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Like it or not, beginning on Jan. 1, 2005, outside counsel for FMC Technologies Inc. must agree to use electronic billing and accept payment online through a credit card company. “We’re just trying to streamline processes where we can,” says Jeffrey Carr, vice president and general counsel for FMC Technologies, which has its corporate offices in Houston. FMC Technologies may be on the cutting edge of the use of e-billing, but other corporations in Texas and elsewhere also are jumping onto the bandwagon and taking advantage of the efficiencies of electronic billing. It can be a win-win, by not only making it easier for in-house lawyers to receive and review invoices from outside counsel, but also helping to speed up payments to the outside firms. In-house lawyers at a number of Texas corporations say they already use e-billing or are getting ready to give it a trial run in an effort to save time and money and to reduce paper clutter. “As companies look for ways to … effectively manage their outside counsel costs and reduce them, certainly e-billing is something that has to be in the toolbox,” says Robert Johnson, assistant chief attorney at Exxon Mobil Production Co. in Houston, which has used some e-billing for the past year. “We believe it will allow us to more efficiently process the bills. We believe it will benefit the law firms because … they will be able to see where the bill is in the process,” says Patricia “Katy” Wells, vice president and deputy general counsel at Advanced Micro Devices Inc. in Austin. AMD plans to launch e-billing by early February, Wells says. Wells says e-billing also should help her legal department generate better reports on what it spends on outside counsel, and save money over the long run. It also will help the department make better decisions about where to spend its money, she says. Other Texas companies using e-billing include Hewlett-Packard Co., which has operations in Houston, and Chevron Phillips Chemical Co. in The Woodlands. Also in The Woodlands, Charlene Ripley, general counsel of Anadarko Petroleum Corp., says e-billing is on the drawing board for her energy company in 2005. William C. Cobb, a firm consultant in Houston, says the move to e-billing started to pick up steam a year or so ago. “The tipping point occurred last year … when GCs were saying, “You know, I’d really like to have a much more up-to-date feel of where we are [in spending],’ and some companies created their own systems in-house. The only question that kept arising was, how do you keep it secure so somebody else can’t tap in?” David Briscoe, a senior consultant with Altman Weil in Newtown Square, Pa., says insurance companies first adopted electronic billing, but the concept is moving well beyond them. The big advantage for GCs is the ability to easily audit legal expenses and monitor litigation, he says. For example, software programs analyze bills to determine whether they exceed guidelines for hourly rates. Programs also flag firms that overstaff cases or bill too much for photocopies or expenses. Some diversity-conscious corporations even use the programs to track the percentage of work performed by women or minority attorneys, Briscoe says. “It’s being able to perform a statistical analysis of the staffing, the rates, the outcomes. The law firms that are most efficient are going to be able to stand out much more so than they were able to do in the past,” Briscoe says. One in five corporate law departments is considering whether to move to e-billing, while 8 percent already use it and another 3 percent are in the process of doing so, according to a survey in 2003 by the Association of Corporate Counsel. CHECK’S NOT IN THE MAIL FMC Technologies has used e-billing for about two years with most of its outside firms, says Jeffrey Carr, the company’s vice president and general counsel. By requiring outside counsel to submit invoices online, the legal department reduced the number of steps in its approval process for payment from 10 to three, Carr says. But with the new Visa payment system that FMC will use beginning in 2005 — it’s similar to Paypal — FMC’s legal department will be able to pay its bills as quickly as a week after they are submitted, he says. That’s in contrast to a lag time of up to 90 days under a traditional system that calls for the company to issue paper checks to pay its outside counsel, he notes. Carr says about 90 percent of the billings from the 11 outside firms FMC Technologies uses for general litigation are submitted online, and about 85 percent of the billings submitted by the nine firms the legal department uses for intellectual property work are done through e-billing. Carr says he hasn’t heard much complaint from firms about e-billing, but the response to the planned Visa payment system was mixed. “It’s ranged from, “We’re a law firm — we don’t accept Visa,’ sort of the white-shoe response, to a … “Hey, this is kind of cool’ response,” he says. But Carr notes that outside counsel likely will get paid more quickly with the new system. He also says it only seems fair for the in-house department to strive to simplify the billing process at a time when it is demanding so much from outside counsel. At AMD, where the legal department plans to begin using e-billing early next year, Wells says the response from the outside firms has been positive. One reason, she says, is because many of those firms already use e-billing with other clients. Chevron Phillips set up e-billing in 2002 and used it in 2003 to process the vast majority of its invoices, says Craig Glidden, vice president and general counsel. “It works great. It really streamlined the movement of invoice approval through the legal department,” Glidden says. “We have different levels of approval authority, so the invoices pass through an ascending level of approvals through our matter-management system.” This is how it works at Chevron Phillips, according to Glidden: A law firm sends an electronic invoice through an outside service provider, which translates its invoices into a file format that can be sent to the legal department’s matter-management system. The invoice comes in marked for the matter it relates to and marked with the predetermined number of approval levels — up to three levels — it must go through. The bill is then routed through the legal department, where employees check the invoice to make sure it is consistent with the company’s billing guidelines and budgetary expectations. Glidden says the e-billing system makes it easier for the legal department to categorize and group cases and matters. “You don’t have to go through an additional step of creating some spreadsheet. It takes your data and allows you to prepare reviewable reports,” he says. Those reports help Chevron Phillips identify some areas with similarities so cases and matters can be grouped together and the legal department can negotiate volume discounts with a firm. Like Carr, Glidden says he’s heard few complaints from firms. “There is a modest charge that the law firm has to pay to the electronic invoice service provider. The only time you get a complaint is when the amount of work you are giving a law firm is not commensurate with the expense,” he says. Andrew Strong, a partner in Campbell, George & Strong of Houston, says two clients, Chevron Phillips and Chevron Texaco, use e-billing. Strong says he likes it a lot. His one complaint is the set-up fee with the outside vendor that serves as the middleman for billing. Conceivably, he says, a firm would face high fees if each client used a different vendor. He likes the fact that the firm gets paid within 15 to 20 days, compared to up to 45 days from clients accepting paper invoices. Irene Kosturakis, a senior counsel-intellectual property at Hewlett-Packard in Houston, says the IP group has used electronic billing for at least a year and a half. She says it works well and outside counsel like it because they get paid more quickly. From the in-house perspective, Cobb says, the big advantage is the ability to generate reports that help in-house lawyers keep better track of spending and the progress of litigation or a legal matter. “They can see what’s going on instantaneously,” he says. And Briscoe, the Altman Weil consultant, says the growth of electronic billing will mean major alterations in the lawyer-client relationship. “The cultural change comes when the lawyer looks at that bill and knows he’s going to be evaluated and reviewed much more stringently than in the past. He’s going to look at the research he billed 26 hours for and say, “We should have done that in 20 hours,’” Briscoe says. “Law firms have had a free ride for a long time.” Brenda Sapino Jeffreys’ e-mail address is [email protected] Charles Toutant, a reporter for the New Jersey Law Journal , a Texas Lawyer affiliate, contributed to this article.

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