic reality of high inflation, increasing labor and infrastructure costs, attrition, labor arbitrage, and major shifts in market demand — all of which will in some way or another impact the cost of legal services into 2023 and beyond.”
Source: Strategies to minimize the impact of law firm rate hikes – Thomson Reuters Institute