Cost Control – Can Legal Fees be Accurately Forecasted?
While I was operating a solo law firm from 1997 to 2008 I never thought much about the widely accepted yet inherently unfair law firm billing practices across the entire legal industry – mine inclusive. We attorneys have been billing corporate clients by the hour for hundreds of years. Abraham Lincoln said, “A lawyer’s time and advice is his stock in trade.” Then I saw how it looked from the client’s side. While working as a contracts specialist for a middle tier contractor on a the Chevron Wheatstone LNG Project in Western Australia, I learned first-hand how it feels to be on the receiving end of a shocking invoice for hourly legal services.
As a contracts specialist I drafted, negotiated, and modified agreements for a wide range of goods and services, some with a value in excess of $200M (USD). Since capital is the life blood of any mega-project effective cost forecasting and cost control are critical to successful project delivery. Across the natural resource construction sector all suppliers of goods and services are accustomed to, and understand, the necessity of accurate cost forecasting. While the business culture in this sector can be as brutal as anywhere, they all demanded, and provided, information to enable accurate cost forecasting – all except for the law firms that is.
The earth works contractor for whom I worked had outsourced some legal work to a law firm with expertise in an issue involving Australian construction standards. When I saw the first bill it was clear to me why contractors would rather eat nails than hire a law firm. Under the firm’s hourly billing arrangement there was absolutely no way to forecast legal costs. Our cost control department had to work overtime to sort out the budget every month until we could get rid of the lawyers. It had become apparent to me that our company would continue to be gouged for as long, and as hard, as we would permit.
The story has a positive ending. A new business model for delivering legal services was emerging down under – and it wasn’t not based on hourly rates. These attorneys were working at the client’s offices on an assignment basis for as long as necessary pursuant to fixed daily, weekly, or monthly rate. Because these firms have no need for large and expensive downtown office space they could provide legal services for a fraction of the law firm cost. And what the construction industry contractors loved the most about the new fee arrangement was that legal costs could be accurately forecasted. High caliber yet affordable attorneys were embedded in businesses creating a superior attorney-client relationship. By observing the attorney at work the client knew exactly what they were paying for.
When I returned to the U.S. I set out to build a business model for legal services that would allow businesses to accurately forecast legal fees. With the client’s perspective in mind we engineered the new billing practice based on fairness and transparency. Alternative practice models such as those developed by Paragon Legal in San Francisco and InSource Law in Reno recognize this international trend as they pioneer better ways of serving clients . . . and fairer ways of billing them.
Lead Attorney & Owner
1Source Law LLC
