The Productivity Commission is set to hand down its final report into Australia’s system of civil dispute resolution, including a study of the real costs of legal representation. Coupled with the level of demand for legal services and the often prohibitive cost of accessing justice, and the result is the legal industry is under intense scrutiny. The ‘price’ you pay for ‘value’ is now the driving philosophy behind dramatic shifts in legal project management and costing.
American investor Warren Buffett, once said: ‘Price is what you pay; value is what you get”.
With this in mind, Roger Quick, one of Queensland’s leading legal costs experts and co-author of Quick on Costs , says a move away from billable hours to a legal project management approach will help firms work more effectively and collaboratively with their clients. We chatted with Roger to find out how firms can project manage their way to effectiveness.
Background to costing reforms
Recognising that accessing justice can be too slow, too expensive and too adversarial, the Productivity Commission has embarked on a 15-month public inquiry into the Australian justice system. The inquiry will help the commission better understand how we can improve the experience of clients, constrain costs, address power imbalances, reform court and tribunal operations and meet the civil legal needs of disadvantaged Australians.
Giving evidence before the commission in June, 2014, Quick provided his views on legal costing and discussed methods that are likely to lead to greater access to justice and better case management.
Quick says that traditionally, lawyers have been focused on ‘selling’ their legal services to the consumer – an approach which he believes is outdated.
“It should be about the purchase and performance of legal services by the client, not about what the lawyer is selling and most definitely not about the ‘billable hour’,” he says. “The best way to deliver these services effectively is to apply project management principles to the legal service process.”
What is Legal Project Management?
Legal Project Management (LPM) provides a way of dealing with the three competing constraints of providing legal advice – time, cost and scope. According to Quick, the primary questions clients want answered when they are seeking legal help are:
1) How long is this going to take?
2) How much will it cost?
3) Will there be any extras?
4) How do we deal with problems that arise?
5) Am I getting a good deal?
With the current billable hour model, these questions cannot be easily answered with any degree of certainty.
As Quick explained to the commission in June, the way lawyers’ costs are valued retroactively is like the flight of the oozlum bird – a mythical Australian bird that flies backwards and can, “poise in the middle of the air while the world goes around beneath it”.
Applying project management principles to the delivery of legal advice provides an effective way of scoping work to deliver quality, timely advice at the same time as giving clients confidence and certainty about the way their lawyers charge fees and conduct their work in proportionality to what they are charged.
“The consideration of legal costs must be prospective rather than reactive,” Quick says. “Ideally, the quantification process should take place at the outset and be shaped by scoping and estimating and be driven by budgeting. Communication and collaboration are also essential.”
How do you project manage legal work?
Do the principles apply equally to transactional and litigation matters? Quick says, yes, they can.
“We need to change the way work is initiated, planned, executed and finished in both litigation and non-contentious matters. If the principles are properly applied to particular work, the delivery of work will be efficient, effective and valuable to the client.”
The trick is to apply the principles on a case-by-case basis. Making alternative financial arrangements, outsourcing certain tasks, using junior lawyers and barristers more often, charging fixed fees, abolishing or minimising the use of the time recording model, exchanging litigation budgets at the outset of a case – these are just some of the methods that can be used to project manage a client’s work.
The benefits of Legal Project Management (LPM)
Used effectively, LPM can bring about the following changes:
- Efficiency and collaboration. Applying a disciplined project management approach to the purchase and performance of legal services to provide a much better chance of winning and keeping clients.
- Alignment of lawyer and client aims. Creating a more open relationship where one understands the problems of the other.
- Prospectivity. Budgeting and costing at the outset meaning greater certainty.
- Proportionality. Where the ends justify the means.
Putting the client first in this way, lawyers can also:
- Align deliverables to business values.
- Improve budget planning to create predictability for clients.
- Create a new synthesis between the practice of law and business.
As with any type of systemic change, training and education will be crucial for fostering an awareness and understanding of the benefits of project management. The underlining message is: don’t just sell legal services, create value for your clients and, like Warren Buffett said, they will be willing to pay the price.
To find out more about Roger Quick’s LPM recommendations, download Thomson Reuters Insight’s free White Paper, The cost of accessing justice – Roger Quick on law firm billing or sign up to a free trial or subscribe to Quick on Costs subscription service available on Westlaw AU or in looseleaf format.