Why Outside Counsel Budgets Should Be Like Shared Cookies
There is a tried-and-true method to make sure children are fair when dividing a cookie. One child divides the cookie in half, and the second child chooses which half to eat.
A similar method can be used by in-house counsel trying to get an accurate budget from outside law firms on a significant legal matter, according to law department management consultant Rees Morrison and Boston business professor Paul Morrison. They outline their idea in a Legal Times article on how to avoid pie-in-the-sky budgets.
The first law firm—the authors call it the “budget firm”—is asked to prepare a budget that includes the assumptions used in the drafting. The budget firm is told a second, undisclosed firm—the “review firm—will get first dibs on the matter and will be paid the amount in the budget if it wants the job. If the second firm declines, the budget firm gets the job.
“The budget firm will try to be realistic, because a fat budget will be snapped up by the review firm,” the article says. “And if the review firm declines, the law department has to that extent obtained a market-based measure of the leanness of the proposed budget.”
