As its first topic of focus, the Council of Luminaries has decided to have regular meetings to discuss the effects of the COVID-19 pandemic on the legal industry as they materialize. The objective is to identify developments in the market, at both clients and firms and to explore potential solutions and make predictions on where things go from here. Key takeaways from each meeting will be published for the public following each discussion.
The below meeting was conducted primarily with the client-side group.
Minding the Gap Between RFP and Actual Project Management
The law firm Luminaries have commented that it's frustrating when questions (e.g. about innovative services) show up on RFPs and then never get mentioned again. Can/should we close this gap?
Luminary 1 – Yes, I think that’s true. Once we selected partners, we do not always focus on project management side of the relationship. It all sounds good in the RFP, but when the new matter comes in, the housekeeping/relationship offered by the firm gets lost in the focus on getting up to speed quickly. It is on us to make sure firms actually implement the offers they’ve extended.
Luminary 2 – We don’t run big RFPs like we used to. We start with strategic thinking – to how can we be partners, but after that process is over, then it turns back to the day job and switches to tactical.
Luminary 1 – Agreed, firefighting often gets in the way of progress!
Luminary 2 – We mainly do AFAs. So sometimes those grandiose strategic initiatives kind of fall to the wayside. Largely in my opinion that’s the fault of the client. If someone isn’t going to really demand something from me that takes more time/resources, I wouldn’t do it either. But there’s an opportunity for the law firm to bring clients back to strategic mode and remind them that there’s an opportunity to wow you. Law firms miss a lot of opportunity to wow clients. How do you do that? You do something unexpected.
Luminary 3 – When you are doing RFPs for convergence, that will be the case. We’ve been pushing really hard on practice area RFPs and project work RFPs – in those cases we are 85% going after the AFA.
Luminary 4 – It’s a security blanket. A lot of lawyers like to take on procurement tasks when it comes to legal providers. And they are protective of the firm relationship – and don’t want their firms to be treated like any other vendor. They are doing it like lawyers. Their RFPs were so long and horrible. If it was a deposition, I would have gotten it right, but for an RFP too long.
Luminary 2 – Do you read all the answers?
Luminary 4 – I swear I did. I read thousands of pages of responses.
Luminary 1, Luminary 2 – I don’t believe it!
Luminary 4 – That was early. I learned my lesson; our RFPs are much more streamlined now. But I believed that, if I tortured firms to write them, I had to read them. But now I do skinnier processes and avoid RFPs whenever possible. If you have attorneys, they will ask every question, because they act like lawyers. They ask every question. I bet most don’t read the answers. If no one is making you spend the time to reads the answers, why not ask all the questions? But anyone who has ever taken it seriously has a better process.
Luminary 1 – Sometimes the good strategic offerings that come through RFPs require us on the client side to put in more time to get them implemented. And we don’t have the time or energy.
Luminary 2 – Do we think that’s a miss by legal ops? Or by law firms? Perhaps they suggested something that’s too difficult.
Luminary 1 – I’m not sure we need to assign blame. No one does enough project management.
Luminary 2 – What’s the incentive for a law firm to follow up?
Luminary 4 – I will assign blame. It’s both. The law firms want to get the work and will do what it needs to get it. The client never has the resources. Everyone wants a magic solution that will be self-executing. What you never hear in an RFP/sales process is, “This is what we need from you to make it work.” Because the firm is afraid that they’ll get eliminated. And they are probably right
We are in the process of rewriting our outside counsel guidelines. We have these relationship meetings – one aspect will be tying back to whatever was promised in the RFP, clarifying a point of contact for innovation, asking “what you will do for us?”
Luminary 6 – Is this quantitative or qualitative?
Luminary 4 - In the future it will be both qualitative and quantitative, but our e-billing implementation is a mess (not tracking the right things). So it’s qualitative for now.
E-Billing and Dirty Data
Luminary 5 – With regard to “garbage data” – we tried to understand the cost of a large MDL and realized we needed a reduced number of billing codes and rules for using them. UTBMS codes are not self-executing. There’s way too much room for different uses. Until you nail that down, you are not going to get good data.
Maybe AI can help if it’s reading the narrative behind the codes. But we came up with 12 codes for product liability MDL litigation. You need to have discipline. The lawyers and the paralegals aren’t disciplined about the codes
Luminary 1 – We’ve created some reports to pull out some of the timekeepers, etc., code entries (in e-discovery) so we could track that up. Data that was causing errors – so when you run the report again – you have a better understanding – the data is the challenge. I understand the limitations of AI, but the nerd in me geeks out at getting in there.
Luminary 4 – Have you crated an internal infrastructure to create a training loop with the firm? To train them to correct coding going forward.
Luminary 1 – Yes. We communicate back which code and how we want it used. Calling it “training” may be too strong. But we do give guidance we expect to be followed.
Luminary 4 – I’m thinking of enforcing that strongly. We bought a service center in India. We can have a center of excellence there to enforce requirements. It’s not hard, but it does take a considerable amount of time. The benefit is we’d be able to let people know in real time that their task code usage is poor.
Impediments to Moving to Flat Fees
Luminary 2 – Why not move to flat fees?
Luminary 4 – Management isn’t ready.
Luminary 1 – And still wouldn’t know your answer. (e.g. your e-discovery spend)
Luminary 2 – Why not arrive at flat fees based on robust assumptions? Set parameters, let the market work, get to a flat fee based on market and not what you think it should cost. Why are more people not moving off the hour?
Luminary 1 – It’s all about buy-in.
Luminary 5 – Change management takes time. We don’t have buy in to bid everything out. We have complex cases. We have a culture where lawyers are afraid of doing something different. They feel like they have to have this bespoke approach to complex cases and have a really intense thought process about which firm they chose for it. Our folks are not ready to flat fee every case. They all have stories about this one time that the firm didn’t work a case properly because it was underwater... We’ve tried success kickers, so firms are not so cheap on staffing the case.
Luminary 2 – We haven’t experienced firms understaffing matters on flat fees.
Luminary 5 – It’s more of a fear on the part of the attorneys. Sometimes our outside firms talk our lawyers out of flat fees.
Luminary 4 – No one ever got fired for hourly. For a good AFA, you have to know what you’re doing. We do it for discrete things. We use them in e-discovery. Independent matters, though – it’s much harder to do that. Especially if you don’t have historical billing data to help verify the flat fee is actually a fair deal.
Luminary 2 – But why can’t we bid and the market will tell us what it should cost?
Luminary 5 – after doing this for a while, you’re able to use AFAs for comps. But the market does drive it. And even if you have crap data, leveraging market forces can tell what a matter should cost.
Luminary 4 – it’s mostly a culture issue. Like COVID, when people are forced to adapt, they will. But not if they are not incentivized.
Luminary 2 – So how can we change that culture? We piloted flat fees on mass torts
But we had an incredibly progressive GC, who was not a fan of billable hour. We had the support. Is the biggest impediment is the ability to someone to show that you’re not getting ripped off.
Luminary 4 – that’s a concern. But it’s more fear of unknown. How to break through? It’s got to be GC’s talking to GCs. If one says, “I just saved 20% and freed up resources…” That would move the needle.
Firm Profitability and Buying Value
Luminary 6 – What if the firms came to you proposing solutions. If they do it right, flat fees can be more profitable for them than hourly.
Luminary 4 - It would be awesome if a firm came to us. If it was a top firm and came with a fully baked proposal, it would land really well.
Luminary 1 – Agreed.
Luminary 2 – How concerned you are with how profitable the firm is?
Luminary 6 – Here’s a hypothetical I use to test that. “Imagine agreeing with a law firm on a million-dollar fee for a certain matter. The firm comes back in 3 days with news that they somehow settled the matter in only 3 days at a better number than you even hoped for. Do you pay them the $1 million?” More than half say of they’d have a hard time paying that bill. Because they didn’t work hard enough.
Luminary 2 – Then we as clients need to shut up about “paying for value.”
Luminary 5 - Something like this happened to us. It was called a “disgusting windfall.”
Luminary 2 – We all say we want to pay for value. We need to be willing to pay for value. Clients are not great at defining value. In their matter, Luminary 5 defined it – then when the firm provided it there was buyer’s remorse.
Luminary 6 – Heaven forbid a firm does exactly what we ask them to.
Luminary 4 – I’m a big fan of parables to dumb this down for people. The story of the plumber is a good one: There’s water spraying everywhere. You call a plumber, who fixes it in only 2 minutes and presents a bill. “But it only took you two minutes.” “No, it only took me 2 minutes to turn the wrench. You’re paying for 35 years of knowing how to find the leak.”
Luminary 2 – Luminary 5, what was result for the law firm? Have you hired them again?
Luminary 5 – We’ve kept using them. This may have been the result of some comments from some very top-level in-house counsel. A lot of it is gut and hindsight. It was a flat fee kicker. But the attorneys who put it in place really suffered a bit internally despite the fact that they got an incredible result for the company.
Luminary 2 – …and then got their hand slapped.
Luminary 3 – That’s partially expectation setting. We had one where it was our own in-house counsel who really got it done, but we had to pay the success fee to the law firm.
Luminary 2 – That’s an issue. Some in-house lawyers are more active than others. There have been some where the internal lawyer was like, “I was the girl on the front lines…” In one case, a firm unilaterally discounted its success fee, saying “it was mostly your guy who did this; we helped but don’t feel right collecting the whole fee.” Of course, it was a strategic move. It was a very smart play though and well received internally.