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Have you ever heard that old expression about life, “It’s about the journey, not the destination?” When selecting a legal bill review vendor, it’s about both. You need to ask the right questions on the road to evaluating potential vendors in order to arrive at a decision that is right for your organization.

Let’s look at a typical scenario- your legal department has just decided to put a legal bill review program in place. Now what? How do you go about the formidable task of selecting a vendor? Before you begin contacting prospective vendors, first establish your goals for the program. Are they purely cost savings? Do they focus on efficiency and workflow improvements? Having a clear vision of your program goals will assist you in quickly eliminating some vendors and putting others at the forefront of the decision process.

Once you have established your goals, you can begin the process of identifying the vendors that may be able to meet your program objectives. Besides specific questions surrounding what you want to achieve with your program, below is a list of the top 8 questions that should be asked when evaluating a vendor. This is not intended to be an inclusive list, but a few questions to get you started on your journey to finding the best vendor for your program.

What are your service/product offerings?

Discuss the company’s product offerings with the vendor. Are you looking for an e-billing application only, a program that has attorney review, or both? Do you need matter management, document management, and analytics? Just because a vendor offers every bell and whistle, it doesn’t mean they are necessarily the best vendor for your program. Focus on the attributes that you need and then evaluate companies based on those items. Don’t forget to inquire about their reputation in the industry.

If you are looking at a program that has attorney review, find out who performs the audits. Is the vendor using paralegals to review your invoices or first-year law students? The auditors should be seasoned attorneys with several years of litigation experience. A legal auditor should have specialized knowledge of the litigation process and in spotting billing issues.

What is your price structure?

There are just as many pricing structures in the market as there are vendors. Some charge a flat fee based on the number of users on the software or a percentage of the dollar amount of the invoices reviewed. Others extend their fee to the law firms instead of the client. There is no right or wrong way to price these programs, but just make certain that you have a full understanding of charges before you select a vendor. A vendor may offer a very low price, but they could charge additional fees for training, customized reports, or minor modifications to their software. Make certain to account for all possible expenses when comparing pricing schedules.

Is your software flexible? Can it be modified? 

Make certain to discuss the flexibility of the software with potential vendors. Is the system able to handle different types of workflow? For example, do you want one person to have authority to review an invoice or do you want an employee to review the invoice and a supervisor to approve?

Another issue that is worth addressing with a potential vendor: Is the system flexible enough to capture custom data? For instance, your company may track the business unit associated with a particular matter. Can the legal spend management application capture the business unit information from your data feeds and use it in your reporting?

How long is your contract term?

Before you enter into a relationship with a legal spend management vendor, it is important to know the contract terms. Some contracts lock clients into a relationship for several years. Ask the vendor about the penalties for early withdrawal on the contract. Also, inquire about your data. Make certain you remain the owner of your data and your data is easily transferred to you at the end of the contract or upon early termination.

How is my account serviced once I sign the contract?

You are the most important person in the vendor’s world before you sign the contract, but what happens once the contract is signed? What type of service is available to you and your employees once you start a program? Some vendors have dedicated program managers for your account. This person should be your main point of contact for all of your program questions and concerns. Since a legal spend management program has bill review, IT, and customer service involvement, it is important to have one person within the vendor’s organization who can make certain your requests are addressed.

Do you have customer service for the law firms?

Law firms spend a significant amount of time in the vendor’s application. Many of your law firms will upload their invoices in a LEDES format, directly into the vendor’s software. Check with a few of your firms to see if they have positive or negative feedback regarding a vendor. Ask a potential vendor about their customer service for law firms. Do they have a dedicated department to assist firms in uploading invoices, budgets, and other billing questions? Does the vendor’s software allow them to track the status of their invoices?

Do you offer an analytics package?

Today, almost all legal spend management vendors offer some type of analytics package. Analytics software allows you to go a step beyond basic cost cutting. Having visibility into your legal spend data allows you to compare law firm performance, examine your spend by areas such as geography and business unit, and assists you in pinpointing patterns in your data.

Every organization is unique regarding what type of data is important in evaluating firms and internal performance. Make certain that your vendor’s application can accommodate the type of information that is important to your company. Having a stable of standard reports is a must, but also inquire about their ability to create customized reports according to your specific needs. Is the vendor agile enough to create custom reports without requiring exorbitant add-on fees?

What type of security do you have in place?

Most vendors will give you the option to house your data at your facility or offer a hosted solution. Usually the hosted solutions are an easier, more cost-effective option that takes the burden off of your internal IT department. If you select a hosted solution, make certain to ask where the data is hosted. Does the vendor have a secure location for your data? Do they have a disaster recovery plan in place? Also inquire about the length of time they will archive your data and specifically, what data is archived.

In conclusion, when selecting a legal spend management vendor, take time to outline your main goals and objectives for the program. Then, ask the above 8 questions when interviewing potential vendors along with questions specific to your program. Take these simple steps and your journey to finding the right vendor will have fewer bumps along the road.

For more information about how Stuart Maue can help you effectively manage your legal spend, contact us at: 1-800-291-9940 or e-mail: info@smmj.com.

As the holidays draw closer, you are probably getting ready for your Black Friday/Cyber Monday shopping. If you are like me, each year you put together a budget and as it gets closer to the holiday, your budget is knocked off course by a series of unexpected purchases. Every year, I vow to design a better budget for next year, with a more realistic view of any additional expenses.

When you think about it, planning your holiday budget is not much different than planning a litigation budget, except that the stakes are much higher. You are dealing with corporate funds, not your own money, and encountering a major surprise has a much more profound effect than putting a dent in your vacation fund. Dealing with litigation budgets can be challenging due to a lack of predictability in litigation as well as a deficiency of information early on in a matter.

By now, you’ve probably seen it all in your litigation budgets. The budget spectrum most likely ranges from law firms offering up low-ball estimates in order to keep you happy all the way to firms quoting something unrealistically high to stay within budget. As a client, these wide variations are troubling because your main goal is usually to avoid surprises and manage your fees and expenses. So how do you get more accurate litigation budgets from your firms? By looking at why firms dislike budgeting, why you are budgeting in the first place, and implementing budgeting best practices, you can assist your firms in producing more accurate litigation budgets.

Why Firms Dislike Budgeting

Unfortunately, many in-house law departments measure a firm’s success by their ability to bill at or near the initial budget. Additionally, a firm’s budget-to-actual performance is often a significant factor in deciding which firms are given future work. This causes a tremendous amount of pressure for firms. Litigation can be fraught with events and circumstances that are outside the control of the client and the firm. So how can a firm bill at budget when they have no idea what types of external contingencies can occur? This is just one common reason that lawyers tend to loathe the budgeting process. Others include:

• Lawyers assume that their first estimate is going to be incorrect because they only really know their side within the first 30, 60, or 90 days of the case.
• Budgeting usually isn’t a billable exercise.
• Often, when attorneys hear the word “budget” they think you want them to do the same amount of work for less money.
• Many attorneys feel they don’t possess the “number” skills to develop a sound budget.
• They are afraid that some clients will look at the budget as a fee cap and refuse to pay or discount any amount over the budget.
• Firms worry that if their budget is too high, the client will balk at the estimate and go elsewhere.
• These are true concerns for the law firm. However, by clearly communicating the purpose of the budget to the firm, it will ease some of their initial anxiety.

Why Do You Budget?

Are you asking for budgets for the right reasons? Is it just an exercise mandated by the general counsel? Do you feel like you have been taken advantage of in other cases and want to control costs (partners were doing associate work or cases were overstaffed)? One of the best ways to ease an attorney’s fear of budgeting is by explaining why you require budgets.

There is no right or wrong reason to require budgets, but not communicating properly with your firms about the budget can be a cause for anxiety. In a perfect world, the initial budget is a preliminary assessment. It is a document that helps both parties discuss risk and assists the firm in understanding what is important and what isn’t. The budget should show that you and the firm are in alignment with how much you want to spend on the case as well as your approach to the litigation. In-house counsel needs to work with outside counsel to come up with a strategic plan, not just hand it over to the firm to defend.

Firms should understand that the budget is a collaborative document that keeps all parties on the same page with strategy and expenses. Additionally, firms need to be aware of the importance of budgets for your organization. In-house counsel wants certainty; they don’t want to go to the executive team and tell them that a case has gone over the budget.

For more information about how Stuart Maue can help you effectively manage your legal spend, contact us at: 1-800-291-9940 or e-mail: info@smmj.com.

When working with prospects during our 29 years in business, we are often asked the question, “Why shouldn’t we just bring the bill review process in-house?” Over the years, we have seen the trend change from companies creating a bill review unit in-house or having current staff review bills to using an outside vendor (legal auditor) for the bill review process.

Whether a client uses Stuart Maue or another vendor in the industry, there are many benefits to using a third party for legal bill review services. This blog post briefly outlines some of the major benefits of outsourcing legal bill review.

Uniformity in review:  Unless a company has a stand-alone bill review unit, it will be difficult to maintain a standard method of review for legal invoices. When companies use their current staff to review invoices related to their matters, there is little consistency for law firms. Many third-party legal bill review companies use a standard methodology when reviewing invoices. With standardization in the review, law firms quickly learn the billing expectations of the company. In addition, the legal auditor is available to discuss concerns about the bill review with the firms. This frees the client, who may have built a strong relationship with the firm, from the task.

Best practices:  Third-party bill review companies work with many organizations. Working with different companies allows them to see what techniques work well in various situations. They can provide best practices in revising billing guidelines, provide workflow recommendations, and guidance on creating and managing budgets. Additionally, many experienced legal auditors have a strong understanding of complex litigation that they can bring to the review process. Reviewing for billing issues does not require in-depth knowledge of the facts of the case but it does require specialized knowledge in spotting billing issues and the litigation process. A legal auditor can provide a client with both areas of knowledge.

Rapid turnaround times:  Outside bill review companies are dedicated to your program. They aren’t splitting their time on a multitude of competing tasks. This allows them to review your firm invoices quickly. Firms benefit from the dedicated review as well. Firms can call the bill review company to check on the status of review instead of interrupting the client. Some legal auditing companies even have a customer service group dedicated to assisting the law firms with payment issues and questions involving uploading invoices and budgeting.

Advanced technology:  A third-party bill review company has the advantage of offering clients the latest in advanced technology. Clients usually have some type of client portal to electronically approve, track, and send reviewed invoices for payment. They also provide clients with management reports and some of the more sophisticated vendors offer advanced analytics. Usually, trying to build comparable technology from the ground up in an organization is cost prohibitive as the organization typically lacks the technical resources.

Neutrality:  Third-party vendors are paid based on a percentage of fees reviewed. This allows the legal auditor to remain neutral during an invoice review.  In-house reviews can become difficult when the in-house staff is asked to review the invoices of a firm where they have built close relationships. Using a legal auditor allows the client to maintain their relationship with the law firm.

Cost:  In our over 29 years of experience, we have not had a client pay more for our services than the amount we saved them in non-compliant findings. This provides a no-cost bill review program for clients. When developing a legal bill review unit, the client will need to factor in items such as the cost of salaries, training, insurance, and benefits for the additional employees. If the company decides to use current staff to review invoices, they will need to take into account the cost of training these employees and consider what type of time constraints their employees have with their current workload.

Uniformity in review, best practices, rapid turnaround times, technology, neutrality, and cost are just a few of the benefits of using a legal auditor to review your legal bills. It is also important to remember that a legal auditor will do the initial review of the invoices, but they defer to the client regarding the final amount paid. In fact, we encourage our clients to review our findings. Our findings can be one of the tools used to evaluate firm performance in an overall litigation management strategy.

For more information about how Stuart Maue can help you effectively manage your legal spend, contact us at: 1-800-291-9940 or e-mail: info@smmj.com.

A good legal bill review program begins with a strong set of billing guidelines. Law firms, especially large firms, have timekeepers who bill to multiple clients, each with their own unique set of billing requirements. Due to the multitude of guidelines that the firm needs to follow, it is important to present your guidelines to a firm at the onset of the relationship so the firm will have an excellent understanding of your expectations. Many attorneys will invoice the same way for each client, assuming that most billing guidelines are similar. It is vital to review your invoices to make certain that the firms are adhering to your billing guidelines. When you are willing to review your legal invoice against your guidelines and question entries that are not allowed according to the guidelines, you will most likely see more accuracy in billing procedures by firms in the long run. This blog post will outline some tips for improving your billing guidelines in 7 areas: tasks per entry, billing frequency, task descriptions, overhead, research, staffing, and travel.

Tasks per Entry

The practice of grouping more than one task together and assigning a single time increment is referred to as block billing. Block billing is a common issue found in legal invoices. Block billing makes it difficult to identify and quantify the reasonableness of work performed and the cost of the work. The majority of billing guidelines require that time is billed in increments of one-tenth of an hour (.1) or 6 minute increments. Billing multiple tasks in one entry makes it impossible to know how much time was allocated to each task. The following is an example of a block-billed entry and how this type of entry can be costly for the client over time:

Example: phone call with client; e-mail to Mr. Smith; drafted letter to Mr. Davis   1hr.

Let’s look at each of these tasks individually:

• Phone call with client: 6 minutes
• E-mail to Mr. Smith: 12 minutes
• Drafted letter to Mr. Davis: 30 minutes
• Technically, this example adds up to .8 hr. versus 1 hr.  In this case, the activities would have cost the client less if they were billed individually.

Often, our clients will add illustrations directly into their billing guidelines in order to clarify their billing requirements. Adding an example such as, “entries such as ‘prepare for and attend event’ and ‘travel to, attend, and return from event’ are considered blocked entries and are not compliant with the billing guidelines” can be helpful illustrations for the law firms. Also, a law firm should not be compensated for the time it takes to correct the blocked entries.

Frequency of Billing

It is important to note the billing frequency for law firms in your billing guidelines. Many clients require their firms to bill on a monthly or quarterly basis. This can assist with reducing administration costs and cash flow issues in the company.

Task Descriptions

Billing entries should describe the activity performed with specificity. Descriptions such as “prepare for trial” and “work on case” and “office conference” are considered vague. Ideally, an entry describing communication activities (emails, correspondence, conferences, meetings, etc.) should identify the receiving parties and subject matter of the communication. It is important that the client has the ability to confirm that the task relates to the case, is not an administrative or overhead function, does not duplicate the work of other timekeepers, and is not excessive for the time associated with the entry.

Overhead

The hourly rates submitted by a law firm include overhead expenses. Billing entries should not include charges such as office supplies, library staff, proofreading documents, preparation of bills and invoices, or filing or e-filing documents with the Court. Even if an associate or paralegal bills an activity that can be performed by a secretary, file clerk, or other nonprofessional staff member, the task should be considered part of the firm’s hourly rate and the charge should be denied.

Research

Many clients have a limit of 4 hours on research entries.  Any billing entry above 4 hours will not be reimbursed unless there is prior approval of the client. Entries describing legal research should indicate the subject matter of the research and its purpose. For example, “research statute of limitations for motion to dismiss.” Additionally, if a topic is presumably familiar to an experienced counsel (items such as rules of procedure and evidence, or elements of common causes of action, etc.) research on such a topic should be questioned.

Staffing Issues

The majority of clients are concerned about keeping staffing levels to a minimum. Some billing guidelines even go so far as to limit each matter to 1 partner, 1 associate, and 1 paralegal unless there is prior approval by the client.  Overstaffing could appear in an invoice as duplication of effort (same person performs same task, different person performs same task as another biller). An invoice may also show excessive intra-office conferencing. Those billers with material responsibility for the case should bill for attendance at an intra-office conference and they should be limited to necessary strategy sessions related to events in litigation.

Other staffing issues include:

Multiple attendance at meetings, depositions, and court date – Attendance at events should be limited to those timekeepers who are making a significant contribution to the proceeding.

Orientation for billers – This includes situations where a new attorney starts on a case or when giving education or administrative direction to the staff.

Billing at associate rates for paralegal activities – Activities such as “preparation of routine notices” whether the task is performed by an associate or a paralegal, is a paralegal activity which should be billed at a paralegal rate, regardless of the timekeeper’s position. Similarly, tasks that could be performed by an associate should not be compensated at a partner rate.

Travel

Travel time is another area that is often questioned. Companies handle reimbursement for travel time in various ways. Regardless of how a company reimburses travel, it should be addressed in the guidelines in order to set expectations for the law firm. Often, a company agrees to pay full hourly rates for travel as long as the attorney is working on company matters. If the attorney is not working on company matters, they will pay 50% of agreed hourly rates. Other companies work with thresholds. For example, anything under a certain amount of hours or miles is billed at a full rate and anything over is billed at ½ rate.

These areas are just a few of the ways to improve your billing guidelines. The most important thing to remember is to continue to enforce your guidelines with law firms. This will work to create adherence within your law firms. Finally, don’t be afraid to revise your guidelines.  If you are using a third-party bill review provider or if you are reviewing invoices in-house, make sure to track the categories of billing violations. This will assist you in identifying where your guidelines are strong and where there is room for improvement.

For more information about how to improve your billing guidelines in order to more effectively manage your legal spend, contact Stuart Maue at: 1-800-291-9940 or e-mail: info@smmj.com

As law firms and businesses struggle to maintain profitability after the 2008 financial crisis and recession, corporate counsels have been looking for ways to gain more predictability in legal spend. One of the most popular ways to gain predictability in spend is through the use of alternative fee arrangements (AFAs). An increasingly common practice in AFAs is the request by the client for firms to submit “shadow bills.” “Shadow billing” is a practice where a firm submits a fee for an alternative billing arrangement along with invoices outlining the actual hours and work performed. This 2-part blog post reveals why shadow billing tends to be controversial, two scenarios where shadow billing is necessary, and how to get the full benefit from shadow billing.

Controversy around shadow billing

Clients requesting shadow billing in conjunction with a fixed price structure often meet opposition from law firms. This is due to the fact that some firms see it as a lack of trust in their ability to invoice fairly for the work completed. But, law firms need to be cognizant of the fact that clients are under the stress of keeping costs under control. Sharing information with the client as to the actual hours billed can build trust and allow for more transparency in the relationship. Additionally, in the beginning of a fixed fee arrangement, providing hourly information could help both parties. Looking at hourly costs versus the fixed fee can assist the firm in evaluating risk and managing the case to ensure that the client is saving money and the firm is remaining profitable. For the client, having access to the shadow bills allows them to make educated decisions on the benefits and drawbacks of fixed fee arrangements versus hourly billing. Shadow bills also provide clients a clear-cut way to manage cases; for example, the client will be able to see if the firm is spending too much time on a specific aspect of a case and ask the firm to adjust their time accordingly. Also, shadow billing allows the client to still use a fixed fee arrangement but track and report on data elements supplied by hourly billing.

When you need shadow billing with an AFA

Capped fees with shared savings

Capped fees, common in transactional work, are often proposed in highly competitive situations. With a capped fee arrangement, the client agrees to pay the law firm a flat amount unless their hours come in less. If the hours come in less, the firm charges the client the lower rate. In this pricing scenario, some argue that it incentivizes the law firm to bill as close to the cap as possible. However, clients gain the benefit of predictability in costs.

When you need shadow billing with an AFA

Fee Collars

Fee collars allow for a lawyer to be paid a set amount if the hours come in on target or at a certain percentage above or below the set target. If the hours come in below the fixed percentage, the savings are shared between the client and the lawyer. If the hours are above the fixed percentage, the lawyer is paid only a percentage of the additional amount billed. Fee collars are often used in scenarios where outcomes are unpredictable. For example, let’s assume a client and an attorney agree to a fee of $100,000 for a project with a 20% up and down collar. If the lawyer’s billing comes in at an amount between $80,000 and $120,000, the attorney will be paid $100,000. However, if the billings come in at $60,000, the $20,000 difference is split between the client and attorney (the client receives a $10,000 credit, so the attorney is paid $90,000). If the attorney’s time amounts to $140,000, the attorney is paid 50% over the $120,000 collar (the final fee to the attorney is $110,000). Again, this is another situation where the firm has an incentive to try to bill at the cap or at the collar around the cap, if the fees are below the collar. As with the capped fees with sharing, the benefit to the client is a more predictable fee structure.

Getting the full benefit from shadow billing

With both types of alternative fee arrangements, capped fees with sharing (mentioned in Part I) and fee collars, there is a need for shadow billing in order to calculate the final cost to the client. The problem with shadow billing is that it can cause a disincentive for law firms. Firms may begin to worry that if the billed hours come in significantly lower than the fee caps, the client may feel like they are not getting a “good deal,” even if the amount paid is appropriate for the value delivered by the law firm. With this in mind, it is important to remember that shadow bills have their maximum value only when they are reviewed for billing guideline violations, consistency with ethical rules of professional responsibility, industry standards, and other relevant authority. This type of review will keep the law department on track and also benefit the client by giving them a more accurate view of their data. With the shadow bills available, clients also gain the benefit of using the data to track and report on the data found in the invoices.

Alternative fee arrangements have the benefit of providing predictability and, in some scenarios, cost savings for the client. However, if a legal department decides to shift to using some form of alternative fee arrangement, it is important to require shadow billing, at least in the beginning of the program. Shadow bills give the client a gauge to measure if the program is successful by allowing for full transparency. But, along with a request for shadow bills, comes the incentive for law firms to create shadow billing that comes close to the fixed fee in order to make the client feel they are getting a “good deal.” The best way to maximize the use of shadow billing is to review the bills for accuracy. This will give the legal department clean data to measure for reporting and analytics, and the client will have a more accurate picture of true costs when negotiating fixed fee arrangements in the future.

For more information about how Stuart Maue can help you effectively manage your legal spend, contact us at: 1-800-291-9940 or e-mail: info@smmj.com.