Large corporate clients are demanding “far more” fixed fee and ‘menu’ pricing, a survey based on interviews with 40 in-house teams and 50 top 100 law firms has found.
All the in-house lawyers in the survey said law firms were “not offering a sufficient range of pricing options” and “more worryingly, those options had to be requested, pushed for or demanded”.
All of them told the survey, by legal consultancies isential  and OMC Partners , that greater use of fixed fees for smaller routine matters would help reduce the amount of time they spent pricing work and checking bills.
The vast majority, 93%, of law firms said ‘menu’ pricing, with fees set at pre-determined prices for different types of work, was most suited to repeatable work with similar tasks.
Examples given were property licences and permits of all types, leases, conveyances, reports on title, commercial contracts, minor disputes, debt claims, secured lending and straightforward mergers and acquisitions.
Gill Watt, director of isential, said: “Clients invariably will have fixed prices with their own customers, so expect price certainty as a matter of course. Other professional services providers, such as accountants and surveyors, fix fees even for complex matters so why should lawyers be different?”
The vast majority of in-house lawyers, 87%, reported a desire to pass costs risks back to law firms through fixed fees, particularly menu pricing which could be shown to businesses before any instructions were given.
Ms Watt said menu pricing was particularly useful “when checking whether there’s sufficient budget” to send legal work to external lawyers.
“Additionally, there is no need to reinvent the wheel and considerable time can be saved for both clients and firms as jobs do not need to be scoped and costed each and every time.”
Law firms reported that although 84% of matters were still delivered under traditional hourly rates, more than half reported that their clients expected other options, such as fixed fees, to be available.
Two-thirds of firms thought that “finding ways of adding value to pricing” would increase their prospects of winning work.
“The hourly rate model – adopted by most law firms – creates uncertainty and passes cost risk to clients,” Ms Watt said. “Menu pricing, however, creates certainty for clients whilst passing cost risk back to law firms.
“All clients – whether lay client or in-house lawyer – are under constant pressure to reduce operating costs and legal costs are no exception.
“In-house lawyers must demonstrate value to their own business clients by obtaining ‘more bang for their buck’ and improving cost certainty, while preserving service quality.”