Risk Update

Outside Counsel Guidelines — Industry Survey Highlights OCG Headaches & Heartburn

Results of a survey commissioned by the Association of Legal Administrators (ALA): “Law Firms Feeling Headaches from Outside Counsel Guidelines, Struggling to Comply, Report Says” —

  • “More than 80% of corporations reported they use some form of OCGs to manage the work and billing practices of their outside law firms… Legal departments view OCGs as one of the most effective tools they have for controlling their outside counsel spend, typically one of the largest budgetary line items that corporate legal departments face. OGCs are also a highly effective means of enforcing the kinds of change that legal departments have been asking for, but which many law firms have been slow to offer.”
  • “There is no such thing as a standardized set of guidelines, nor are clients interested in trying to standardize them. OCGs will undoubtedly vary from client to client, and often even from matter to matter even with the same client. It’s the client’s chance to customize the kind of legal service they expect to receive; and not surprisingly, the clients want to take full advantage. This puts a large burden on law firms to read, interpret, clarify, implement and follow the guidelines for each individual matter. Consequences for failing to comply can range from delays in payment to legal action or even to being fired.”
  • “Nearly every firm that is subject to OCGs experiences some degree of invoice rejection as a result of non-compliance. About 43% of law firms see between 5% and 10% of their invoices rejected due to compliance issues. Shockingly, almost 36% of firms see 20% or more of their invoices rejected or reduced due to compliance problems. This is staggering.”
  • “Simply put, law firms need to get better at tracking, managing and complying with OGCs. Less than one-quarter of law firms report having a consistent process to review, analyze and document OCGs as they come in… Worse yet, some 23% of law firms do not communicate OCGs to their attorneys at all.”
  • “Many law firms will point to the fact that they lack the staffing or the technological acumen to manage OCGs. But rather than providing an excuse, this highlights an area of needed investment. These firms have clearly identified a shortcoming in their service delivery model; therefore, the next step should be making plans to address this need. This should, at a minimum, consist of the following:
    • All OCGs are analyzed immediately upon receipt and checked for conflicting guidance from the same client on the same matter so clarification can be sought if needed.
    • OCGs are summarized and circulated to, at least, all partners working on the effected matter, especially the billing and/or relationship partner.
    • Partners are held accountable for acknowledging receipt of the OCGs and disseminating that information to their teams as appropriate.
    • Processes are implemented across the firm to ensure ongoing compliance with OCG terms.”
  • “Building the staff, tech stack and procedures to effectively comply with OCGs is, without question, a burdensome task. But the alternative is untenable.”