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Has the gap between costs of inside and outside counsel been narrowing? I think not.

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“Over the years, the cost differential between external and in-house lawyers has narrowed.” This statement by Peter Turner, with no empirical backup, is found in Benny Tabalujan, ed. Leadership and Management Challenges of In-House Legal Counsel (LexisNexis Australia 2008) at 6.

To assess this claim, we need data to support the assertion by Turner, the former CEO of ACLA and general counsel of Fosters. Various surveys that calculate the fully-loaded costs of in-house lawyers, primarily US and Canadian, suggest that internal costs per lawyer hour have been keeping pace with inflation or thereabouts. It is unlikely to me that law firm rate increases have not matched; indeed, I believe hourly billing rates have climbed at a faster pace.

If this gap-closing were true, companies would shift toward more use of outside counsel and that has not happened (See my post of Sept. 28, 2011: my article comparing year-over-year changes in staffing.).