Editor's Note: D. Casey Flaherty, corporate counsel at Kia Motors America Inc., developed and administers an in-person, technology competency audit for his outside counsel. (Read more about it here, here, here, and here.)
Here is a single topic, mini audit that in-house counsel can administer remotely.
The ask: Request that outside counsel provide you with a budget estimate for a common task, such as an opposition to a motion for summary judgment. When counsel respond that they are unable to construct a budget for a content-free hypothetical, ask that they merely provide you a range of costs for a final budget. If they supply that range, ask how they developed it, and what data it is based on.
What's being tested: Whether your firms use the large quantities of time data they collect for anything other than sending bills to clients.
Why: Most law firms are religious about recording attorneys' time. Time is the key metric in how they bill their clients. Many law firms purport to know, with a high degree of certainty, how much time was required to accomplish a specific task and how much the client owes the firm for that work. Yet, ask for a budget for a prospective task and you typically are fed a word salad about uniqueness, idiosyncrasies, contingencies, etc. In short, you are subjected to most lawyerly of all phrases: "It depends."
It certainly does depend. But your lawyers are not operating in an information vacuum. Presumably, they are your lawyers because they have done this kind of work whatever it is many times before. How long did those projects take? How much did they cost?
A budget request is not a demand for predictive perfection; it is probabilistic exercise based on expectations grounded in past experience, much of which has been captured as empirical data. Unfortunately, in too many instances, if you can move counsel beyond waxing eloquently about the contribution infinite variety makes to the subtle majesty of the law, you are given a gutstimate a guesstimate based on gut feeling in the hope that you will go away and let them get back to real lawyering. These conjectures are often useless.
Lawyers, as a group, seem particularly prone to the planning fallacy the systematic tendency to underestimate how long is required to complete a task, despite past experience of similar tasks that ran over budget. Lawyers, as a group, are also less apt to recognize such shortcomings because we are the poster children for self-serving bias the systematic tendency to attribute our successes to our personal merit, but attribute our failures to situational factors beyond our control.
The lack of data-driven deliberation can be galling, especially because the firms already collect the pertinent data. The numbers are there; firms just need to analyze them in such a way that they can provide in-house counsel with a range and distribution of potential time/cost for commonly recurring tasks. Discrete tasks can be combined to supply a cost range for a phase. And phases can be merged to present a budget for the engagement.
Indeed, there are umpteen ways to analyze, arrange, and present the data. And there any number of software providers and consultants who are happy to offer the 'optimal' method for doing so. I, however, am not advocating for any one approach. From what I have seen (candidly, pure anecdata; please email me to tell me I am wrong), few firms are at the point where it is even worth debating which method is preferable. For now, I would simply be heartened to be presented with any attempt at empirical analysis that is intended to be of use to clients.
The benefits of reasonably accurate budgets do not need to be explained to an in-house audience. But I probably need to be more explicit as to why in-house counsel would rely on law firms for quantitative analysis. Many in-house counsel already have access to all sorts of data about costs incurred on matters past.