Am Law 200 Firm Gains Competitive Advantage and Charge Back Model to Recoup Costs for eDiscovery Managed Services

Problem: This 250 attorney, Am Law 200, Washington D.C.-based firm had specific areas in which it was struggling; in particular, they were finding it difficult to keep current with technology, flexing to meet demand, and recovering costs for the internal systems and storage related to litigation support services (e-Discovery).

The firm had many legacy databases on the firm’s infrastructure, utilizing dated software and amassing TBs of storage for which they were not recovering any costs from clients; the firm was only able to bill for pro- fessional service time for their litigation support employees. The firm wanted modern applications, a reliable infrastructure that got them out of the business of being a client data center, and the ability to charge back hard costs to their clients–the billing model needed to overcome attorneys’ objections that internal costs are non-billable.

Solution: The firm retained Mattern & Associates to compile a comprehensive report that detailed the current charge back rate for those professional service hours and an estimated cost of performance under a new Managed Services Agreement with a 3rd party vendor. Furthermore, the firm required assistance with modeling various recovery models that would allow the firm to stay below industry benchmark costs as well as recover costs from any new Managed Service arrangement.

Mattern’s consultants determined the firm’s total and unit costs for the litigation support/eDiscovery oper- ations for the in-house and outsourced services, and based upon these costs, developed different pricing models (unit, hourly, flat fee) for the recovery of these costs. Mattern proceeded to conduct a “flash” survey to obtain recovery costs from peer firms for benchmarking purposes.

Results: With Mattern’s recommendation, the firm was able to create a hybrid charge-back solution that is able to recoup the cost of shifting to a 3rd party provider incorporating a hard cost model versus the firm’s previous soft cost overhead model. In the first three months, the firm increased their recovery on the litigation support/eDiscovery services to five figures per month while retaining the hourly rate for professional service time. This additional recovery covers the new, hard costs of the Managed Services agreement while they subset their legacy internal systems, infrastructure, and associated costs.

In addition to improving realization, the firm is also realizing these additional benefits:

  • Reducing future capital expenditures on infrastructure as well as attaining added security
  • Receiving the latest software tools
  • Realizing a true disaster recovery plan
  • Demonstrating external hard costs delineated by clients/matters that reduce internal and external write-offs
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