Corporate clients should systematically request detailed matter budgets with the planning assumptions and hours by phase and task for each fee earner when the file is likely to exceed 50 hours. This is good, basic practice management.

The article suggests that putting more eggs in fewer legal baskets and making long term commitments of work to law firms makes it possible to introduce fixed fees for portfolios of work. It also removes barriers to introducing key performance indicators and to truly innovating in legal service delivery.

A survey of 153 legal sourcing professionals by the Buying Legal Council leads to four questions. How do the savings get measured? To what extent is the entire portfolio of legal work scoped and then sourced on a non-hourly basis? Is the company able to evaluate law firm practice patterns as a way to select the best AFA? To what extent is complex, strategic work subject to the legal sourcing process?

Most law departments do not possess the information or analyze the data that they have to leverage law firm capabilities. The result is a default to retail hourly pricing and the usual discounts for volume.
Too few firms have robust templates for matter plans and budgets. Planning assumptions and a percentage certainty by phase and task are the exception.
When asked, law firms always meet the challenge to produce data about practice patterns, to generate robust matter plans and budgets, and to accelerate the introduction of alternative fee arrangements.

There are 3 ways for Directors of Legal Operations to collaborate with Procurement professionals when the company decides to be more structured when retaining external counsel. The first is to collate solid data on consumption patterns for legal services: fees and hours by area of law; volumes by complexity level; detailed matter budgets. The second opportunity for collaboration concerns leading practices, technology, and infrastructure related to workflows and service delivery. With this comes structured practices and results applied to law firm performance. The third area of collaboration between legal operations and procurement is the migration away from hourly-based fee arrangements.

Some 80 per cent of law firms have no templates or standards for budgeting complex legal work. Few in-house counsel feel at ease analyzing and challenging matter plans and budgets prepared by law firms.

Budgets should set out the hours for each fee earner by phase and task of a matter. This should be done after communicating planning assumptions to yield a budget plan that is 85 per cent reliable for a most likely outcome rather than a worst-case scenario.