Given the recent trends around Outside Counsel Guidelines (OCGs) becoming more common while also becoming more complex and demanding, you would think there would be a bevy of providers bringing new technology to the market to help firms address this issue. For now, that seems to not be the case, with limited exceptions. This is forcing too many law firms to cobble together their own solutions, utilizing basic tools (e.g. spreadsheets), alongside generic tools and home-grown options.
Defining the Need — Billing Guidelines vs. Outside Counsel Guidelines
First let us define the need for reviewing and tracking OCGs. In the past, clients would issue relatively simple billing guidelines. These documents focused more on the mechanics of how invoices should be structured and submitted, primarily so e-billing systems could process them. As billing guidelines grew more complex, and the number of e-billing systems that firms had to comply with increased, products like Thomson Reuter’s eBILLINGHUB were created. Systems like this allow firms to consolidate and simplify compliance with many different e-billing system rules under a single environment, including validating invoices and time entries against time and billing-based OCGs. This technology can reduce rejections by 60% and write-downs by 50%, the company says.
Related solutions like ALP Development’s TimeCheck can improve the quality of time narratives prior to month-end prebill end e-billing phases. It can identify violations in time entries as set forth by clients, alert the timekeeper of these issues and allow them to address them contemporaneously. This can reduce the number of corrections needed during the prebill process while also teaching timekeeper better narrative habits. TimeCheck also allows the billing attorney to review and edit time entries throughout the month, versus having to wait for the prebill. (Note: Cael’s BillPrep software is another example that streamlines billing and improves compliance with client billing guidelines. IntApp’s Time software for time entry also has similar features when used in conjunction with IntApp Terms).
Outside Counsel Guidelines
OCGs in contrast, cover a wide variety of subjects, well beyond the mechanics of billing. This includes budgets, accruals, limits on what a client will and will not pay for (e.g., first-year lawyers and online research), and sometimes even prescribing use of specific hotels. Even beyond those requirements, some OCGs even dictate acceptable and unacceptable language for time entries. These needs have been documented repeatedly, in numerous articles such as The Future of Change is Client/Law Firm Collaboration and Outside Counsel Guidelines: Navigating the Changing Landscape of Client Demands. All of this demonstrates a clear need for more advance technology solutions.
These more complex demands have driven a need for more robust reviewing and tracking of the various terms within these documents. At its core, the emerging challenge is for firms to understand and comply with the terms from the OCGs, since they are effectively and sometimes explicitly, becoming contracts. Failure to meet these requirements can lead to various consequences, including loss of fees and damage to a valuable client relationship. Firms that have stepped up to meet this need have assembled teams and developed extensive processes for reviewing and capturing the requirements, much like a contract management approach.
Meeting the Need
When a client OCG comes in to a firm (and this can happen in many ways), the firm should have a defined, consistent process for managing them. Since OCGs have a variety of clauses, numerous departments at a firm need to weigh in, therefore the first requirement is for a workflow management capability to handle the review and approval process. This workflow needs to manage multiple, simultaneous threads in parallel, and then bring each thread back into a final sign off. The workflow also needs to manage exceptions and document edits to OCGs. The review can no longer be limited to the Finance or Billing departments.
From a moderately advanced perspective, it would be a nice to leverage some level of artificial intelligence (AI) to determine the terms contained within each OCG. That functionality would allow firms to parse out clauses for review and to identify which clauses may need to be negotiated, reducing the amount of manual review needed. One frequent example is that of Most Favored Nation clauses; another example is security requirements. Sometimes these requests are not feasible or run counter to a firm’s policies and need to be negotiated and revised. And these revisions need to be tracked.
Once the document is in final form, the various requirements need to be captured in a database for future use, be that for alerting or reporting in order to ensure compliance. As time passes, firms need to make sure they stay in compliance with the contract that is the OCGs, especially as new lawyers become involved in different types of engagements with a client.
Of course, capturing all of these guideline documents means firms will need a repository of them. Integration with a document management system (DMS) is one option, with the bonus value that having a single, searchable repository will provide. Additionally, firms should fully expect clients to update their OCGs from time-to-time and will need to be able to compare the full documents against each other. One firm I spoke with reported an embarrassing situation where a practice team reviewed an OCG and told the client they needed some modifications before they would be willing to sign it. The client then told them it was too bad because their firm had already previously agreed to these OCGs (in a different practice area). This could have been avoided in a few ways but having an OCG review technology and/or at least a central repository for storage, would certainly minimize such exposure.
In another example, a corporation’s guidelines included a cap on paralegal rates. After performing an audit, they discovered that one of their panel firms had been submitting bills that exceeded this cap. The client reached out to the firm and requested a refund of the total overbilled amount. While it was unintentional, overbilling clients will obviously erode their trust of this firm.
Beyond determining the contents of a single OCG, it would be helpful if the tools had data analytics components to understand the requirements across all client OCGs so firms can create processes and policies to better comply across all clients. Determining commonalities and trends in the clauses being included would be useful for firms as they prioritize their technology and systems.
There also needs to be an alerting tool to send out notices to various parties about needed actions. For instance, many OCGs require new rates be provided by a certain date (e.g. December 1st) or they won’t allow an increase. This functionality is very similar to that of contract management software.
A long-run need will be to track compliance by the responsible parties. For instance, if accruals are required, firms will eventually want to be able to track compliance on that for each client.
What’s Out There?
The earliest to market with an OCG software tool was IntApp. Their “Terms” product was released in April 2016. Being early to market the tool’s early releases were basic, but it has since evolved. It covers the main needs outlined above, including workflows for reviewing and approving OCGs as they are presented to firms. IntApp recently added an AI-lite functionality that reviews the documents to determine which clauses they contain. Based on initial assessments, the tool is already discovering which clauses are more unique versus the more common and general market-level OCG requirements.
An added feature, beyond what firms have been doing, is possible via their time-entry tool. If you have both the IntApp OCG and time-entry tools you can enforce OCG requirements at the point of time entry (similar to TimeCheck, mentioned previously). This could be a useful way to drive compliance and avoid lost fees or damaged client relationships. However, it will take time and training for firms to fully realize the value of that functionality.
Another more recent entrant into the OCG market is Bellefield, which released its OCG Live product to the market in November 2018. Prior to that, several early adopter firms were using the product. A review of the product shows a strong emphasis on enforcing compliance with guidelines at the point of time entry. Of course, you need to have both of their products to do that. Otherwise you can do nightly checks for compliance, prior to submitting any electronic invoices. The product also has an add-on manual service for creating summaries of each OCG for firms that do not produce those on their own.
There is a definite need for technology to support the review and management of OCGs. E-billing compliance has been largely tackled with solutions like eBILLINGHUB and it may be possible to leverage document analysis tools (employing AI) to assist in the review of new OCGs, identifying common components within an OCG that the firm has already identified how to address, as well as more easily identify new or “outlier” components that may be unreasonable or difficult to enforce compliance with. This could assist with initial review and negotiation but may not help in terms of compliance once an agreement has been reached.
All in all, the market is just beginning to bring viable end-to-end compliance options, but more are needed. For instance, Cael, producers of the Elevate suite, is purportedly working on an OCG offering presumably based on LexPredict’s AI technology which they acquired in late 2018.
In the interim, it is likely that firms are managing this process manually, building their own tools or using point solutions that address some of the issues, but not across the spectrum of potential issues in managing and complying with outside counsel guidelines.