Fifteen Strategies to Reduce Legal Fees
There are myriad routes to lower legal fees without having to sacrifice quality or client service. Here are ten suggestions to help you reduce your legal fees:
1. Explain To Your Existing Law Firms That There Are Both Competitive Influences and Internal Pressures. Some lawyers live in a bubble. Law firms can get comfortable in dealing with clients, particularly clients that have been clients for more than a year. They may forget that in a competitive market, there is more than one law firm chasing their business and that a number of firms are pursuing them.
In a competitive market, firms may lower their fees to attract new clients or retain existing ones who might be considering other options. I once conducted a client feedback interview with a Chief Legal Officer, and as always, my final question was “If you could convey one thought to our firm’s CEO, what would you tell her?” The client didn’t hesitate and replied “I would tell your CEO that your competition is calling on us every day. And I don’t mean four days a week.”
Separately, your client is likely feeling subtle to not-so-subtle pressure from the CEO, CFO or COO -- or all three -- to manage costs, like all departments. It's a mistake to think that in-house counsel is immune to those pressures.
2. Force law firms to compete. In early October 2024, BTI Consulting announced a startling finding from their yearlong survey of large companies: 79% of the clients surveyed had engaged their law firm without a competitive process. Nearly four out of five clients directly engaged their law firms without considering the offerings of a competing firm.
In my 18 years of experience with law firms, I've found the figure to be closer to 83%, about five out of every six clients engage a law firm without an RFP, oral presentations, or even statements of qualification -- nothing. In other words, they gave their work to a law firm without demanding the lawyers compete for the work.
This is why law firms invest so much in marketing and business development. They don’t want to position themselves as a good option, or even a great option. They want to position themselves as the only option. They want you to pipe work directly to them, and based upon the numbers cited above, they are largely successful.
If you want to ensure competitive fees, demand that law firms bid for your work.
3. Separate buyers and users of the services. When I used to sell services directly to in-house counsel, the single most frequent response was "No thanks. I like my lawyer and want to keep a good relationship with them." If you disassociate the in-house lawyers from the individual or entity who makes the financial decision to purchase the service, you eliminate the single most frequent internal upward pressure on legal fees.
When I conducted sales training for law firm partners, I would instruct them to identify the “financial buyer” and the “user buyer.” In most companies and most departments, these are two separate individuals, for obvious reasons. In legal departments, they are frequently the same person, or they are codependent, which amounts to the same thing.
This can be counterproductive if in-house counsel, or legal operations are unable or unwilling to separate the legal services from the financial obligations. This separation is endemic in every other part of the business except for the legal department. The interesting element is that this can hold back the careers of in-house counsel who prefer overpaying familiar, comfortable firms over fiscal prudence.
Why? Because management notices. They may not complain much if in-house counsel overlawyers or overpays for their lawyers, but they definitely notice.
4. The more law firms you consider, the better your odds of securing a reduced fee. When conducting an RFP, it is common for clients to select three law firms that are very similar. Instead, try firms which are substantially different from the incumbent. When you initiate the competition, ask more than one or two firms to compete with your current firm, e.g.:
Large firms trying to break into a geographic market
Small firms that have spun out of your target firms
"First challenger" firms that are similar to your existing firm
Low-cost leaders
Law firms that specialize in your industry
There exists another dozen subcategories which can lead to lower fees, whether or not you award the work to a firm in any specific group.
5. Use Artificial Intelligence to select candidate law firms. Employ a sophisticated search tool developed through a Large Language Model, one that has categorized and indexed the broad range of firms by industry, market, practice group and recognition. These are tools which have catalogued nearly half a million business lawyers and can provide you with an excellent starting point.
But only a starting point. Generative AI tools have their limitations. I know of one labor and employment specialty firm that used an AI tool to conduct a search for a religious accommodations expert among their attorneys. The firm had just one attorney who was the clear expert in the field…and the tool identified her as the seventh most optimal pick.
AI-driven searches, like most AI tools, require additional resources, but they can provide a useful first step.
6. Let the firms know who is bidding on your work. First, most companies keep the identity of the competing law firms confidential. One option is to consider releasing the names of the competing firms to those competing. That stimulates competition between firms for the work.
Another option is to describe the firms and the purpose for which you are inviting them, e.g., you might say you have invited seven firms to submit proposals for the purpose of evaluating two or three in an orals competition, and that you're seeking a mid-sized firm, a local firm and a firm with a specialty in your industry.
There are several purposes to a law firm competition. The most obvious is to select the firm(s) to meet your near-term legal needs. The second is to learn from everyone who competes. The more firms with whom you speak, the more chances to gain insights, and you may engage other firms down the road…or hire someone you’ve met.
7. Engage a mid-sized, regional or boutique law firm. My college roommate was a civil engineer and had a mid-term that consisted of one question: design a bridge based upon specific criteria, including expected conditions, topography and traffic. The professor graded the exams as follows: bridge designs that were too weak and failed received an “F”. Bridge designs that were properly executed received an “A”. And bridge designs that were too strong and wasted resources received a “C”.
Most companies engage prominent firms for non-commodity legal work, and there is a tendency to hire an overly expensive lawyer, particularly if the buyer feels that the law firm’s brand inoculates them from criticism.
Rather than engage a national “brand” firm, you could consider one of the numerous, high-quality regional, specialty and boutique law firms capable of addressing your needs. Chambers, widely recognized as the foremost independent global authority assessing law firms for the last 35 years, not only reviews the largest 100 law firms, but another 1,730 American law firms covering 26,228 lawyers. There are excellent lawyers affiliated with smaller, more cost-effective firms that deserve your attention.
8. Seek a firm with experience directly relevant to your legal issue. Some years back, I worked with a tax partner who created a tax strategy unique to biotech startups. We were first to the market and brought it to nearly eighty biotech startups at very favorable rates. The first client invested $20,000 in the tax strategy. 75% of the strategy was boilerplate, the remaining 25% was customized to the specific client’s needs.
In a profession with a finite set of rules and laws, augmented through legislative and litigation-related changes, there are likely firms who have encountered your specific legal challenge and have formulated response strategies. In fact, there may be firms that have "productized" a service to eliminate both repetitive work and expense from the service in order to offer a more economically prudent overall cost to their client.
9. Seek a law firm that farms out less profitable work. Similar to the above answer, forward-thinking law firms work with their clients to identify law firms and ALSPs that are willing to perform work that the larger firm is unable to do so profitably. In the past, when I was trying to expand relationships with clients that had less sophisticated needs, my firms would partner with smaller, less-sophisticated firms or ALSPs in order to execute less demanding work.
10. Consider affiliate law firms when conducting RFPs. Your law firm may be affiliated with more cost-effective firms in lower-cost jurisdictions and may pass the savings on to their client. I once proposed to a very large-scale client that was just outside the Fortune 100. After reviewing their Request for Proposal, I realized that we could only perform about 20% and still remain profitable. I didn’t want to offend the client by bidding solely on that small portion of the work, so I partnered with two smaller firms (with the client’s approval) and won the work. Our firm supervised the other firm, and it worked very well. To this day, the firms inter-refer work.
11. Use an Alternative Legal Service Provider (ALSP). How complex is your legal need? If it's bet-the-company litigation, look for the very best law firm you can provide. If it is for a more pedestrian or commodity need, there are hundreds of organizations that provide legal services other than traditional law firms.
12. Use Contract and Temporary Lawyers and Seek Lawyers for Secondment Roles. Nearly two decades ago, my first law firm created a business to assign temporary and contract lawyers and lawyers on secondment to clients. The business is still active and effective today and works particularly well for legal departments that have well-defined, temporary needs.
13. Reverse Auction. Once you have settled on your legal alternatives, you will conduct an RFP process. You might also consider a reverse auction as part of the process.
A conventional RFP consists of an auction, in which two or more parties bid for a specific good or set of services. In a reverse auction, a client flips the process and auctions off their legal work to firms who bid in a live auction to procure that work.
Typically, these law firms satisfy a minimum set of standard requirements posed by the client to ensure that only law firms with valid capabilities and capacity participate in the auction. Then – unlike a standard auction – prices are typically bid down, and the firm submitting the lowest price generally gets the legal work.
14. Ask for MFN status. Most Favored Nation (MFN) status refers to securing the lowest rates that a law firm charges its best customer. If you spend at least six figures with a law firm, you should ask for MFN rates. If your firm refuses to provide MFN rates to you, they should give you the delta between their MFN rates and the rates they charge your company. Their response to your reasonable request will give you a strong indicator as to how much they value your work and your relationship.
15. Hire an outsider to administer your search. Hire an outsider, specifically, hire an external legal procurement firm to execute your search. Legal procurement specialty firms aid clients in seeking and securing the services of a superb law firm. They all have slightly different approaches.
It is crucial that in-house counsel and the lawyers at outside law firms have a positive working relationship, but it must not come at the cost of unnecessary fees. Like every department within a company, in-house counsel has a fiduciary responsibility to seek the best possible financial arrangement with outside vendors. To that end, it is both useful and important to separate the users of legal services from the purchasers of legal services. You can achieve that core goal by using an outside legal procurement firm.
CRITICAL POINT: It is crucial that you use an external firm that has no existing ties to outside counsel. For purposes of conducting a competition between firms for your work, your company is adverse to the interests of your candidate law firms, therefore, any so-called legal procurement with close ties to the traditional law firm profession runs the risk of conflicts.
Contact me directly, and I am happy to discuss the options with you.
“Fifteen Strategies to Reduce Legal Fees” is adapted from “Sixty-Three Strategies to Reduce Your Legal Fees” by James J. Stapleton. Mr. Stapleton has managed over 7,500 transitions between law firms on behalf of clients.
