Every legal ops conversation of the last few years has included some version of the same line: AI is going to finally kill the billable hour. Our Director of Legal Spend and Analytics, Rhett Lemmel, makes the opposite case in a recent interview with Law.com, and the reasoning holds up. 

Law firms have the incentive to lock in alternative fee arrangements now, not later. If AI genuinely drives down the cost of producing legal work, firms that get corporate clients to commit to a fixed fee at today’s pre-AI cost structure come out ahead as their own delivery costs fall. Corporate legal departments have the opposite incentive. Why lock into a flat rate now, when the efficiency gains AI promises haven’t even shown up yet? That dynamic alone could stall the shift toward alternative fees that law departments have been pushing for. 

That’s only one piece of a broader argument about how legal departments actually lose money, and it isn’t mainly about the rate on the invoice. Cost is a system with three additional levers beyond price: volume, staffing, and scope. A 10% rate discount means nothing if hours worked quietly rise 10% to offset it, and those effects are multiplicative, not additive, which is exactly the trap that makes negotiated discounts so easy to overstate as real savings. 

Staffing is where the most avoidable waste tends to live. Partners routinely bill for discovery work or routine meetings that could be handled by a senior associate or professional staff, and virtual meetings have made it almost costless for junior associates to sit in and bill for matters they’re only shadowing. None of that shows up as a rate problem. It shows up as a staffing and scope problem that rate negotiations never touch. 

On AI specifically, the efficiency gains law firms promise haven’t reliably shown up in client bills yet. General counsel should be asking firms direct questions about how AI is used, how it’s governed, and what metrics the firm tracks internally, the same framework many legal departments already apply to their own AI initiatives. 

Heading into 2027 budget season, the better move is to stop fixating on rate as the primary lever, and start treating billing guidelines as the controlling document that actually keeps volume, staffing, and scope in check.