Unforeseen and Unbudgeted Legal Matters - How Can In-House Legal Departments Keep Costs in Check?

We often receive frantic calls from legal ops professionals who are suddenly faced with a legal matter for which they hadn’t budgeted. It’s usually right after they’ve received the first invoice and a new matter, (usually M&A or litigation) and realize they don’t have the bandwidth to thoroughly review -- and more invoices are coming. Here is what we recommend:

 1)    Don’t pay the invoice -- send it over to our team to review;

2)    If billing guidelines are not already in place with outside counsel, create and send them;

3)    Adapt your process, within your existing framework, to manage resources.

Don’t pay the bill

The bill will get paid on time.  But before you pay, you first want to ensure the bill is accurate and free of mistakes. Whether your organization has an eBilling system in place or not, adding a professional review should work within your team’s process. Paying law firm invoices on time encourages firms to accept adjustments suggested by the reviewers. 

Next, when engaging with a third-party reviewer, provide as much information as you can about the matter, the law firms, and agreements in place. This will assist the review team as they look for errors and inconsistencies in the invoice. Additionally, the context surrounding each time entry narrative determines whether a line item is acceptable or not. 

If your legal department has an eBilling system in place, having a third-party review is just as important. The reviewer should be able to “clear the flags,” make adjustments,and, most importantly, capture all of the nuanced and subjective items that even the most sophisticated AI will not uncover -- as the majority of all bill review adjustments come from subjective billing issues. Lawyers need to put their eyes on the invoices, but it doesn’t have to take time away from your in-house team. Your third-party legal billing analysts should certainly be US-based, licensed attorneys with at least 10 years experience practicing law in the matter which they are reviewing. .

Outside Counsel Guidelines

OCGs Are Commonplace

●       In a 2019 survey, 81% of legal departments reported using OCGs as a cost-control tool with their firms.

●       OCGs are seen as “highly effective” by 60% of legal departments surveyed.

●       Law firms are accustomed to getting their invoices challenged and reduced. In a survey of 198 firms, 57% reported that 10% or more of their invoices are challenged, with 36% reporting that the figure is more than 20% of their total invoices.

●       89% of law firms currently receive OCGs from at least some of their clients, and 63% of firms report receiving more than 10 new sets of guidelines from clients in a typical year.

OCGs Don’t Work Unless They’re Enforced

●     Simply issuing guidelines is not enough to ensure compliance.

●     52% of firms report that they are not adequately staffed to handle OCG requirements and ensure compliance. 63% of firms only have an informal compliance process in place, while 23% of firms report having no compliance process whatsoever, meaning guidelines are fully discarded upon arrival and never even communicated to attorneys.

●     43% of firms report that they do not even read OCGs received from clients.

SOURCE: Association of Legal Administrators 2019 Annual Law Firm Leader Survey on Outside Counsel Guidelines. https://www.aderant.com/research/2019-annual-law-firm-leader-survey-on-outside-counsel-guidelines/

The majority of legal departments have billing guidelines for their outside counsel, but few have a consistent process in place to actively enforce them. The best legal bill review consultants will have developed their own outside counsel guidelines and will be able to easily include the client’s existing OCG’s into their review. If the client doesn't have well-developed OCG’s, the consultants should be able to immediately provide new OCG’s to the law firms and enforce those rules in their bill review. 

Outside Counsel Guidelines are standard in the practice of law. Law firms abide by hundreds of OCG’s from their clients. Not all lawyers and not even all law firms do so effectively, but the standards should be set and communicated by the client. Law is rule-based and there is a professional responsibility to follow billing rules and maintain good “bill hygiene.” Even the most compliant lawyers make mistakes, and the law and the practice of law are ever-changing, and thus it is important to maintain a strict bill review process.   Everyone in the process should be held accountable.

Adapt your process

“When you can't change the direction of the wind – adjust your sails,” H. Jackson Brown, Jr.

Unexpected legal matters happen and even the most mature legal departments need to adjust their process to accommodate. Many companies I speak with have an effective bill review process with multiple layers and touchpoints for their everyday legal matters. But when an extraordinary matter arises, the internal reviewers are likely to be pulled to more substantive legal work and an outside bill review provider can pick up the slack. 

An effective outside bill review resource should not only reduce costs but create greater efficiencies in the process. When in-house teams are responsible for their own review, discrepancies are inevitable. People are working on different matters, and have different timelines and priorities. Different in-house reviewers are also going to have varying appetites for the tedious process of bill review. Therefore, it is important to adjust and bring in a team that can relieve the bill review burden from those whose skillsets are needed elsewhere. 

Lastly, I would like to mention how outside counsel relationships are impacted by a more efficient cost management structure. With LegalBillReview.com, legal bills will be reviewed and approved quicker, allowing the law firms to get paid faster. Additionally, having your bill review service work directly with your law firm’s billing team delineates the practice of law from the billing issues.  The in-house team can focus on the legal matters with their firms while the billing professionals work together for a mutually beneficial outcome.

Is your in-house attorney's time better spent reviewing each time entry of numerous invoices and communicating the findings with each law firm each month or practicing law and managing risk for your organization?