“We see that people in law firms are fighting for the billable hour and it may be higher hourly rate lawyers who are grabbing those hours as opposed to lower rates, so we’re watching that as well,” said Quovant president Michael Sheridan.
As the novel coronavirus outbreak drives corporate legal departments to look for new ways to rein in costs, some in-house leaders are turning to legal spend management firms to suss out additional savings.
One such firm, Quovant, has been comparing how lawyers were handling cases pre- and post-pandemic in an effort to identify potential cost savings for legal departments, according to the Nashville-based company’s president, Michael Sheridan.
Widespread court closures, fewer in-person depositions and a dramatic reduction in travel costs have “shrunk the average size of an invoice” that legal departments have been receiving from their outside law firms during the pandemic, he said.
“We’ve had clients who have had travel costs go to zero. If a third of your outside legal spend was associated with lawyers on travel time or incurring travel expenses, that’s gone away,” Sheridan added.
But he cautioned that general counsel should be on the lookout for costs to climb in other areas.
“We see that people in law firms are fighting for the billable hour and it may be higher hourly rate lawyers who are grabbing those hours as opposed to lower rates, so we’re watching that as well,” Sheridan said. “Who is doing the staffing of the cases and what’s the hourly rate that’s being done and is it appropriate to be done at that rate?”
Sheridan also noted that some in-house counsel have less time these days to keep an eye on outside legal spending, especially if they’re in industries that have suffered more than others during the pandemic and are focused on store closures, layoffs and other types of unplanned work.
“They have less time to pay attention to the actual nuts and bolts of what’s going on in the case, who’s billing what in the case and is the work being done appropriately for that given case,” he said.
Mark Tochtenhagen, senior vice president of product at Quovant, stressed that his company doesn’t see itself as being “punitive to law firms.”
“Law firms generally like us. We answer questions. We get them paid faster, etc. But in the beginning of the relationship we see a lot of direct cost opportunities as law firms try to figure out how to comply with client guidelines,” he said. “Over the course of that relationship, that behavior changes and they learn to comply better.”
According to Tochtenhagen, Quovant was able to save a new client $120 per invoice initially and, over time, the savings dropped to about $20 per invoice as the law firm’s “behavior got better.”
“That particular example, over the course of a relationship, would be worth about $1.38 million,” he said. “When you factor in the indirect savings of that behavioral change, it’s actually significantly more.”