Preferred / Panel Counsel
Once the legal department has identified the scope of work to be performed by outside counsel,
there is a core decision to be made as to whether the company would benefit from a preferred /
panel counsel arrangement with fewer law firms and vendors. The terms “preferred counsel” and
“panel counsel” are often used interchangeably to describe an arrangement under which the legal
department and company consciously consolidate work among fewer law firms and vendors in
exchange for preferred terms.
The degree of formality of these agreements varies. It ranges from a rigorous application and
negotiation process to designate a list of firms who are “in,” to a more informal vetting of firms
who, over time, perform higher volumes of company work based on preferred terms and
performance, even absent a formally designated list.
The decision as to whether a preferred counsel structure makes sense for the company is a highly
individualized assessment best made by the in-house lawyers who are closest to the work and
most familiar with the client’s legal service needs. The potential benefits of preferred relationships
should be weighed against potential drawbacks. The chart below highlights both sides.
Preferred Counsel Arrangements
■ Closer working relationships, producing
better knowledge of the client’s business
Substantial investment of time and effort
upfront to structure the program;
■ Savings via preferred terms and greater
■ Better knowledge-sharing when fewer
firms become more accustomed to
collaborating to drive efficiency and
manage risk; and
■ Reduced administrative burdens (over
time) in managing fewer firms.
■ Reduced flexibility in assigning new
matters if the legal department is
committing to assigning certain matters
to preferred firms in exchange for more
■ Potential lack of savings if many leaner,
cost-effective firms are replaced with
fewer bloated firms that end up costing
■ Risk of complacency among entrenched
firms on the list who may not have the
same levels of efficiency incentives in
light of reduced competition from the
broader law firm market.