LAWFUEL – The Law Firm Newswire – Shopping for law firms to obtain better value is something Honeywell International Inc’s Peter Kreindler, the top lawyer at Honeywell, does very well. Bloomberg’s report.
Kreindler said he hopes to trim work from hundreds of law firms in Europe this year to gain volume discounts. In the U.S., he has already cut the number of firms he uses for litigation, employment and intellectual property issues to about 20 from 60.
“The fewer firms you use, the more volume you can give them and consequently the bigger discounts you get,” Kreindler, 62, the general counsel at Morris Township, New Jersey-based Honeywell, said in a telephone interview. “That’s what it’s all about.”
As companies spend millions to comply with the Sarbanes- Oxley law and firms raise lawyer salaries by about 10 percent this year, corporate counsel are looking to slash legal budgets. Companies such as General Electric Co., Schering-Plough Corp. and Shell Oil Co. have rolled out similar programs to trim their roster of lawyers.
Corporations spent an average of 0.63 percent of revenue on legal expenses in 2005, compared with 0.52 percent in 2003, according to the General Counsel Roundtable, a Washington research group.
More companies are trying to limit legal work to a handful of firms to gain volume discounts, said Daniel DiLucchio Jr., a consultant at Altman Weil Inc. in Newtown Square, Pennsylvania.
“It’s easier to manage fewer firms, you can establish a better relationship, and you leverage your purchasing power,” DiLucchio said.
While corporate legal departments reap savings, law firms can expect a cut in their profitability. Volume discounts shave about as much as 15 percent off hourly rates of partners at large law firms that charge up to $1,000 an hour, said Peter Zeughauser, a law firm consultant and former chairman of what’s now known as the Association of Corporate Counsel.
“It’s a killer” to a firm’s profitability, said Zeughauser, who is based in Newport Beach, California.