First, outside counsel's understanding of the particulars of a specific matter has genuine predictive value. That value is better realized in selecting among evidence-based budget scenarios than in conjuring budget scenarios from thin air. Where outside counsel's experience should come into play is not in substituting speculation for an empirically grounded range of outcomes, but, rather, in predicting where within the distribution a specific matter may fall, making explicit the assumptions underlying those predictions, and pinpointing the key variables.
Second, outside counsel's budget should be of use when it comes time to review the bill. A budget should guide a discussion about reasonable costs, unanticipated exigencies, and value delivered. But a budget cannot serve that purpose if both sides treat it as a work of implausible fiction.
Third, reasonably accurate budget estimates are useful in considering alternatives. They are useful in comparing prospective firms to an incumbent. They are useful in selecting among firms bidding on a new project. They are useful in weighing and structuring alternative fee arrangements. Etc.
Fourth, if you do not measure it, you can not improve it. That aphorism, a paraphrase of Lord Kelvin, is a confederate of Parkinson's law: work expands so as to fill the time available for its completion. Though lawyers operate in a world of inflexible deadlines, many do not face strict time constraints — sleep can always be bartered for additional billable hours. There is nobility in an ethos of getting everything done right and on time no matter what (i.e., how long) it takes. But that mindset too often leads to a reliance on brute force and a valorization of poor time management. How many associates have been heard to brag about all-nighters and weekends sacrificed to labor-intensive busywork?
Fifth, the more extraordinary the matter, the more valuable an accurate budget becomes. Extraordinary might be a function of size. But extraordinary can also be a function of familiarity. In-house counsel has reams of data on the matters they consistently encounter. The data, and attendant comfort, disappear when the matter is outside their norm. In such instances, in-house counsel has few choices but to rely on their outside lawyers' past experience to produce reasonably accurate budget estimates.
Finally, the ability to supply reasonably accurate budget estimates based on empirical analysis of past matters is evidence of a firm's overall approach. Reasonably accurate budget estimates are, of course, something that clients want and need. Giving clients something non-billable that they want and need, signals a firm's commitment to customer service. Likewise, a penchant for empirical analysis is a departure from the tradition-bound, ossified law firms that so many lawyers (including this one) imagine as one enemy of progress in our profession.
D. Casey Flaherty is corporate counsel at Kia Motors America Inc. The opinions expressed herein are his own.
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jjohnson@quantumediscovery.com
In my development of "The Proportionality Triangle" Game last year, I really got down into the data when it comes to cost predictability on the discovery side of the house. I built spreadsheet models that accommodate a wide range of variables, defensibility requirements, preservation strategy, culling strategy, search strategy, technology treatments to the data such as TAR. My conclusion was much like Mr. Flaherty's (in the discovery sense)...reasonably accurate budgets are possible, at least on the discovery side.
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OfficerFriendly
"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."
See: "Fundamental Attribution Error" This is a nearly universal human trait.
The flip side of this bias is the belief that others fail due to personal shortcomings rather than as a result of confronting the same situational factors the observer uses to excuse his own failures.
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Richard Brzakala
I personally think that simply asking a law firm to create a budget is unfair. Clients have a responsibility to provide the firm with details of what it is that they are looking for. When someone undertakes a house renovation with a contractor.. you have specific details, expectations, timelines and costs. Budgets for legal work should not be any different. I would be concerned if a law firm in today’s market place responded saying that they cannot provide a budget estimate. Most firms understand the new market conditions and the power buyers of legal services hold. A law firms response demonstrates to the client the firms proposed game plan and what the client should expect. Anything less then a reasonable, predictable plan is sub-optimal and the client should look elsewhere.
I think that gone are the days where a law firm, particularly one that a client has used numerous times before, would list a thousand and one excuses as to why it can’t put a budget together. Sophisticated buyers of legal services in today’s tight and competitive market will say that If your firm CAN’T ( or is unwilling to) provide me with a budget… then I will find someone who CAN.
I agree with asking for background material around how a firm came up with its budget. It may shed some interesting insight into how the firm manages a clients work and may also identify factors that a client may have missed. I think corporate clients have started to use budgets as an alternative to a much larger and drawn out RFP processes. I think there is a trend in that budgets are being used as reverse bids where multiple firms bid on a piece of legal work.
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Maria
What about alternative fee arrangements? What role does technology play there? Are more clients asking for AFA? This blog has some insight into the matter but what are your thoughts? http://fir.mx/1598eIO
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D. Casey Flaherty
It would be the subject of a much longer article, but I don't currently utilize flat fees (not that I have an objection to them). In general, the primary reward that I can offer is additional work.
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