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Corporate Counsel Reporting Increased Use of “Value-Based” Fee-Arrangements

The Association of Corporate Counsel (ACC) recently released the results of its 2011 Chief Legal Officer survey. Almost two-thirds (63%) of in-house counseled surveyed said they are now using some form of value-based fee agreement. This percentage is up considerably from prior years. Value-based fee agreements are fee arrangements that are typically not based on billable hours. The survey found that these types of arrangements represented 10% or more of the work performed by outside counsel, as reported by the respondents who use such arrangements.

The survey also noted several of the effects the economic downturn has been having on in-house legal departments. Faced with increased pressures to reduce outside legal costs, legal departments have increased the amount of in-house work performed. This increased workload has resulted in some in-house legal department expansion. Additionally, two-thirds of respondents are implementing practices to create cost/time efficiencies and/or generate value for their department.

Over one-third (35%) indicated that they have implemented methods to control outside legal spending and have realized savings from doing so. Much of these savings were attributed to the use of value-based fee arrangements. The survey noted that the rates charged in traditional billable-hour structures continue to rise. Almost half of the respondents (45%) saw increases in outside counsel hourly rates in 2010 and almost as many (43%) expect increases in 2011.

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