Procuring Legal Services on a Budget
By David R. Cook & Chadd L. Reynolds
From interpreting contract language to settling disputes and claims, contractors often rely heavily on legal services, which can be expensive. How can CFMs obtain these essential services and stay within a budget?
Rethink Attorney Compensation
Law firms traditionally charge by the hour. While high fees may not be an issue for some companies, it can cause hardships on others – to the point where they may avoid consulting with an attorney or forfeit asserting their legal rights altogether. Alternative compensation strategies can help lower legal costs by more closely aligning the company’s interests with those of its legal counsel.
By aligning the interests of each party, alternative compensation strategies can satisfy both attorney and client: Clients typically save money upfront, and the attorney will assume some risk in exchange for potential upside. Let’s take a look at common alternative compensation arrangements.
Under this approach, the attorney receives a one-time or periodic sum that covers all or part of a legal matter. CFMs favor this approach because it allows for some certainty with regard to costs. While attorneys assume the risk that the matter will involve more time and cost than budgeted, experienced attorneys will know how to set a reasonable fixed fee and efficiently reduce their costs.
In this strategy, the attorney receives a portion of amounts recovered in connection with the matter. As the client’s recovery increases, so does the attorney’s compensation. In addition, unless the client agrees to pay certain costs, it encourages attorneys to complete matters quickly and efficiently.
Hybrid Contingency Fee
This approach combines attributes of contingency fees and hourly fees. In exchange for a lower hourly fee, the attorney is paid a contingency fee on any recovery, though at a lower contingency percentage.
This approach can take many different forms, but it ultimately bases attorney compensation on performance. For example, part of the payment can be satisfied with hourly fees, with the remainder withheld contingent upon success in the matter. Another example involves the payment of a lower hourly fee in exchange for a bonus payment upon satisfaction of performance criteria.
A great way to keep legal costs down is to establish clear expectations with legal counsel and ensure attorneys understand goals and expectations. This helps to reduce unnecessary costs due to confusion or differing philosophies. Otherwise, legal counsel may focus on facts not relevant to the company’s objectives or pursue a legal strategy with which the company doesn’t agree.
Monitor Costs & Quality
CFMs should also review the allocation of work within a law firm. The costs of certain types of legal services or matters can be offset by utilizing other resources within the firm. Good legal counsel should be upfront about the cost-benefit analysis to determine where and how costs to the company can be minimized.
One way to monitor costs is to review invoices and determine how certain work is allocated to different individuals within the law firm. For example, time-consuming legal work that does not require legal experience, such as research, can be handled by the firm’s associates or paralegals who bill at lower rates than partners.
If the company has multiple matters with legal counsel, each matter should have its own billing code. All legal costs should be associated with the associated billing code. This will assist attorneys when they seek to recover fees and litigation costs.
Whether it’s changing the compensation arrangement, communicating expectations, or reviewing legal invoices, CFMs can play an important role in procuring legal services without busting the company’s budget.
David R. Cook is a Partner at Autry, Hanrahan, Hall & Cook, LLP in Atlanta, GA. A previous author for CFMA Building Profits, David is a member of CFMA’s Georgia Chapter. He works in the firm’s construction law practice group, advising clients on contracts, commercial and corporate transactions, dispute resolution, litigation, and arbitration of construction claims. He can be reached at 770-270-6974 or email@example.com. For more information, visit ahclaw.com.
Chadd L. Reynolds is an Associate at Autry, Hanrahan, Hall & Cook, LLP in Atlanta, GA. Chadd works primarily in the construction law division and has legal experience in drafting complaints, answers, motions, and briefs for cases involving complex construction disputes, delay claims, structural defects, contractual disputes, surety claims, and liens. He can be reached at 770-818-4444 or firstname.lastname@example.org. For more information, visit ahclaw.com.