How to Create the Perfect Set of Outside Counsel Guidelines

You need more than a handshake agreement to build a solid foundation for the relationship between your in-house legal team and your outside counsel.

Without clear outside counsel guidelines, in-house teams risk misalignment on critical issues like how firms resource work and the kinds of work you’re willing to pay for, which results in inefficiency and higher costs.

Establishing outside counsel guidelines, also known as legal billing guidelines, is the key to ensuring law firms align with your company’s values and expectations and provide the transparency and fairness crucial for a trusting and effective partnership.

We’ve helped hundreds of corporate legal teams create or update their outside counsel guidelines in the last decade. In that time, we’ve consolidated our experience into key rules to include in your own set of guidelines. We’ve also developed best practices for developing, implementing, and, most importantly, enforcing those guidelines.

Read on to learn how to use your outside counsel guidelines to forge stronger, more aligned relationships with your external legal providers, ensuring your legal operations run smoothly and in lockstep with your corporate ethos.

What Are Outside Counsel Guidelines?

Outside counsel guidelines are a set of instructions and rules a corporate legal team provides to its law firms. In-house teams use these guidelines to outline their expectations regarding how outside counsel should manage legal matters, billing practices, budgets, diversity, equity, and inclusion (DEI), and the use of technology and other services.

OCGs set the foundation for a successful relationship with outside counsel, allowing both parties to focus on providing value to the business by solving important legal issues.

Enforcing Legal Billing Guidelines

Outside counsel guidelines set the tone for all engagements, and legal service providers must adhere to them when performing work and billing on matters.

In-house legal teams enforce outside counsel guidelines during invoice review. Legal e-billing software can assist by identifying violations of rules and potential violations of guidelines, so reviewers don’t need to find them independently.

Most e-billing systems can automatically reject invoices that violate certain rules, saving reviewers even more time. At the same time, they can auto-approve invoices that don’t have violations and meet certain other criteria, such as being under budget.

Most legacy e-billing systems require law firms to add UTBMS codes to each invoice to enforce outside counsel guidelines. This significantly reduces the effectiveness of outside counsel guidelines. Brightflag uses legal industry-leading AI to enforce outside counsel guidelines 100% of the time without law firms doing anything differently.

The Difference Between Rules and Guidelines

In-house teams support every part of the business and rely on outside counsel to deliver a wide variety of legal services. For this reason, creating hard-and-fast rules that apply to every legal matter isn’t always practical. In these cases, in-house teams can ask outside counsel to follow discretionary guidelines which apply in most, but not all circumstances.

Not billing for legal research is an example of a guideline. In-house teams do not expect to pay for basic research; however, original research is sometimes necessary for matters related to niche or new areas of law.

You can reject billing for basic research but approve specific research charges where the attorney feels necessary. A rule, on the other hand, is always enforced. Charging according to agreed timekeeper rates is an example of a rule. You would reject higher timekeeper rates in all circumstances.

20 Outside Counsel Guidelines Every Corporate Team Should Use

Outside counsel guidelines typically cover four areas:

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

Resourcing Guidelines

Resourcing covers who should be working on the legal team’s matters. It’s best practice to have the following resourcing guidelines in place.

1. Staffing (Guideline)

The legal team hires outside counsel for their specialist expertise. Often, members of the outside counsel team have valuable knowledge of your business and preferred ways of working due to your long-standing relationship with them.

In-house teams typically ask to approve the outside counsel team for each matter and be notified if the vendor wants to change the team. This allows them to encourage optimal staffing with fee-earners who have the subject matter expertise and knowledge of the team’s business to get the job done.

The in-house team usually also asks that the number of fee-earners working on any one matter be kept to a minimum to increase the depth of knowledge and reduce time relaying information back and forth.

It’s important to ensure that outside counsel assign tasks to the right level of seniority. Encourage law firm staff to operate at the “top of their license,” with junior lawyers doing the most advanced work possible by junior lawyers and ditto for all other fee-earner roles.

For example, drafting discovery motions is better addressed by junior lawyers than senior partners. On the other hand, senior partners should put their deep expertise and domain knowledge to good use by advising on case strategy.

2. Diversity (Guideline)

Legal service providers are making important strides towards increasing the diversity of their fee-earners. Often, in-house teams wish to make their commitment to diversity explicit in their outside counsel guidelines and to encourage diverse staffing within their outside counsel. Tell fee-earners if they must fill out diversity surveys in your legal spend management system.

3. Billable Hours Per Day (Guideline)

Outside counsel often work long hours to resolve matters. To promote work-life balance and recognize fee-earners can only do so much truly productive work in one day, in-house teams should limit the number of hours one fee-earner can bill in a single day.

Instructing in-house attorneys can always waive this guideline in particularly demanding stages of a matter or when an unforeseen roadblock arises.

Activities Guidelines

When instructing law firms, in-house teams usually have expectations about what work fee earners should and shouldn’t charge for. Rules and guidelines under the theme of ‘Activities’ cover these requirements.

4. Read-in Time (Guideline)

When staffing changes are unavoidable, the cost of onboarding new staff rests with outside counsel. Time spent ‘reading in’ to or ‘getting up to speed’ with a matter should not be billed at the legal team’s expense without prior consent.

5. Research (Guideline)

Legal teams hire outside counsel for their specialist knowledge and expertise. Because of this, legal teams do not expect to pay for basic research into known areas of law.

Prohibiting research costs is a guideline rather than a rule because research may be necessary for niche or new areas of law. Typically, outside counsel should seek pre-approval before performing and billing for research.

6. Internal Communications (Guideline)

A certain level of intra-firm communication is necessary to work on a matter successfully. However, excessive internal conferences can be a value drain rather than a value add.

It’s best practice to ask legal service providers to limit internal communication to the required amount to work the matter successfully. The lead in-house attorney should determine if the internal communication is excessive. A good rule of thumb: reject internal communication that exceeds 10% of the invoice.

7. Participation of Multiple Fee-Earners in Meetings/Calls (Guideline)

Meetings and calls with the in-house team and other parties make up a significant portion of spend on many matters. To keep costs in check, outside counsel must staff these meetings efficiently.

Usually, it’s most effective for one fee-earner to attend meetings and update their team members afterward. This is also true for other tasks, such as conducting depositions and court attendance.

There is a link between the above guideline and the guideline on internal communications. When meetings and calls are staffed efficiently with fewer fee-earners, the fee-earners in attendance will need to communicate the information they received internally. This is why some level of internal communication is always necessary to enable the right level of collaboration.

Sometimes, multiple fee-earners must attend the same meeting or call for their respective expertise. So it should be left to the discretion of the lead in-house attorney to decide whether the attendance of multiple fee-earners was appropriate in specific instances.

8. Administrative Support Services (Rule)

Outside counsel should bill you for their legal work and include administrative tasks as part of their organization’s overhead.

The kinds of work that fall into this administrative category and should never be billed include:

• Organizing or indexing documents (including docket and document production files)
• Collating, labeling, binding, stamping, copying, or scanning documents
• Filing, serving, or hand-delivering documents
• Photocopying, OCR projects, or coding documents
• Proofreading
• Document review
• Word or data processing
• Time spent traveling to or from meetings, excluding cases when legal work is completed throughout
• Budget and accrual activities
• Checking for potential conflicts
• Preparation of engagement letters
• Preparing or processing invoices, time entries, or responses to billing inquiries
• Calendaring and docketing

In addition, clerical staff should not charge time with roles such as secretaries, librarians, law clerks, and summer associates unless explicitly agreed to by the legal team.

9. Prohibited Expenses (Rule)

As with administrative support services, outside counsel is expected to cover the overhead of basic business expenses and should not charge these to the in-house team. These include:

• Electronic research service subscription fees
• Licensing or library subscription fees
• Data hosting, uploading, or processing fees
• Telephone, fax, and internet charges
• Postage

You should usually reject the following expenses except under extenuating circumstances like a looming deadline.

• Messengers and couriers
• Food, meal, or transportation expenses

10. Training Time (Rule)

You hire outside counsel for their knowledge and expertise. Training time for junior fee-earners is part of outside counsel’s overhead. This includes junior lawyers attending calls or meetings or drafting documents purely in a training capacity.

Commercial Terms Guidelines

While the focus often falls on the legal work delivered as part of outside counsel relationships, the relationship is a business one at heart. Therefore, financial expectations come into play. Commercial terms cover these financial expectations.

Also, explain how often you expect invoices and the submission deadlines.

11. Timekeeper Rates (Rule)

Hikes in fee-earner rates can occur for several reasons. For example, if a firm promotes a fee-earner, or inflation drives up a firm’s expenses. However, blanket rate increases significantly impact the legal team’s budget and are generally not allowed.

Outside counsel should submit proposed rates for each fee-earner before working on the legal team’s matters. This provides the legal team with a baseline of agreed rates and allows them to identify when fee-earners charge more than what was agreed.

Legal teams should specify that rate increases can only be submitted once per year and that outside counsel must submit a clear reason for the requested increase. The legal team can then assess each rate increase request on its merit, how the proposed increases will affect the legal team’s bottom line, and how rate increases are trending per vendor over time.

12. Budgets (Rule)

Cost control is key to the effective running of the legal department. It is best practice to require that outside counsel provide a proposed budget for the matter within a set timeframe after
being instructed (typically 10-30 days).

In-house counsel should also specify the type of budget they wish outside counsel to submit.

The in-house team can then evaluate the appropriate budget and approve or adjust it before adding it to the department’s annual forecast. They should also specify that outside counsel must submit requests to increase the budget for approval.

13. Business Reviews (Rule)

Specify that the vendor should designate a relationship manager for your legal team.

The relationship manager should schedule regular business reviews so that you can review the volume of matters worked, the resourcing profile of matters, compliance with your outside counsel guidelines, and opportunities for improved collaboration.

Billing Hygiene Guidelines

Billing hygiene rules cover the mechanics of the outside counsel relationship. They include when and how to bill and requirements for submitting accruals.

14. Billing Detail (Rule)

In-house teams need detailed descriptions of work performed by outside counsel to ensure that billed activities align with their instructions. Because of this, it’s important to spell out the details outside counsel must provide on each invoice. Doing this allows the in-house team to review the work performed appropriately. Our sample outside counsel guidelines template highlights all the details you should request in your invoices.

Some in-house teams may require outside counsel to provide Uniform Task Based Management System (UTBMS) codes and every invoice line item. UTBMS codes describe the legal work performed according to a standard code set. Some legal spend management systems use AI to automatically apply UTBMS codes to legal invoices, meaning outside counsel doesn’t need to provide coded line items.

It’s also best practice to require one invoice per matter, allowing for better routing of invoices to the invoice reviewers and accurate reporting on matter spend.

15. Block Billing (Rule)

Block billing occurs when fee earners describe multiple tasks in one invoice line item. Block billing makes it difficult to understand how much time each 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 should submit a revised invoice with the block-billed tasks separated into individual line items.

16. Invoice Format and Process (Rule)

LEDES, PDF, and scanned PDF invoices are the most common types of invoice format. Depending on your billing process and the legal spend management software you use, the legal
team may only be able to accept certain invoice formats. It’s best to specify which invoice format your outside counsel should provide.

Finance teams may require you to submit a PDF invoice alongside the LEDES invoice for tax or internal policy reasons. In that case, put the requirement into your outside counsel guidelines.

17. Invoicing Process (Rule)

Spell out how outside counsel should send invoices to the legal team. Also describe how you’ll notify counsel when you adjust invoices for billing guideline violations.
Invoice upload and notifications of adjustments are typically carried out through the vendor portal of your legal spend management system or via email if you do not have a legal spend
management system.

18. Billing Period (Rule)

In-house teams usually require outside counsel to submit invoices no later than one month after they perform the work. That way, your in-house attorneys can review invoice line items while their instructions are still fresh in their minds.

Most in-house counsel apply a 10% reduction when outside counsel bills work 30 days late. If that work is six months old, most in-house counsel refuse to pay for it.

A notable exception to this guidelin is mergers and acquisitions work. In those cases, outside counsel usually bills the work at the close of the matter.

19. Accruals (Rule)

Accruals are estimates of work done but not yet billed within a given financial period (typically one month). Accruals help your finance team ‘close the books’, allowing the finance and legal teams to create accurate financial statements.

The frequency with which outside counsel must submit accruals and how they must submit should be clear in your outside counsel guidelines.

20. Currencies and Entities (Rule)

If you work for a multinational organization, your vendors must invoice the legal entity associated with the matter in a currency they are authorized to use. Otherwise, your Accounts Payable team will likely reject the invoice, causing duplicative work for your in-house and outside counsel.

Some legal spend management systems help to enforce these rules. Attaching the authorized currency and entity combinations to your outside counsel guidelines can be helpful so your vendors can avoid errors from the outset.

Best Practices For Developing And Implementing Your Outside Counsel Guidelines

Based on lessons learned from hundreds of in-house teams we’ve worked with, we’ve put together these top tips for crafting your outside counsel guidelines to help control legal spend and build better partnerships with your law firms.

Be Concise: Your guidelines should be clear, simple, and approachable. Use plain language and concrete examples to ensure the guidelines are easily understandable.

If your guidelines document is hundreds of pages, there’s no way to expect timekeepers to understand and remember all of them. And if they aren’t trying to follow the guidelines, those guidelines aren’t helpful to them or to you. Make the key policies and expectations immediately clear.

Align With Company Policies: Your guidelines should reflect the broader company’s policies and values. For example, if your organization doesn’t reimburse stays at five-star hotels or first-class tickets, you should apply those standards to your outside counsel.

Encourage Collaboration and Value: Explicitly request value-added services such as training sessions, legal updates, and secondments that outside counsel can offer to bring additional benefits to your organization.

Designate Clear Contacts: Specify who in the legal department is responsible for different inquiries, ensuring that the outside counsel knows whom to contact for billing, matter management, and substantive legal questions.

Detail preferred communication methods and protocols for routine updates, urgent issues, and escalations.

Explain Your Invoice Review Process: When drafting your billing guidelines, explain your invoice review process. Tell firms how your team uses automation to process invoices. Describe how invoices will be reviewed and adjusted when charges are found to be in breach of your guidelines.

By preemptively addressing these aspects, you provide your outside counsel with a clear understanding of your billing practices, which can reduce confusion and disputes about invoicing.

Onboard Firms To Your New Guidelines Gradually: It’s difficult for busy in-house attorneys and many outside counsel fee-earners to remember what each guideline means and how to apply it. To help with this, providing lead-in time allows invoice reviewers and fee-earners to get up to speed with guidelines and can help increase compliance.

Update Your Guidelines Regularly: Outside counsel guidelines are living documents and should be updated regularly as the needs and resourcing mix of the legal department change. For this reason, the best practice is to maintain outside counsel guidelines independently of engagement letters. This makes it easier to include updates over time.

Download Brightflag’s Sample Outside Counsel Guidelines Template

Now that you have a thorough understanding of what outside counsel guidelines are and the best practices for incorporating them, you’re ready to start creating or updating your own set of outside counsel guidelines.

To guide you in the process, Brightflag has developed an editable outside counsel guidelines template available for free and on demand. Download it today.

This resource leverages Brightflag’s years of experience working with in-house legal departments to maximize the value received from their outside counsel. It will help ensure you create the best outside counsel guidelines possible—saving your legal team time and money and reducing misunderstandings with your outside counsel law firms.