Legal Industry News

October 19, 2010

Law Departments Slash Outside Counsel Spending, According to Hildebrandt Baker Robbins 2010 Law Department Survey

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For the first time in ten years, law departments have reduced their total legal spending, according to the Hildebrandt Baker Robbins 2010 Law Department Survey.

Much of that reduction involves use of outside counsel. More than 60 percent of survey participants decreased their spending on outside counsel; at the same time, internal legal spending and staffing increased slightly.

The 2010 survey showed a decrease in total legal spending – by 1 percent in the U.S. and by 2 percent worldwide – between 2008 and 2009.

Over the previous nine survey years, total legal spending in the U.S. had increased by an average of 7 percent, with a range of 5 to 9 percent.

The median total legal spending was $24 million in the U.S. and $33 million worldwide. Total legal spending as a percent of revenues worldwide was 0.40%.

Inside legal spending rose by 1 percent in the U.S. and on a worldwide basis. Spending on compensation for in-house legal staff, which is 86 percent of inside legal spending, increased by 2 percent worldwide.

The most notable decreases in global legal spending were on contract and temporary staff (down 12 percent) and administrative expenses (down 13 percent). The median inside legal spending was $9 million in the U.S. and $12 million worldwide.

Outside counsel spending decreased by 5 percent in the U.S. and by 6 percent worldwide.

Over 60 percent of the participants reported a decrease in spending on outside counsel worldwide. Global non-litigation spending, excluding intellectual property costs, decreased the most at 14 percent. The median outside counsel spending was $14 million in the U.S. and $17 million worldwide.

“The survey results confirm what we are seeing every day in our consulting practice with law departments of all sizes, sectors, industries and locations,” said Jonathan Bellis, who chairs Hildebrandt Baker Robbins’ Law Department Consulting practice. “As shown in our survey last year, law departments began to adopt a wide range of management practices to reduce and control internal and external legal costs. These efforts have continued, resulting in an overall decrease in total legal spending for the first time in the past 10 years of the survey. The decline in total legal spending was driven in particular by a reduction in outside legal costs.”

The participants were asked to forecast their demand for legal services across 28 different legal practice areas. Among these, regulatory was the highest, with 44 percent of participants expecting an increase in demand in this area.

“This result is not surprising, considering the major financial reforms being instituted in the U.S. and globally, health care reform, and the ever-increasing focus on myriad compliance requirements around the world,” commented Bellis.

Other areas with significant forecasted increases in demand include employment and labor (39 percent), government relations (35 percent) and international (35 percent).

The 2010 survey achieved an all-time high in participation, reflecting a strong interest in benchmarking among general counsel and law department managers.

The 2010 survey also reports information on management practices that law departments have adopted in response to the current economic environment.

This year, the Law Department Survey included 252 participants representing 22 industries. Almost 30 percent of participants are companies with more than $20 billion in revenues. Over 65 percent of participants have revenues at or above the Fortune 500 level. This includes companies that are privately held or based outside the United States.