When you talk about how you manage your outside legal spend, there’s more to it than online billing. While it’s true that online billing and the reports an enterprise legal management program generates can make it easier for a corporation to track its outside legal costs, managing those costs requires a commitment to communicate, collaborate, consolidate, and control your overall processes that go into where you are incurring those legal expenses.
Communicate your budget needs early on to outside counsel — especially for unexpected litigation, which can eat away at a significant amount of a corporation’s reserves in one or two fiscal quarters. Creating a budget encourages outside counsel to think about staffing and scheduling. Budgets help a corporation set reserves for expenses and help a law firm manage its cash flow. Whether you use a task-based or phase-based budget is not as important as establishing a budget before lawyers start billing time on a matter. Make sure everyone is on the same page before the first hour is billed.
You pay outside counsel for their brilliant analysis, so collaborate with them on ways your company can save costs. Will the firm agree to use attorneys with low hourly rates to review discovery documents? Will the firm agree to use paralegals for routine tasks that don’t require legal analysis? Does a discounted blended rate make sense for depositions where more than one attorney attends? Work with outside counsel to find out how their other clients are saving money, and borrow those ideas for your own matters.
In general, the more lawyers who work on a file, the higher the legal spend will be. One basic concept to keep in mind as you manage your outside legal spend is to consolidate outside firms to a handful of trusted counselors who are in it for the long run. Insist that those firms staff your matters with a lean team. Leverage the size of your company or the size of your outside law firm to get discounts from such vendors as court reporters, jury consultants, and hotels. Consider finding attorneys on the team handling the matter so that rates are defined and approved.
Control costs by distributing your company’s outside counsel policy to the law firms you work with, and make sure the firms comply with it. How much will you pay lawyers for their travel time? Will you pay for them to stay in five-star hotels? Watch the budget as the bills come in, and reject line items that diverge from the agreed-upon plan. Make sure a matter stays within the budgeted amount. If you awarded the legal work for a complex acquisition or major litigation to a firm because it was the lowest bidder, it makes no sense to approve fees that exceed the budget just because the firm miscalculated its bid.
As your legal team takes on the task to manage your outside legal spend, remember that the initial stages are complex, with many moving parts. You can manage and reduce your company’s legal costs by setting clear expectations, working with your firms to save costs, reducing the number of lawyers who work on your matters, and monitoring compliance with your billing policies.