Tips for Entering a Flat Fee Contract

Recently it was reported in the Pittsburgh Post Gazette that Buchanan Ingersoll & Rooney entered into flat fee e-discovery contract with a company by the name of D4. D4 will work with Buchanan Ingersoll’s litigation support department to handle e-discovery consulting, collections and forensics, processing, predictive coding, analytics, hosting and review. The firm is paying a flat contract price for up to three terabytes of data to be handled by D4, with the option to buy an additional plan if the firm exceeds that data limit.

The whole flat fee model is attractive but there are a few things to be aware of:

Key contract terms – Flat fee all you can eat contracts such as these must contain underusage reconciliation, monthly performance criteria, reporting and scorecards.

What happens if you build it and they don’t come? – In order to optimize the value of a flat fee contract, firm management must mandate their usage. Individual users have to be forced to send their work to the designated vendor. Issues that frequently occur are client driven vendor preferences, or the firm management does not have the mandate to force the issue.

Recovering the costs – Legal Research – A great example of what not to do.
The key to the flat fee set-up is the policy for the recovery of these costs and the pricing. An excellent example of what not to do is what has happened with legal research. Based on the Mattern & Associates 2014 Cost Recovery Survey, the majority of firms are still attempting to recover legal research costs, but the net realization of these costs is at all time low. The primary reasons given are clients’ refusal to pay and internal attorney write-offs. Both of these reasons can be attributed to the pricing policies that many firms employed to recover legal research costs under the flat fee arrangements the legal research vendors were providing.

Our recommendation is to structure the recovery cost as a hard cost pass -through (Mattern Plan B Cost Recovery) or to “net” out your true costs and pass this cost through to your clients. Additionally, educate your billing attorneys and keep the process transparent to the end users.