In-house lawyers need to treat external lawyers 'appropriately' and ensure that hiring decisions are not driven solely by cost, a leading City lawyer said in Chicago.

Peter Rees, formerly a senior partner at Norton Rose and now with US firm Debevoise & Plimpton, told a session on beauty contests that the average cost of putting together a pitch was $20-50,000 (£11-26,000).


When extrapolated to two pitches a week for a firm with 100 partners and a $200 million turnover, that meant $50,000 of profit per partner spent on parades, or 2.5% on every client's bill.


Explaining that he had been asked to be provocative, Mr Rees demanded: 'Why don't you in house lawyers tell us what you're prepared to pay up front and see who'll pitch? That way, we won't feel driven down on cost.'


Another option for matters where technical expertise is vital would be a 'two-envelope tender', he said. This would involve the in-house counsel picking two or three firms that have the required expertise, and then having them compete on price.


At the same time, Mr Rees acknowledged that 'it may be that we should be looking to provide our clients with rather more certainty and predictability'.


He also suggested greater risk- sharing with clients, such as agreeing a price for a piece of litigation which is paid even if the case settles.


However, Peter Lawson, general counsel of communications giant Motorola, dismissed complaints about the cost of beauty parades, saying they are 'just marketing expenses'. He continued: 'When Motorola advertises, it doesn't complain about the cost.'

Mr Lawson said that while law firms consider their reputation to be the most important factor (after technical expertise) in being hired, in-house counsel identify trustworthiness, responsiveness and cost. 'I really don't care about the name of the firm,' he said. 'We have a practice of following lawyers, rather than the firm.'