In-House Counsel

How to handle law firm budgets on matters

By Rees Morrison

Here are some of the ways to find success with single-matter budgets by law firms.

1. Have a couple of examples of budgets available to send to law firms (See my post of Dec. 15, 2006.).
2. Develop budget requirements differently for litigated matters and for transactional matters (See my post of Nov. 6, 2005.).
3. Train lawyers and paralegals in the techniques of budget review (See my posts of Aug. 31, 2005: look at the ?importance burn rate?; and June 25, 2006: in line with exposure estimates.).
4. Develop policies that govern matter budgets by external counsel (See my posts of Dec. 15, 2005; April 14, 2005: budget adjustments; May 21, 2007; policies of law departments; and March 4, 2008: spend minima to justify budgets.).
5. Ask firms to extend their budget period no more than three months out (See my post of April 27, 2005: don?t budget beyond your headlights.).
6. Consider having firms submit rolling monthly budgets (See my post of Jan. 13, 2008.).
7. Emphasize that firms should list and discuss the three or four major tasks that they will handle during the budget period (See my post of Feb. 16, 2006.).
8. Insist that the firm offer three plausible contingencies that would materially affect the budget upward or downward (See my post of Nov. 8, 2007: ask for scenarios.).
9. Require that inside counsel review the budget (See my post of Oct. 19, 2007: inherent tension between firm and department) and modify at least one aspect of it, giving reasons for doing so.
10. Deny payment to firms until their budget has been submitted and improved (See my post of Feb. 18, 2006: how to get budgets from firms.).
11. Track actual spend compared to budgeted expenditures (See my post of Dec. 18, 2006.).
12. Automatically re-budget for the next period by the conclusion of the former budget period, and perhaps hold back overages (See my post of March 1, 2007: bank budget over-runs.).
13. Request budgets only for matters that are likely to cost significant amounts, with that amount possibly varying by practice group (See my post of Nov. 15, 2005: major litigation explained.).
14. State clearly in your outside counsel guidelines your expectations about the budget process.
15. Use the budget and actual data to assess the performance of inside and outside counsel (See my posts of March 24, 2005: analysis of budgeted matters; and June 21, 2006: track cumulative accuracy.)

Full post as published by Law Department Management on March 25, 2008 (boomark / email).