What Do Legal Research Cost Recovery and Scans Have in Common?

What do legal research cost recovery and scans have in common?  More than you think.

Recently we had an article published in The American Lawyer –coauthored by William Josten of Thomson Reuters titled “Reimagining Cost Recovery: A New Strategy for Higher Realization.” In the article, Bill and I discuss the increased realization firms receive when hard costs are used for recovery and how Westlaw is starting to shift some of their legal research costs from a soft cost recovery model to the hard cost recovery.

Much has been written and discussed about the demise of the recovery of legal research costs from clients, usually following the path that cost recovery is dead followed by the phrase “Clients never paid for our paper library. Why should they pay for our electronic one?”

True in concept but false in reality.

Clients did pay for your paper library. They did this by paying the increased number of hours Attorneys spent completing legal research using books. Nowadays this time (hours) is greatly diminished by the use of web-based legal research. Is it fair to pass along a reasonable charge for these services – absolutely. If is in a hard cost format, all the better.

The same can be said of scans and recovering those costs. Whenever we are asked by a Managing Partner or a management committee about recovering scans their argument is usually “they don’t cost anything” and attorneys won’t bill / clients won’t pay for them.

On both fronts, the statements are not accurate. There is a cost, attorneys will bill and clients will pay.

The cost side of scanning is deserving of an entire blog unto itself and clients will pay if it is presented properly and priced fairly. The analogy I use in this discussion is that 5 to 10 years ago if a client needed a document immediately, you faxed it. Did the clients pay for faxes? – Yes, at an average rate of a $1.00 per page. Another way to deliver this document was to send it via an overnight service – did the clients for this cost (hard)? Absolutely. The scan is the modern equivalent of both of these services at a much lower rate –typically $.15 per page. If clients paid for a fax at $1.00 per page or $10.00 for an overnight package, why wouldn’t they pay for a scan at $.15 a page which is accomplishing the same goal? The reason – firms are not asking.

It is a tough, tough market however the most successful firms over the next 10 years will be the ones who will align their costs with the ability to recover them efficiently. If recovery is not possible, then they must perform the services in the most cost-effective way possible.