An investigation into law firm billing by in-house lobbyist C&I Group and consultants BDO Stoy Hayward has revealed that in-house counsel are being left in the dark by law firms and are disillusioned with billing methods.
Ninety-four per cent of respondents stated that there was no certainty over the final cost of a bill with 82 per cent stating that there were no incentives for firms to be quick and efficient.
Colt Telecom legal, regulatory and commercial director Robin Saphra commented: “There is no transparency. You just tend to get a bill on your desk.”
Hourly billing is still the prevailing method of billing despite being rated as the least satisfactory by in-house lawyers. An overwhelming 97 per cent of in-housers were billed by the hour during the last 12 months with only 10 per cent opting for value-based fees.
“Some firms are risk averse from hourly billing,” said Saphra, adding that Colt had recently piloted a fixed fee method.
The report also showed that two-thirds of in-house lawyers were willing to incur higher fees for high-value work if they were able to pay less for lower value work.
CMC Markets global general counsel Dominic Bacon said: “I use hourly billings for most of my transactions but have an up-front discussion about what the work is likely to entail and what the costs are likely to be – so hourly rates become more of a measure than a fixed rate.”
He also explained that there is commonly no certainty over costs but this is usually because of the lack of certainty over the work.
“Negotiations over a settlement or an acquisition can be simple or protracted depending on the other parties involved,” he said.
171 in-house lawyers were interviewed. The C&I Group is looking to create a “tool kit” to deal with billing after analysing its findings.
Billing methods used in last 12 months
Hourly rate – 97 per cent
Fixed fee – 66 per cent
Success/conditional fee – 13 per cent
Capped rate – 42 per cent
Value-added fee – 10 per cent
Billing methods – satisfaction mean score
Hourly rate – 2.61
Fixed fee – 3.96
Success/conditional fee – 3.76
Capped rate – 3.8
Value-added fee – 3.65
Which alternative billing method is best?
Value-based – 10 per cent
Success/conditional fee – 4 per cent
Capped fee – 13 per cent
Fixed fee – 22 per cent
None of these – 4 per cent
Combination of methods – 47 per cent