Tips for Creating Outside Counsel Guidelines

Outside counsel guidelines are pivotal to developing a strong relationship between in-house legal teams and outside counsel. Whether you are just getting started on creating outside counsel guidelines, or are in the process of updating already existing ones, the following outside counsel guideline tips will set you and your organization up for success.

What Are Outside Counsel Guidelines?

Outside Counsel Guidelines (OCGs)—also known as billing guidelines— are agreements between in-house legal teams and their legal service providers that provide instructions on how work should be managed. This allows both parties to focus their attention on what matters most: solving important legal issues for the in-house team’s business.

Below are a few best practices for creating outside counsel guidelines that are clear and comprehensive, based on Brightflag’s experience working with hundreds of legal teams to improve their own guidelines. For a full breakdown of OCG best practices, be sure to download our 2023 Sample Outside Counsel Guidelines document, which features an in-depth look at how to develop and update your own OCGs.

Setting the Framework

OCGs typically cover four thematic areas:

  • Resourcing: Who at the vendor should be doing the work (seniority and diversity of fee earners).
  • Activities: For what work fee earners should and shouldn’t charge.
  • Commercial terms: Compliance with agreed rates and budgets, limits on when and how much rates can increase, etc.
  • Billing hygiene: When and how to bill, requirements for submitting budgets and accruals (unbilled estimates), etc.

Within each of these categories exist rules and guidelines. A rule is a hard requirement that is always enforced, whereas a guideline applies to certain situations and can fall to the invoice reviewer’s discretion as to whether it will be enforced.

An example of a rule would be agreed-upon timekeeper rates—any charges above the approved rates will always be rejected.

A guideline, on the other hand, could be a clause that stipulates that outside counsel should only charge for research if directed to by an in-house attorney. In this example, a charge for research may be approved, but only if certain conditions are met.

Finding the Right Fit

Now that the general framework has been established, it’s time to explore a few outside counsel guideline tips regarding specific rules and guidelines that every organization should consider including when crafting their own set of OCGs:

Staffing (Guideline)

As part of staffing guidelines, in-house teams will often ask to approve the outside counsel team for each matter, and be notified if a vendor wants to make a change. In-house teams will typically also ask to limit the number of fee earners working on each matter to reduce time spent relaying information. Additionally, they will ask outside counsel to assign work so that all fee earners are operating at “the top of their license.” This ensures that all law firm staff are doing the most advanced work possible within their role.

Research (Guideline)

Because outside counsel is expected to bring in-depth knowledge to the table, in-house teams often do not expect to pay for basic research into known law.

That said, research is sometimes required when addressing niche or new areas of law. To address this, OCGs stipulate that fee earners should seek pre-approval before performing and billing for research.

Timekeeper Rates (Rule)

Outside counsel should submit proposed rates for each fee earner in advance of working on the legal team’s matters. And legal teams should specify that rate increases can only be submitted once per year, with clear reasoning, so that each increase can be assessed on its own merit and incorporated into the budget.

Block Billing (Rule)

Block billing occurs when fee earners describe multiple different tasks in one invoice line item. Block billing makes it difficult to understand how much time each individual task took and whether the outside counsel resourcing was appropriate.

In-house teams should prohibit block billing and reject invoices with block-billed line items to discourage the practice. Outside counsel can submit a revised invoice with the block-billed tasks broken out into individual line items.

Implementation, Improvement, and Enforcement

Once the OCGs are developed, it’s time for implementation. Because it can take time for both the fee earners and invoice reviewers to become familiarized with the OCGs after they’re in place, it is typically recommended that new or updated OCGs be monitored for compliance for the first few months. Shortly afterwards, guideline enforcement and invoice adjustments can begin. OCG enforcement typically takes place during invoice review, and oftentimes with the assistance of a legal spend management system that can help identify violations of the guidelines and automatically reject or approve invoices.

Roughly five months after implementing OCGs, invoice reviewers should have a clear sense of which aspects need to be tweaked or fine-tuned to better address the work of the vendor. Because OCGs should be living documents that are revisited regularly, it is advised that they be maintained separately from law firm engagement letters to better facilitate changes, and make updates significantly easier to implement.

Getting Started

Building out OCGs is a vital step in ensuring smooth and productive relationships between in-house legal teams and outside counsel. The outside counsel guideline tips presented here provide a broad overview of what to consider when crafting these rules and guidelines.

If you would like help with creating outside counsel guidelines, or improving your existing set, download Brightflag’s newly updated, 2023 Sample Outside Counsel Guidelines.

This resource leverages Brightflag’s extensive experience working with legal teams, and features 20 best practice guidelines that all OCGs should include, as well as a full OCG template that can be used to easily develop or update your own OCGs.

With this guide in hand, you’ll have everything you need to create a more open line of communication between your in-house team and outside counsel.

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