Alternative Billing: What's Working and What's Not?

These are my notes on a panel that had representatives of the three key players in alternative billing work; law firms, consultants, and law departments.

Formal Description:

There are lots of options for billing, but who is actually using an alternative billing method, and which ones really work? Find out if certain billing options can jeapordize a happy client-vendor relationship, how law departments can determine if pricing is competitive and fair, and who is using analytics to decide. Our seasoned panel of current and former law department members will share successes and failures regarding billing options and vendor management.

Speakers:

·         Lisa Girmscheid, Rockwell Automation

·         Chris Emerson, Bryan Cave

·         Donald Knight, PNC Financial Services

·         Eyal Iffergan, Hyperion Global

·         An Trotter, Viacom

See tweets at #ldpg and slides here. These are my notes from the session, forgive typos and any misattributions.

Overview

This session was standing room only, though with an odd small-table-and-banquet layout. I was impressed with the extensive and frank discussions that addressed a wide range of critical pricing issues. It's great that ILTA can provide a forum for dialogue between law firms and law departments, albeit at the staff and not business owner level.

AFA Trends

AFAs are increasing slowly in the last two years, from 16% to 19% of legal work. Chris Emerson is not seeing increases in AFAs, but he is seeing increases in requests for budgets.

A budget is a process statement, it isn't far from that to a statement of work. It's been encouraging to see evolution of pricing directors and the like.

Portfolio analysis versus Bottom-Up

Chris Emerson suggests that law firms can take an "averages" approach with portfolio work, but the best pricing comes from detailing tasks and assumptions behind the tasks. How many depositions will there need to be? Who will be leveraged to do the work?

Obstacles to AFAs

The room agrees that law firms are more comfortable with the billable hour than AFAs. This strikes Eyal Effergen as "smoke and mirrors" as there is little dialogue around value. 95% of firms are offering AFAs.

An audience member commented that law firms that have negotiated an arm's length fixed fee arrangement shouldn't have to worry about "shadow billing" (in which billable-hour and phase/task code information is provided despite a fixed fee arrangement).

An Trotter and her GC agrees with that comment. She expressed frustration around having to notify firms that they have gone over budget, even though they get the data 60 or 90 days later.

Donald Knight doesn't agree with the objection to shadow billing. He wants to know what he's getting.

Profit and Value

Clients wonder why they should help law firms continue 35%+ profit margins when they are getting by on 3-12% margins themselves.

It's not a problem that attorneys earn lots of money, but corporations are upset about the profit margins.

Corporations may be asking for this additional information because they don't understand what they get from outside counsel spend.

Another audience member asked, what if lawyers started acting as general contractors, getting autonomy to shop? Has there been mixing & matching of content and service providers? Yes, in the eDiscovery area. The market dictates that the specialized work will be able to bear the higher rates.

An audience member has seen this sort of thing happening in health care and IP practices already. It hasn't really hit the litigation groups? Reverse auctions are starting.

Litigation AFAs

Where 13% of law firms say they use AFAs for litigation, 67% of law departments use AFAs for litigation.

Software

Key areas of software used are eBilling, matter management, and accounting.

Most eBilling systems for law departments also include matter management these days. Accounting systems are only marginally useful for collecting information about law firm matters.

Share Prebill Information?

An Trotter would like to see transparency around law firm information. She'd like to see law firm pre-bill data fed into the law department data.

An audience member (Julie Richer from the American Electric Power Legal Department) indicated that the new cloud-based service Viewabill that would allow law firms to privately share prebill information with law departments.