Using LPM to keep
AFAs Profitable
January 25, 2013
Monte Malone
Mike Burks
David Rueff, Jr.
More info can go here
PANELISTS
Mike Burks is the Pricing Manager in the finance department of Baker
Donelson. He is a CPA with over 11 years of experience in law firm
management and administration. Mike is responsible for the evaluation
and implementation of value-based billing arrangements for the firm and
provides practice group financial management to improve financial
performance for eight of the firm’s practice groups.
Monte C. Malone is the Chief of Practice Management for Fulbright &
Jaworski L.L.P. He has an MBA in finance and over 22 years of experience in
law firm management and administration. Monte is responsible for all areas of
pricing and legal project management for the firm. This includes working with
all firm practice groups in the development of alternative fee arrangements for
clients, the management of these arrangements and monitoring their
profitability.
David A. Rueff, Jr. is a shareholder with Baker Donelson and is the firm's
Legal Project Management Officer. He is a practicing attorney with over 20
years of experience implementing project management systems. David is
responsible for the design and implementation of the firm's patent-pending
legal project management system, BakerManage.
Monte Malone
Mike Burks
ALTERNATIVE FEE ARRANGEMENTS
More info can go here
LEGAL PROJECT
MANAGEMENT: THE AFA
•
Alternative Fee Arrangements (AFA's) may sound like
another term for discounts or reduced fees, but in reality, it
means an alternative to the typical pricing and delivery of
legal services. Clients want more predictability in their legal
spend.
•
By developing an alternative fee structure that more closely
aligns with the interests and goals of the client, the law firm
must deliver its legal services in the most cost efficient
manner possible. Burks and Rueff, Value-Based Legal
Services (Not Just Estimating Hours at Standard Rates), ILTA
White Paper (September 2012), p.1.
•
Communication, client knowledge, and legal expertise are the
key components in crafting a successful AFA.
LEGAL PROJECT
MANAGEMENT: THE AFA
What types of matters are best suited for an AFA and what type
of AFA pricing should be used?
o Repetitive Work: Recurring or repetitive matters, which allow
historical data collection on performance are best suited for fixed
fee pricing. These types of matters include labor and
employment litigation, intellectual property, product liability or
healthcare litigation, mass real estate loan closings, or a portfolio
of similar loan foreclosures or asset recovery matters. These
matters have similar legal issues and procedural challenges,
therefore assumptions and risks are more predictable and
support the creation of a more reliable fee estimate.
Burks and Rueff, Value-Based Legal Services (Not Just Estimating
Hours at Standard Rates), ILTA White Paper (September 2012), p.1.
LEGAL PROJECT
MANAGEMENT: THE AFA
What types of matters are best suited for an AFA and what type
of AFA pricing should be used?
o Phased Budgeting. Alternatively, if the entire matter cannot not
be predicted with a level of certainty, the matter may be estimated
by phases. This approach permits the firm and the client to enter
into an AFA for preliminary phases of the case, with an
agreement to re-evaluate later phases when more facts and
information are available regarding the opposing party’s strategy.
Matters which fit into this category are litigation, mergers and
acquisitions, and commercial transactions. The client benefits
from this approach because they do not bear the risk of a windfall
to the firm if the matter settles early before completion of all the
phases. Conversely, the firm benefits, because they are not at
risk for a fixed fee prior to gathering valuable information during
discovery and motion practice.
LEGAL PROJECT
MANAGEMENT: THE AFA
What types of matters are best suited for an AFA and what type of AFA
pricing should be used?
o Billable Hour with Fee Caps. Some matters are more difficult
to predict and the client may be more comfortable with a billable
hour arrangement, but the client may still want to cap its legal
spend. In this situation, capped pricing is used and the client
and the law firm agree that the fee will not exceed a certain
dollar amount. Bonuses can also be factored into this approach.
If the matter settles before the fee cap is reached, the client only
pays for the time it took to settle. This approach is a true
partnering between the client and the law firm, because the law
firm accepts the risk that matter will not settle before reaching
the fee cap.
Burks and Rueff, Value-Based Legal Services (Not Just Estimating Hours at
Standard Rates), ILTA White Paper (September 2012), p.1.
LEGAL PROJECT
MANAGEMENT: THE AFA
What types of matters are best suited for an AFA and what type
of AFA pricing should be used?
o Volume or Tiered Discounts. If the law firm and client do not
have an existing relationship, and they anticipate a significant
volume of work, volume discounts or tiered volume discounts
may be appropriate. Once the volume exceeds "X" dollars, the
client receives a discount off standard rates for amounts over "X"
or in a tiered volume arrangement, the discount would apply to
the entire amount retroactively. Volume Discounts allow the
client to reduce its hourly rates in return for the client
guaranteeing a certain volume of legal work.
•Burks and Rueff, Value-Based Legal Services (Not Just Estimating
Hours at Standard Rates), ILTA White Paper (September 2012), p.1.
LEGAL PROJECT
MANAGEMENT: THE AFA
What types of matters are best suited for an AFA and what type
of AFA pricing should be used?
o Collar Up: A Collar Up implies that there is an amount set as
the budget. If the firm goes over the limit, it cannot charge for
any additional work until it reaches a certain amount over the
limit (the collar amount). At that point, the law firm is allowed to
charge a certain percentage of the amount over that limit.
Example: The budget limit is $1,000,000. The collar is $100,000
and the percent is 60%. The amount from $1,000,000 to
1,100,000 cannot be billed. If the firm goes to $1,200,000 then it
can bill 60% (40% discount) of the $100,000 that is over
$1,100,000 or $60,000.
o Collar Down: A Collar Down is the same as a Collar Up only it
also rewards the firm for being under the limit. Example: If the
firm only bills $800,000, it would get a bonus of $60,000 or 60%
of the difference between $800,000 and $900,000.
David Rueff
Monte Malone
LEGAL PROJECT MANAGEMENT
More info can go here
WHAT IS LEGAL
PROJECT MANAGEMENT?
• LPM draws upon traditional project management
• Improves planning, monitoring and communications to ensure
that an engagement adheres to a set of defined objectives for
scope, cost, and time
• Coordinating scope, cost and time is
sometimes referred to as the
triple “constraint”
• If scope remains the same, but time is reduced, cost and
necessary resources increase; likewise, if costs and
resources are reduced, time is increased
IDENTIFY THE LEGAL
PROJECT MANAGEMENT TOOL
BakerManage – Baker Donelson’s LPM Process
BAKER DONELSON’S LPM SOLUTION:
BAKERMANAGE – TECHNOLOGY AND
IMPLEMENTATION
•
Baker Donelson’s Project Management Information System was developed in
SharePoint
•
Communicates with Firm’s financial
system (Aderant – CMS), time entry
system (DTE)
•
Patent Pending for both the process
and integration with other Firm systems
•
In Edge International’s 2011 publication, Staying Power: Legal Project Management
Update - the BakerManage system was described as follows:
“Among the best is Baker Donelson’s BakerManage system, a model of singular clarity, simplicity and
utility. BakerManage serves as a one-stop information shop, neatly integrating project information,
budgeting, team selection and communication in a format that echoes the classic project management
activity sequence.“
BAKERMANAGE
Example of a BakerManage Client / Matter Site in SharePoint 2010:
FULBRIGHT’S LPM SOLUTION: ENGAGE –
TECHNOLOGY AND IMPLEMENTATION
FULBRIGHT’S LPM SOLUTION: ENGAGE –
TECHNOLOGY AND IMPLEMENTATION
PROJECT DEVELOPMENT – STEP 1
DEVELOP A PROJECT PLAN – SCOPE OF SERVICES
The scope of the engagement should be clarified to confirm that the
tasks to be completed, schedule and budget are limited by the scope
and will be on target with expectations.
• Identify the Client’s business need for the engagement
• Identify the Client’s goals and expectations with regard to timing and cost
(early settlement, expedited discovery, closing a transaction in a short period of
time)
• Develop a clear statement of the scope of services to be provided
• Use Best Practices Guides to clarify whether there are any carve outs from
the services – what is out of scope
• Develop the factual background with the Client, identify key documents, and
note any assumptions being made which, if untrue, could broaden the scope
of services, timing or budget
PROJECT DEVELOPMENT – STEP 1
BAKERMANAGE – SCOPE OF SERVICES
BakerManage captures this information in a Statement of
Work which is included in the engagement letter.
This information is
also shared with the
Client (through an
external login) and
the Legal Team
(through the Firm
intranet) on a SharePoint collaboration
site
PROJECT DEVELOPMENT – STEP 2
DEVELOP A PROJECT PLAN – IDENTIFY STAKEHOLDERS
Normally the scope is communicated by the Client through a single
point of contact. Other Stakeholders should be identified to confirm
that the scope includes all Stakeholder objectives.
• Key Stakeholders include inside counsel, business department
representatives, third parties, vendors, opposing parties and counsel
• This information is captured and shared with the team and should
also include:
o
o
o
o
o
o
Contact information
Contact type
Expertise
Responsibility
Copied on correspondence
Project role / authority
PROJECT DEVELOPMENT – STEP 2
BAKERMANAGE – IDENTIFY STAKEHOLDERS
BakerManage captures and makes this information available to inside
and outside counsel through the SharePoint collaboration site.
The Stakeholder list
serves as a contact list
and a clarification of
roles
Evaluation of all
Stakeholders presents
opportunities to identify
potential cost savings
through shared
responsibilities or
vendors
PROJECT DEVELOPMENT – STEP 3
DEVELOP A PROJECT PLANT – DEVELOP TASKS
Whether using a standard hourly or an alternative fee arrangement, the
tasks to be completed must be identified in order to prepare an accurate
budget and schedule.
• Best Practices Guides for each practice group identify the
phases, tasks and subtasks to be completed
• The tasks should be consistent with the original definition of
scope, including carve outs
• If tasks are removed due to assumptions (i.e. plaintiff will not file
a motion for summary judgment) these should be noted in the
task list and confirmed with the Client
• The task list will be used to assign resources, identify estimated
time for completion and ultimately develop the budget
PROJECT DEVELOPMENT – STEP 3
FULBRIGHT'S ENGAGE – TASK LIST DEVELOPMENT
PROJECT DEVELOPMENT – STEP 4
DEVELOP A PROJECT PLAN – ASSIGNMENTS AND SCHEDULE
Once the list of tasks has been developed, the Legal Team must identify
the resources and milestones for completion of the work.
•
Best Practices Guides are provided in the template for recommended
resource allocation
•
Used to track Team Assignments, Status, Due Dates
•
SharePoint Alerts identify tasks not started or completed
within a specified time of the due date
•
Upon login, users are notified of their pending
tasks by project
•
Excellent training tool for associates who see the larger picture
PROJECT DEVELOPMENT – STEP 3
FULBRIGHT'S ENGAGE – RESOURCE ASSIGNMENT
PROJECT DEVELOPMENT – STEP 3
FULBRIGHT'S ENGAGE – RESOURCE ASSIGNMENT
PROJECT DEVELOPMENT – STEP 3
FULBRIGHT'S ENGAGE – RESOURCE ASSIGNMENT
PROJECT DEVELOPMENT – STEP 4
BAKERMANAGE – ASSIGNMENTS AND SCHEDULE
BakerManage provides a simple assignment tracking tool to
monitor completion of work. This includes the ability to monitor
task status, due dates and recommended hours for completion.
PROJECT DEVELOPMENT – STEP 5
DEVELOP A PROJECT PLAN - BUDGET
Clients can realize immediate cost savings by implementing a
budget to control legal spend. Although not an alternative fee,
by placing goals or constraints on the Legal Team, the
traditional practice of “bill what it takes” is replaced by “let’s
talk if you need more time”.
• Practice group-approved template budgets estimate time,
recommended resource allocations, assumptions and potential
risks
• Budgets at the task or subtask level provide estimated hours for
completion which serve as a goal or guide for team members
• The template also serves as Best Practices Guide which can be
tracked by all team members
PROJECT DEVELOPMENT – STEP 5
BAKERMANAGE – BUDGET
BakerManage’s Budget view identifies the original budget
allocations by Phase, Task and Timekeeper, and (if time is entered
daily) shows real time (updated every hour) Budget-to-Actual
comparisons.
PROJECT DEVELOPMENT – STEP 5
DEVELOP A PROJECT PLAN – BUDGET
BakerManage’s Budget view also permits filtering to view budget-toactual comparisons by Phase, Task or Timekeeper.
PROJECT DEVELOPMENT – STEP 5
DEVELOP A PROJECT PLAN – BUDGET
Budget information can be tracked and reported at the Client Level
(by Matter), at the Matter Level (by Phase), at the Phase Level (by
Task) and at the Task Level (by Timekeeper).
Phase Level Reporting
PROJECT DEVELOPMENT – STEP 5
FULBRIGHT’S ENGAGE – BUDGET
PROJECT DEVELOPMENT – STEP 5
FULBRIGHT’S ENGAGE – BUDGET
PROJECT DEVELOPMENT – STEP 5
FULBRIGHT’S ENGAGE – BUDGET
PROJECT DEVELOPMENT – STEP 5
FULBRIGHT’S ENGAGE – BUDGET
PROJECT DEVELOPMENT – STEP 5
FULBRIGHT’S ENGAGE – BUDGET
PROJECT DEVELOPMENT – STEP 5
DEVELOP A PROJECT PLAN – BUDGET
Proper real-time budget evaluation tools can streamline the budgeting
oversight process and provide historical information for more reliable
estimates:
• Effective cost controls and monitoring legal spend - searches to show Phase,
Task and Resource / Timekeeper performance against budget
• Set constraints for the Legal Team (not an AFA, but reasonable estimates for
the engagement)
• Integration of all costs related to a matter (local counsel, expenses)
• Automated Alerts to notify of pending budget overages
• Confirm that Phase / Task codes meet client's E-Billing requirements
• Opportunities for alternative fee arrangements that are based upon actual
past performance and trends, and not guestimates by either side
LEGAL PROJECT MANAGEMENT:
ALTERNATIVE FEE ARRANGEMENTS
Example of Phased Budgeting:
We propose three flat fee phases: (1) Initial Case Assessment, Answer and/or Early
Motion Practice, (2) Discovery, and (3) Summary Judgment. A fourth phase to include
trial preparation and trial (if necessary) would be established based on the nature of the
case after the summary judgment hearing. The phases are more fully detailed below.
Phase One – Case Assessment, Answer and Early Motion Practice:
Flat Fee: $12,000
Tasks would include but are not limited to:
•
•
•
•
•
•
•
•
Review Complaint
Fact Investigation/Witness Interviews
Analysis / Strategy
Removal
Answer
Scheduling Conference
Other Written 12b Motions or submissions
Informal efforts to resolve the matter prior to discovery
LEGAL PROJECT MANAGEMENT:
ALTERNATIVE FEE ARRANGEMENTS
Example of Phased Budgeting:
Phase Two- Discovery
Flat Fee:
$25,000
Tasks would include but are not limited to:
• Prepare and issue first set of interrogatories and RFP
• Respond to Plaintiff’s first set of interrogatories and RFP
• Prepare and enter standard Protective Order
• Prepare for and take Plaintiff’s deposition
• Defend up to three depositions taken by Plaintiff
• Report to client and send status reports
Phase Three – Summary Judgment
Flat Fee: $25,000
Tasks would include but are not limited to:
• Prepare Motion for Summary Judgment and Memo in Support
• Prepare Reply to Plaintiff’s Response to MSJ
• Prepare for and argue Summary Judgment Hearing
• Prepare any necessary Post-Hearing Memo in Support of the MSJ
• Report to client and send status reports
LEGAL PROJECT MANAGEMENT:
ALTERNATIVE FEE ARRANGEMENTS
Foreseeable Risks To Be Included in the Budget:
• Standard discovery disputes
• Multiple rounds of foreseeable discovery
• Vigorous adversary who will not cooperate
• Court-ordered hearings that are continued
• Unforeseeable Risks Not Included in the Budget Requiring Prior Approval of
the Client
• Time related to compilation, processing, or review of electronically
stored information (ESI),
• Bankruptcy filing,
• Removal/remand to/from federal court
• Discovery of significant undisclosed facts that require a material
amendment to the pleadings, etc.
• Appellate work, whether interlocutory or after final judgment
• Execution on a judgment
Monte Malone
David Rueff
PROJECT MONITORING
More info can go here
PROJECT MONITORING
FULBRIGHT’S ENGAGE
PROJECT MONITORING
FULBRIGHT’S ENGAGE
PROJECT MONITORING
FULBRIGHT’S ENGAGE
PROJECT MONITORING
FULBRIGHT’S ENGAGE
PROJECT MONITORING
Using LPM to keep
AFAs Profitable
Jan 25, 2013
Monte Malone
Mike Burks
David Rueff, Jr.
More info can go here