Outside Counsel Guidelines (OCGS) Are Your Friend

Ballard Spahr LLP
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Ballard Spahr LLP

[author: Emilia Levisay]

Outside counsel guidelines (OCGs) are a way for clients to set expectations regarding processes, procedures, and handling of matters. Common guidelines relate to rates and expenses (discounts, alternative fee arrangements, travel, and other cost-related exclusions); matter management (budget requirements, early case assessment, and settlement recommendations); and staffing (limits on utilizing first-year associates and more than one lawyer in meetings and on calls, and diversity requirements). Used properly, OCGs help outside counsel deliver more cost-effective, predictable, and efficient legal services because the guidelines identify what the client values and expects.

The problem is that OCGs don’t always work the way they should. For one thing, clients are extremely busy and short-staffed. They often don’t have the time to implement, update, and enforce OCGs unless they have dedicated legal operations resources. Instead, clients use outdated OCGs that, in many cases, are inconsistent and unclear. In addition, law firms trying to follow the guidelines often find them complicated and difficult to comply with. The result is that OCGs frequently fail to accomplish their intended results.

We need to stop approaching OCGs as if they are non-negotiable requirements

The solution to this problem is, we need to stop approaching OCGs as if they are non-negotiable requirements that clients and law firms need to rigidly follow. Instead, the parties should view the guidelines as a tool that promotes collaboration and deepens the relationship.

When adopting or revisiting OCGs, keep the following tips in mind to ensure that they are successful for both parties.

You’re on the Same Team; Be Reasonable

The main reason clients use OCGs is to communicate expectations regarding the handling of matters. Guidelines that are overly complicated, lengthy, outdated, and rigid cause confusion and are difficult to enforce.

When new or amended OCGs come out, clients should use them as an opportunity to talk with their law firms about goals and expectations. If law firms understand the reasons for guidelines, compliance may feel less burdensome. In addition, the law firm will have a better understanding of which guidelines are most important to the client, and make them a top priority. Ultimately, when firms understand the importance of the guidelines, they are more focused on delivering the most efficient legal service, at the best price, based on the client’s business objectives and long-term strategy.

One thing we’ve learned from listening to our clients is that cost certainty is incredibly important. Clients often include a requirement in their OCGs that outside counsel must prepare budgets for matters. Budget requirements also can benefit outside counsel. They help frame the scope of work that will be involved and can help justify the amount of the fee.

For example, a client needs to choose between two firms. Firm A charges $300 per hour and Firm B charges $400 per hour. It seems that Firm A provides more value than Firm B. However, this perception may change if Firm B demonstrates the reasons for the difference during the budgeting process. Firm B explains that it charges $100 more an hour due to the nature and scope of the work. Its budget takes into consideration the amount of partner time required. In addition, Firm B is willing to offer a fixed fee and assume some of the risk. If the client recognizes the reasons for the difference, it is likely to feel more comfortable with hiring Firm B to handle the work.

Efficiency Is In the Interest of Both Parties

Clients should expect their law firms to focus on delivering value and efficiency, and should make this a part of their OCGs. As in-house legal departments try to do more with fewer resources, partnering with outside counsel, and understanding the ways they can provide value, can provide long-term efficiencies. Two major areas in which law firms can provide efficiencies are 1) developing client-focused technology and 2) using lower-cost resources, such as staff attorneys, contract lawyers, and third-party legal service providers.

The development of legal technology is a game changer for law firms and their clients. Firms use a wide range of technology, and some firms are adopting and creating custom tools. Legal technology has come a long way and can be used for e-billing, matter and task tracking, document automation and storage, budget versus actual tracking and monitoring, business intelligence, and data analytics, and to provide 24/7 access to all client- and matter-related information. Tools that save time and promote strategic decision-making increase legal team productivity, encourage law firm-client collaboration, and give clients greater transparency into their matters.

At Ballard Spahr, we’ve seen legal technology benefit our clients and legal teams firsthand. Last year, our Client Value and Innovation Team developed Ballard360, our client technology platform. Since then, the platform has saved our clients millions of dollars in legal spend. The technology has reduced the time spent on first drafts of transactional documents by over 7,120 hours in more than 890 transactions.

Another way law firms can promote efficiency is by using the appropriate teams. Legal teams deliver cost-efficiency by handling the tasks applicable to their seniority and experience. Partners perform partner-level work while mentoring and training junior attorneys. At the outset of the matter, firms and clients need to discuss the scope of work, the proposed team, and how the matter will be staffed. In some matters, more partner time may be needed. In others, junior internal resources or contract attorneys can help reduce legal spend. Clients who play an active part in this process can realize tremendous value, particularly in matters with budget or cost constraints.

Recently, after proposing a fee arrangement to a client, we received feedback that the price was too high. The client wanted more details about the assumptions we used to price the matter and how we came up with our proposed fee. We explained that, due to the nature of the transaction, the work would require more senior lawyer time but would take fewer hours under that scenario and cost less overall. We agreed to create a financial dashboard for the client that would allow them to see budget-to-actual spend in real time. The dashboard could help the client make proactive decisions about how the matter would be handled if issues arose. We won the work.

Set a Review Schedule

As a best practice, clients and law firms should meet annually to review OCGs, discuss what’s working and what isn’t, and “reset” the relationship and client expectations. OCGs cannot be created and forgotten. They are living, breathing documents. During annual review meetings, the parties should set aside time to discuss whether the OCGs are still accomplishing both parties’ goals and, if not, work together to adjust. Scheduling formal reviews strengthens client-law firm partnerships and ensures that outside counsel meet client expectations.

You, Me, and the OCGs

Clients and their outside counsel benefit from developing a truly collaborative partnership. OCGs help frame the hard questions and encourage conversations about each party’s goals. OCGs also focus efficiency efforts on important items like technology and leverage, and encourage regular feedback-gathering. OCGs keep inside and outside counsel on track and are an indispensable asset.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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