Outside Counsel Guidelines: Best Practices

Outside counsel guidelines, also called legal billing guidelines, are a tool for aligning expectations between in-house teams and their vendors. They 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.

If you’re creating outside counsel guidelines or updating your existing set, it can be hard to know where to start. In this blog, we cover the 20 guidelines every in-house team should use and explain how each one helps drive billing efficiency and better outside counsel engagements. Brightflag developed this list by working with hundreds of in-house teams to improve their guidelines.

Brightflag has also developed a free, editable sample outside counsel guidelines template that in-house legal teams can use to create or edit their own set of guidelines.

You can download the template here.

What Outside Counsel Guidelines Cover

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)

Understanding Guidelines and Rules

In-house teams support every part of the business and cover a wide variety of activities. For this reason, creating hard-and-fast rules that apply to every legal matter isn’t always practical. That’s why there are guidelines, for which enforcement is up to the attorney, and rules, which are always enforced.

Not billing for 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 it necessary. A rule, on the other hand, is always enforced. Charging according to agreed timekeeper rates is an example of a rule. Charging in excess of agreed timekeeper rates is rejected in all circumstances.

20 Key Outside Counsel Guidelines

Within each of the four main areas that outside counsel guidelines cover—resourcing, activities, commercial terms, and billing hygiene—are the respective guidelines and rules that they are comprised of.

Here we’ll break down 20 common rules and guidelines, as well as best practices for incorporating them into your own set of outside counsel guidelines:

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 to be notified if the vendor wants to make a change to the team. This allows them to encourage optimal staffing with fee-earners that 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 any one matter is kept to a minimum to increase 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. Work should be allocated in ways that 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 of discovery motions is an activity 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 OCGs and to encourage diverse staffing within their outside counsel. This is also a good time to mention if fee-earners are expected to fill out diversity surveys in your legal spend management system.

3. Billable Hours Per Day (Guideline)

Outside counsel often work long hours to ensure matters are resolved favorably. To promote work-life balance and in recognition of the fact that 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.

This guideline can be waived by the instructing in-house attorney 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 to the matter 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)

Outside counsel are hired by legal teams for their specialist knowledge and expertise. Because of this, legal teams do not expect to pay for basic research into known areas of law.

The prohibition of research costs is a guideline rather than a rule because research may be necessary for niche or new areas of law. Typically outside counsel are asked to seek pre-approval before performing and billing for research.

6. Internal Communications (Guideline)

A certain level of intra-firm communication is necessary to successfully work a matter. 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 amount strictly necessary to successfully work the matter. It can be left to the discretion of the lead
in-house attorney to determine if the internal communication is excessive, with a guideline that internal communication comprising over 10% of the work on any invoice may be rejected.

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, it’s important that these meetings are staffed efficiently by outside counsel.

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

It should be noted that there is a link between the above guideline and the guideline on internal communications. When meetings and calls are staffed efficiently with less 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 are required to 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
• Word or data processing
• Time spent traveling to or from meetings, excluding cases when legal work is being completed throughout
• Budget and accrual activities
• Conflict checking
• Preparation of engagement letters
• Preparing or processing invoices, timesheets, or responses to billing inquiries
• Calendaring and docketing

In addition, time should not be charged by clerical staff 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 are 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

An additional category of expenses should not be charged unless prior agreement of the legal team is received. These expenses may be approved when a particular case requires urgency or for the outside counsel team to work long hours:

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

10. Training Time (Rule)

Since you hire outside counsel for their knowledge and expertise, time spent training junior fee-earners should also be considered as part of 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.

11. Timekeeper Rates (Rule)

Hikes in fee-earner rates can occur for a number of reasons, such as when fee-earners are promoted or when significant inflation means firms must increase revenue to cover rising
expenses. However, blanket rate increases can have a significant impact on the legal team’s budget and are generally not allowed.

Outside counsel should submit proposed rates for each fee-earner in advance of 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 in excess of 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 teams should also specify the type of budget they wish outside counsel to submit. Types of budgets include:

The in-house team can then evaluate the budget for appropriateness 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)

To get the most value out of your relationship with outside counsel, it’s best to 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 OCGs and opportunities for improved collaboration.

Billing Hygiene Guidelines

Billing hygiene rules cover the mechanics of the outside counsel relationship. They include details on 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 are in line 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 appropriately review the work performed. The details that should be requested for all invoices are provided in the sample OCG template provided at the end of this guide.

Some in-house teams may require that outside counsel provide Uniform Task Based Management System (UTBMS) codes along with 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, which means that outside counsel don’t need to provide coded line items.

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

15. 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.

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 is expected from your outside counsel.

Finance teams may require that an accompanying PDF invoice is submitted alongside LEDES invoices for tax or internal policy reasons. If this is the case, it should be clearly stated in
your OCGs that accompanying PDFs must be submitted with LEDES invoices and under which circumstances, e.g. in all cases or in jurisdictions where tax is charged on legal invoices.

17. Invoicing Process (Rule)

Your OCGs should spell out the manner in which outside counsel are expected to send invoices to the legal team and how counsel are notified when invoices are adjusted 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 that invoices are submitted no later than one month after the work is performed, so that in-house attorneys can review invoice line items while their
instructions are still fresh in their minds.

It’s typical to apply a 10% reduction to work billed over 30 days after it was performed and not to pay at all for work billed over 6 months after it was performed. Exceptions to this rule apply, such as for Mergers and Acquisitions (M&A) work where all work is typically billed 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 the legal team to create accurate financial statements.

The frequency with which outside counsel must submit accruals and the manner in which they must submit should be made clear in your OCGs.

20. Currencies and Entities (Rule)

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

Some legal spend management systems help to enforce these rules. It can be helpful to attach the authorized currency and entity combinations to your OCGs so your vendors can avoid errors from the outset.

Developing, Monitoring & Improving

Outside counsel guidelines are living documents and should be updated regularly as the needs and resourcing mix of the legal department change. Best practice is to maintain outside counsel guidelines independently of engagement letters for this reason. This makes it easier to include updates over time.

It’s difficult for busy in-house attorneys and a large number of outside counsel fee-earners to remember what each guideline means and how to apply them. To help with this, providing lead-in time allows invoice reviewers and fee-earners to get up to speed with guidelines can help increase compliance.

This is the best practice for rolling out new or updated outside counsel guidelines:

Enforcing Legal Billing Guidelines

Outside counsel guidelines set the tone for all engagements and legal service providers are expected to 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 on their own.

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 of their invoices to enforce outside counsel guidelines. This significantly reduces the effectiveness of outside counsel guidelines. Brightflag uses industry-leading AI to enforce outside counsel guidelines 100% of the time without law firms doing anything differently.

Sample Outside Counsel Guidelines Template

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

To guide you in the process, Brightflag has developed an editable outside counsel guidelines template that is available free and on-demand.

This resource leverages Brightflag’s years of experience working with in-house legal departments on maximizing 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.

Download it today to get started.

Our “Favorite” Guideline Violations

Brightflag has been helping in-house legal teams to set clear expectations with outside counsel and control costs for years. As you can imagine, we have some “favorite” outside counsel guideline violation stories to tell. Here are a few of them:

• Internal communication is difficult to identify using legacy e-billing software because there’s no UTBMS code for it. Brightflag’s AI once identified an invoice where outside counsel talking amongst themselves accounted for 80% of the charges. (Brightflag automatically rejected the invoice.)
• A law firm partner once tried to bill one of our customers for 26 hours of work in a single day. A single day! Brightflag automatically rejected the invoice for correction.
• One customer’s vendor caused problems with financial reconciliation by consistently billing 90 days late. In partnership with Brightflag’s customer success team, the customer strengthened enforcement of their billing hygiene guideline until all invoices were being submitted within 30 days.

These examples are humorous only if your e-billing software catches them for you; if not, they’re an embarrassing and expensive headache.

Consider booking a demo with Brightflag today to see how we can help ensure you never encounter these issues yourself.