Tracking Legal Costs with Task Codes: Different Firms Take Different Approaches (Part 2 of 3)
A slightly different version of this article, which I wrote with Jonathan Groner, originally appeared in Of Counsel, the Legal Practice and Management Report.
Increased client interest in budgets and alternative fee agreements has large law firms analyzing past, present, and future work to get a handle on what it costs to complete certain transactions, or conduct due diligence, or prosecute or defend a lawsuit. As firms break down large complex legal matters into smaller sub-tasks, they must answer three key questions:
- Should they use UTBMS or another system?
- How granular and detailed should the codes be?
- When estimating future costs, how much weight should firms put on past experience?
Different firms have different answers to each of these questions.
UTBMS or another system?
Michael Tuteur, the head of litigation at Foley & Lardner, says that at his firm the UTBMS codes “are what’s principally being used” to understand past costs and to help clients estimate future legal costs. “Most of the time, the basic task codes are used, not the sub-codes.” (Full disclosure: We have consulted with Foley & Lardner on both legal project management and on their use of task codes.)
UTBMS codes “are not perfect,” Tuteur says, “but they can help you slice and dice so you can tell clients what a summary judgment or a deposition will cost. The challenge is that you need to be systematic, you need to learn how to code everything in a uniform way.”
He cited the example of the way doctors use CPT (Current Procedural Terminology) codes to classify medical, surgical, and diagnostic services. CPT coders are trained to use the medical system, and Tuteur has been training his assistant to review UTBMS coding for one large client before bills are sent, so that the reports from all lawyers on his team are consistent.
Tuteur says this system is not the “pure answer, perhaps,” but that it does provide reliable data for his clients without imposing too great an administrative burden on busy lawyers.
At Nixon Peabody, litigation partner Sam Goldblatt has been using the UTBMS task codes ever since they were adopted in the mid 1990s. He is an enthusiastic supporter of the system and of the use of past phase and task data to forecast future fees and expenses. Recognizing that consistency in execution is key, he says, “Everyone working on matters with me charges time to the litigation phase, and within that phase, to task codes. All clients receive bills coded to the UTBMS, regardless of whether bills are sent electronically or on paper.” He says clients readily accept bills in this format, even if they don’t request them initially, once he explains the value it adds in budgeting, tracking and forecasting.
“There is no doubt that phase and task billing dovetails nicely with detailed phase and task planning, resulting in a more effective and systematic approach to litigation,” he adds. “Properly implemented, the UTBMS system could allow clients to compare cost effectiveness among law firms, at least at a high level. “I welcome the idea of my clients comparing our firm to others using comparable phase and task code sets.”
At Fenwick & West, a task force is spearheading that firm’s efforts to develop a “rational process” for the use of new business models, such as alternative fee arrangements, according to Mark Stevens, a partner and executive committee member and chair of the firm’s pricing and business initiatives committee. The firm decided to start with the UTBMS codes and then to develop an overlay of additional task codes on top of them in areas such as corporate transactions, where it found the UTBMS codes to be not specific enough.
“We realized that we as a firm and as an industry will be pushed by clients to be much more sophisticated,” Stevens says. “Breaking up our work into discrete units and into functional descriptions is the only way we can do that. So now we know that a complaint is, historically, X number of dollars, and a Markmanhearing is Y number of dollars. We have developed a very large data set of hundreds of matters, including but not limited to different types of litigation, initial public offerings and other securities offerings, venture financings, merger transactions, and transactional IP such as patent, trademark, and licensing.”
Stevens says this work “is never done” because “it’s not a project, but a shift in how we do business. This is integral to legal project management, integral to process improvement, and it drives efficiency at the firm.”
However, Stevens adds, although the process started with the UTBMS codes, “we began to see blank spots” that were not covered adequately by the codes. “So we added our own set of proprietary task-based codes that are standard within the firm.” For example, UTBMS has a category for “document review,” but that can cover a great many types of work, from very basic paralegal work to highly sophisticated determinations about documents. The process, Stevens says, is so specific that each practice group at Fenwick & West uses its own proprietary task-based codes when needed.
While some firms use UTBMS in its pure form, and others add overlays, a third category of firms are developing their own task code systems for internal use.
At Miami-based Bilzin Sumberg, partner Al Dotson, head of the land use and government relations practices, noted that this firm decided, on a practice-group-by-practice-group basis, not to use UTBMS, but rather to develop its own proprietary in-house method of coding. (More full disclosure: Bilzin Sumberg is also a LegalBizDev client.)
“We looked at other methods, but we felt it was important for us to tailor our task codes to reflect what we need to measure and what we need to report to our clients,” Dotson says. “Each practice group has its own set of codes, with some commonalities.”
Similarly, at DLA Piper, Baltimore-based Mike Barnes, Senior Director of Business and Program Services, says some type of coding is crucial because, “there’s no other way to capture the tasks that attorneys perform.” But if lawyers are given 600 possibilities for coding their time, they will throw up their hands and not use the system. So Barnes and Stacey Snowman, a partner in the Firm’s Palo Alto office, went to the heads of each practice group and had them come up with 12 to 15 codes that are unique to the practice group’s work.
“For the most part our attorneys come up with the proposed pricing for each matter,” Barnes says. “Other folks are brought in when the topic is more complex. Eventually, we will have a group of non-attorney staff who will focus on pricing. After all, project management is not a core skill for many attorneys and providing strong administrative support in this area can help them focus on delivering excellent legal work. You can be more profitable working that way.”
Part 3 will conclude this series, and provide a link to a pdf of the complete article.