A Task-Based Billing Update
In the course of the 1990s, corporate law departments pressured outside counsel to move away from “block billing” to “task-based billing.” This was accompanied and supported by the industry-wide development of task-based billing codes and the creation of software that enabled in-house lawyers to review task-based bills that incorporated those codes on computers. The ability to review invoices and to display the data in various ways provided in-house counsel better insights into the work represented by the invoices that were not identifiable when the same invoices were received in hard copy.
Alternative Fee Arrangements for Corporate Clients
The negative effects of time-based billing have been exposed for quite some time yet it still underlies the bulk of law firm’s billings to corporate clients. How can outside counsel move away from time-based invoices? What benefits will the firms and their clients realize from such a migration? How easily can they do so? In light of the pernicious impact that the hourly rate has had on client/firm relations, the experiment may be very worthwhile even if the ultimate destination remains obscured.
Toward Fee Arrangements More Closely Calibrated to Value
Because clients recognize the value of legal service differently (one client might even see the same legal service as worth more or less depending on the matter in question or due to other factors), firms and clients to take that variability into account when discussing and designing fee arrangements. Value-related qualities or VRQs can provide a mechanism or framework with which to approach the challenge of designing value-focused alternative fee arrangements.
Task-based billing – it’s all about money and common sense
Task-based billing offers several advantages over traditional law firm billing methodologies. Ultimately, it can serve as a means to improve client/counsel relationships as it provides greater visibility into the work performed by law firms for their clients. It also enables better control of the work for in-house attorneys, itself a benefit that those lawyers should embrace.
Special Billing and Task-Based Billing
Task-based billing can serve as the basis for improved billing arrangements. It also supports the greater application of project management to legal service. The greater insight into the work available through task-based billing can also allow for more focused discussions of fee arrangements and the design of fee arrangements that more closely reflect the client’s goals in the specific assignment.
Task-based Billing As a Strategic Component of Client/Firm Relations
Clients’ dissatisfaction with time-based billing has been recognized for years. This, in turn, has poisoned client/firm relationships in many cases. Task-based billing offers at least partial relief from that malady. It allows for greater insight into the work and can serve as a means for more fulsome discussion of fee arrangements and easier agreement on alternatives to time-based billing, which has played a part in relationship disputes.
Expert Q&A on Alternative Fee Arrangements
Alternative fee arrangements must be specific to the particular assignment for counsel in order to work as hoped. Properly designed, though, they can allow for fee arrangements that are more value-focused and that serve the client’s business goals more directly. This is particularly so if they are based on value-related qualities or VRQs.
Getting Away from the Hourly Rate (Part I): Clearing the Hurdles
Time-based billing bears no direct relationship to the client’s goals for the assignment or its view of how the legal service adds value to its business operations. Understanding that fact allows lawyers, both in-house and outside the corporate law department, to engage in worthwhile discussions of how to replace it and to move to fee arrangements that better serve the client’s interests.
Getting Away from the Hourly Rate (Part II): The Counterproductive Effects of Billing Time
Time-based billing results in a number of negative impacts on clients and law firms. Its persistence seems a result of inertia more than it does any other pressure. Because it rewards inefficiency more than it does efficiency, its basic effect may be the most undesirable quality that it possesses. Accordingly, clients and their outside counsel should embark on a search for an alternative that will benefit them both. Value-related qualities (VRQs) of the service or of the provider can enable them to take steps that will yield greater alignment of their interests and greater value for the client.
Getting Away from the Hourly Rate (Part III): An Efficient, Effective Team Maximizes Value
To maximize the benefits of moving away from time-based billing, corporate clients must put effort into constructing teams that work more efficiently. This, in turn, requires a more deliberate selection of team members. Using an approach to that task that takes into account value-related qualities can enable in-house counsel to do sol.
Getting Away from the Hourly Rate (Part IV): Ready, Set, Go!
“Value” as a concept in the context of legal service requires analysis of the subordinate qualities of the service, of the provider, and of the situation in which the service is provided. These qualities that impact the value (value-related qualities or VRQs) can serve a multitude of purposes. By creating a framework within which to discuss the legal service and its impact on the client’s business objectives, all with a view to the VRQs that apply in that situation, will “advance the ball” incorporate clients’ effort to realize greater value from the work that lawyers perform on their behalf.
Efficiency Not Guaranteed by Legal Bill Auditing Systems
The review of law firms’ invoices for opportunities to reduce the fees thereby represented requires an understanding of the work and of the matter for which the work was performed. Consequently, the invoice reviewer should have some understanding of the client’s matter. A third-party auditor may not have that familiarity and, if not, can do harm to the relationship while missing true efficiencies and mi identifying others.
