Software Solutions to the Billable Hour
Almost everyone in the legal community seems to hate the billable hour. Associates grumble that it turns them into machines. Clients complain that it is used to pad bills. Legal ethicists claim that it encourages fraud. Alas, according to a recent article on law.com, it seems that complex, database-driven software may now provide a solution.
At heart of the new software are complex mathematical models that help firms forecast what it will cost to perform a certain project, and thereby determine if it makes sense to offer an alternative billing arrangement for that project such as a flat fee. Available software packages include Dashboard from Redwood Analytics, proCube Legal Ease from Satori Group, Elite from Thomson, and Expert from Aderant.
The benefit to clients from flat fee billing is not necessarily lower costs as one might think. Instead, what clients say they really like is the predictability. That is, with a fixed fee (with perhaps some adjustment as a matter proceeds), explains Robin H. Sangston, assistant general counsel of Cox Enterprises Inc., there's "the peace of mind of knowing there is a set amount of money you're going to be spending."
Two firms cited for innovation in the area of alternative billing arrangements are McGuireWoods (which uses Thomson's Elite for forecasting) and Kilpatrick Stockton (which uses Dashboard from Redwood Analytics). Indeed, McGuireWoods last year launched an advertising campaign to publicize its alternative billing arrangements (see archived posts from the JD Bliss blog here and here).
Placating clients seeking predictable legal budgets is not the only motivation for developing alternatives to the billable hour. There's also the bad PR from getting accused of overbilling, or worse, getting caught. As was recently reported (see earlier post here), Matthew Farmer, a former junior partner at the Chicago law offices of Holland & Knight, recently resigned from the firm amid accusations that the firm had inflated the number of hours he had worked in connection with a litigation matter. Holland & Knight denies the accusations but certainly cannot be happy about the flap getting into the press. The law.com article also cites the cases of William P. DiSalvatore who resigned as partner from Wilmer Cutler Pickering Hale & Dorr in New York after admitting to creating fictitious billing records, and Patrick Carmody, a former tax partner at Willkie Farr & Gallagher in New York, who resigned and was later suspended for one year by the New York State Bar Association after he was caught billing $30,000 in personal calls to clients.
Read the full law.com article here.