Fixed-fee deals oblige the law department to commit to certain levels of support

A report released this year by Commerce & Industry (C&I) and BDO Stoy Hayward brought up an interesting point about any arrangement between a law department and a law firm under which the firm will handle all of a certain kind of work for a set fee (See my posts of Aug. 5, 2007 for two comments on fixed-fee arrangements.).

According to the report (at 2), “Cisco put in place a service level agreement: if Cisco doesn’t perform the work it has promised to do, it will have to compensate the firm.” In other words, a law firm that has signed on to do all the work of a certain kind for a client for a set payment must be able to rely on the law department – and the company – to maintain or improve the status quo. The department must keep its staff levels the same, their workload similar, and their incentives to handle similar kinds and amounts of work as high. Nor can clients slough off. Both the in-house legal group and its clients must hold up their ends of the bargain with the law firm.