It’s a challenge corporate legal departments continually face: how to get the best results for the best price when working on projects with outside counsel.
Legal departments are trying to streamline their work and use automation and other tools to save time. Companies like Apple use data and metrics to track spending by the law firms they contract with. Corporate legal teams, including at Google, may also look for products that clarify how legal services prices are determined.
There may have been a time before the Great Recession when in-house legal departments and outside law firms agreed on budgets at the start of a contract and put them aside, Susan Lambreth, principal at consulting firm LawVision Group, recently told a group of legal professionals. But today’s industry requires more active management throughout.
Corporate legal departments are using a variety of new technologies and strategies to manage their costs with outside counsel. Pricing and budgeting are a focus of attendees at the Corporate Legal Operations Consortium, or CLOC, institute in Las Vegas the week of April 23. CLOC members represent more than one quarter of Fortune 500 companies and some $50 billion in annual legal spending.
Improving how legal departments work with outside counsel is another way to make the companies more efficient, speakers said.
Apple: Metrics Drive Discovery
Controlling a budget is particularly important during those times when costs can spiral, like pre-trial discovery when parties in a lawsuit seek to obtain evidence and other information.
Apple, for example, uses a centralized data system to make smarter decisions at the start of a case, said Beth Kellermann, the company’s senior director of litigation operations. The company looks at everything from the jurisdiction in which a case is litigated to whether outside counsel comes in under budget.
Metrics help outside legal counsel make smarter decisions about what needs to be discovered in a case, Kellermann said. That helps Apple drive down its overall costs.
Once all that data is pulled together with billing, a company can understand its discovery costs and room for improvement, Kellermann said.
Pricing Tools, Alternative Fee Structures
Lambreth recommended legal project management—or LPM—as one way to make sure companies aren’t surprised by a law firm’s scope of work or budget overruns. The pressure is on outside law firms to make sure they’re on the same page as their clients, she said.
LPM is a process of outlining and executing projects that requires upfront conversations. It breaks down stakeholders and the components of budgeting and managing a project.
“It’s doing what a lot of lawyers already do,” Lambreth said.
Corporate legal departments may also see law firms shift from hourly rates to alternative fee arrangements, or AFAs. The agreements are structured in various ways, including pricing based on time, value, and performance.
Many legal vendors also are catering to the trend to offer tools to track spending and maximize efficiency.
Companies such as Fulcrum Global Technologies offer products that open the “black box” on how the deals are structured.
Fulcrum Global’s tool can give law firms a data-driven look of what a project will cost when they quote prices to clients, Marika Daggett, legal operations manager at Google, said during a product demonstration at the CLOC event.
“We want firms to be creative,” she said. “We want them to be thoughtful.”
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