Alternative funding arrangements (AFAs) now account for a fifth of in-house legal teams’ external spending – yet general counsel lack strategies for handling these arrangements, a survey by consultants has concluded.
According to Huron Legal’s 2014 IMPACT Benchmarking Report, AFAs were used by 83% of legal departments last year, compared with 69% in 2011.
The research shows that, on average, AFA spend accounted for 20% of total outside counsel expenditure.
Successful AFAs, the consultancy said, could be an ‘informed, collaborative process’ based on legal departments’ understanding, the organisation’s work portfolio and historical costs, and clear communication with outside counsel.
The report also advises GCs to devise long-term strategic technology development plans, highlighting the fact that less than half (45%) of departments had one, though this rose to 70% among corporations with more than $10bn in turnover.
Technology and processes ‘provide the underlying support for the services the legal department provides’, the firm said.
‘Legal technology is evolving: new options go beyond basic tracking organising functions, and can now better enable the efficient execution of legal work.’
A report by consultancy Consero found that more than three-quarters (79%) of Fortune 1000 chief litigation officers reported that using a third-party e-billing system had resulted in savings of up to 25% in annual outside counsel spend.
Nearly half (46%) of respondent CLOs predicted an increase in outside counsel expenditure. More than half (58%) believe internal expenditure will increase.
Nearly three-quarters said the pressure on legal departments to become more efficient and better manage legal spend had increased.