After defining value and scoping the work, the next step is assessing who is best
suited to perform this work, and on what terms.
Who Should Perform the Work
Most inside counsel have extensive experience in selecting law firms – the “who”
part of the equation – and much has been written on this topic. This piece will not go
into great detail here, other than to note two brief points.
;First, it is important to consider not just quality but cost. How do you
assess cost? It is not just about rates – that’s only half of the equation. Rather,
you assess law firm cost via: comparative all-in fee constructs, willingness to put
“skin in the game,” and via track record on prior value-based fee arrangements
the firm’s offered you or for other clients. If you simply send a new matter to a
firm and don’t thoroughly assess comparative budget or cost info up front, there
should be little surprise if costs are not ultimately well managed.
;Second, consider who the right service providers are to handle the matter
(or components of it). Some matters may require the best-known experts
in the world and others may not. Perhaps you want multiple law firms or
vendors in the mix -- or only associates or only partners. As clients increasingly
“unbundle” work, the market is seeing extensive experience across the spectrum
of providers, including bringing certain pieces of the work in-house, assessing
how to get the highest use from each contributor to the matter, and stretching
overseas for the right types of projects.
On What Terms
The other half of the “assessing” equation – “on what terms” – raises a host
of options in terms of value-based approaches. There are a variety of possibilities,
depending upon how the work is segmented and whether outside counsel compensation
is correlated in some way to outcomes delivered.
At the outset, though, it may be helpful to distinguish some commonly used
approaches that are not typically considered value-based fee structures, including
discounts off hourly rates, tiered volume discounts, and use of blended hourly rates.
While helpful in part (because they’re an “easy” short-term triage) none of these fit
the definition of a value-based fee structure as a construct that assesses the value of
the service from the client’s perspective – apart from law firm-centric measures like
profitability, utilization rate, hours worked, or cost to produce. A list of options that do
fit this definition is set forth below.