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Managing legal spend is one of the top priorities for GCs and CLOs. And one of the most effective tools for achieving this control is the implementation of outside counsel guidelines (OCG). In fact, a staggering 81% of businesses now utilize OCG as a means to rein in expenses and drive efficiency.

Enforcing these guidelines not only helps manage costs but also empowers legal to shape and influence the processes of their chosen law firms. 

The question that arises is: How to build and enforce effective outside counsel guidelines? 

In this post, we will discover how you can create enforceable OCG that can transform your legal operations into a finely-tuned machine, ensuring that your business remains agile, efficient, and in control.

6 Tips to creating effective outside counsel guidelines

6 Tips to creating effective outside counsel guidelines

Outside counsel guidelines play a crucial role in setting expectations and fostering a successful collaboration. However, it's not uncommon to come across guidelines that focus on rules and highlight failure rather than offering positive directions.

“As lawyers, many law department leaders fashion their guidelines in a manner that is more consistent with a contract than one designed to promote a good relationship. The document doesn't provide guidance (remember, it's called a "guideline") as much as it proffers rules, and it rarely offers positive directions or resources that help people succeed in meeting the client's expectations. Rather it provides descriptions of what constitutes failure. It seems they're not intentioned to promote success, which is an opportunity missed."

~ Susan Hackett, CEO of Legal Executive Leadership, LLC
Are your outside counsel guidelines working for or against you?

This missed opportunity can hinder the very essence of a productive partnership. Let’s delve into the importance of crafting guidelines that embrace positive guidance and empower both your organization and outside counsel to thrive.

#1 Ask the outside counsel for a budget forecast timeline

To avoid unpleasant surprises, it's crucial to proactively discuss budget forecasts with your outside counsel. Include a clause that mandates a budget forecast timeline to gain insights into the estimated costs associated with outside counsel needs. This will empower you to plan and allocate resources effectively, keeping your financial house in order.

Define a deadline for outside counsel to submit a budget forecast. This allows them to plan accordingly and document the necessary information.

Asking for a budget forecast also initiates an open and honest conversation about costs with your outside counsel. Establishing trust and transparency from the beginning sets the stage for a collaborative partnership that extends beyond legal matters.

#2 Add a clause on automatic invoice rejections and reductions

When it comes to managing invoices from outside counsel, efficiency and accuracy are key. Nobody wants to get tangled up in a tedious dispute over billing discrepancies. 

That's why incorporating a clause on automatic invoice rejections and reductions into your outside counsel guidelines can be a game-changer. 

When an invoice doesn't meet the agreed-upon criteria or fails to adhere to your billing guidelines, you can set it up for automatic invoice rejections.

By clearly explaining the circumstances under which invoices may be rejected or reduced, you establish transparent expectations from the get-go. This clause acts as a guide, ensuring that invoices meet predefined criteria related to billing accuracy, adherence to the scope of work, or compliance with established guidelines.

Remember, the purpose of the automatic invoice rejection and reduction clause is not to create a hostile environment or undermine the efforts of your outside counsel. Instead, it's about fostering a mutually beneficial partnership where both parties adhere to agreed-upon standards. 

#3 Appoint a designated supervising attorney for seamless communication

The designated attorney or point of contact (POC) acts as a crucial link between your organization and the outside counsel, overseeing the relationship and facilitating efficient communication. 

Without a designated point of contact, communication can become scattered and fragmented, making it easy for important documentation, invoices, or requests to get lost in the shuffle. 

When it comes to outlining the role of the supervising attorney in your outside counsel guidelines, simplicity is key. There's no need to be overly detailed or prescriptive. Instead, you can use this clause to broadly state that all communication, regardless of its nature, should be directed to the designated POC. This allows for flexibility while maintaining a consistent and efficient line of communication.

The benefits of designating a supervising attorney extend beyond streamlining communication. It also fosters a more productive working relationship between your organization and outside counsel. 

#4 Limit internal communication with outside counsel to reduce costs

While internal communication is vital for outside counsel to work on matters effectively, excessive back-and-forth can quickly accumulate costs without necessarily contributing to the resolution of the issue at hand. 

A sensible guideline is to cap internal communication at no more than 10% of the total fees specified in an invoice. By establishing this expectation, you encourage outside counsel to be mindful of their internal communication practices and focus on essential discussions that drive progress.

Of course, there may be instances when particularly complex or urgent matters require additional internal communication. In such cases, it's reasonable to allow in-house instructing attorneys to exercise their discretion in approving invoices with higher levels of internal communication. However, this should be the exception rather than the norm to maintain cost control.

By limiting internal communication, you create space for more direct and purposeful interactions between your organization and outside counsel. This streamlined approach fosters a stronger partnership, allowing for more targeted discussions, prompt decision-making, and ultimately, more favorable outcomes.

#5 Create comprehensive summaries for easy readability

You've put in the effort to create well-crafted outside counsel guidelines, but their effectiveness ultimately depends on whether the outside firm's attorneys actually read and follow them. 

“The most jaw-dropping outside counsel retention document guideline I ever saw was one issued by a large company/large department that was 327 pages long. The idea that anyone was conversant with what was in that document (on either side) or had any intention of either implementing or enforcing it (until they wanted to prove their point in an argument) is crazy.”

~ Susan Hackett, CEO of Legal Executive Leadership, LLC
Are your outside counsel guidelines working for or against you?

That's why you need comprehensive summaries for each section. They increase the likelihood of your guidelines being read and understood. 

You need to distil the main points into easily digestible snippets to make the document more approachable and reader-friendly. This allows busy attorneys to quickly skim through the summaries and grasp the essential information without getting bogged down in the nitty-gritty details.

Here’s an example of a summary for outside counsel guidelines:

Summary: This section outlines the budget forecast timeline, requiring outside counsel to provide estimated costs within 10 days of opening a new matter. It also establishes a timeline for in-house team review and approval of the budget. The goal is to ensure transparency and reduce conflicts by setting clear expectations from the beginning of the engagement.

By crafting summaries like this for each section, you create a document that is not only visually appealing but also reader-friendly. 

#6 Include e-signatures to confirm the engagement 

Including e-signatures in your outside counsel guidelines streamlines the engagement process, making it convenient for both your organization and the outside counsel. 

There’s no need for physical documents, postage, and tedious back-and-forth exchanges. Instead, the engagement can be confirmed swiftly and securely with just a few clicks.

The benefits of e-signatures go beyond mere convenience. They offer a level of security and authenticity that traditional signatures may lack. With robust encryption and authentication measures in place, you can trust that the signed documents are tamper-proof and legally binding.

Here's a quick example of how including e-signatures can be outlined in your outside counsel guidelines:

“To confirm the engagement, both parties shall utilize e-signatures. The designated representatives from our organization and the outside counsel shall digitally sign the engagement agreement, indicating their agreement and commitment to the terms outlined within. This digital confirmation signifies the official commencement of the partnership.”

In fact, did you know that SpotDraft eSignatures are built keeping in mind the compliance requirements of different regulatory frameworks?

Every time an eSignature request is made, the email ID of the recipient is registered and a unique URL to the contract is generated. These details are then recorded on the audit trail along with the IP address and timestamp.

Moreover, to display intent and consent between parties, SpotDraft makes them agree to customized terms before proceeding to sign the contract. We also offer a provision to opt-out of the process.

Also read: A Quick Introduction to eSignatures

Outside Counsel Guidelines (OCG) FREE Template

We created an outside counsel guidelines template that covers key aspects such as budgeting, communication protocols, invoice management, and more. This customizable template will serve as a valuable resource to guide your interactions with outside counsel. 

Note: Feel free to review and modify the template further to meet your specific needs.

[Your Organization's Name]
Outside Counsel Guidelines

1. Introduction

1.1 Purpose
These Outside Counsel Guidelines (the "Guidelines") establish the framework for our organization's relationship with external legal counsel. The Guidelines outline our expectations, promote effective communication, and facilitate a successful collaboration.

1.2 Scope
The Guidelines apply to all engagements between our organization and outside counsel, including legal matters, advisory services, and any related work.

2. Relationship Management

2.1 Engagement Process

2.1.1 Selection and Engagement
- Clearly define the process for selecting and engaging outside counsel.
- Specify the criteria for evaluating and approving outside counsel for each matter.

2.1.2 Engagement Letters
- Require engagement letters for all engagements, outlining the scope, objectives, and terms of the engagement.

2.2 Conflict of Interest
- Mandate outside counsel to promptly disclose any conflicts of interest.
- Establish a procedure for addressing conflicts of interest and protecting our organization's interests.

3. Communication and Reporting

3.1 Designated Point of Contact
- Appoint a designated supervising attorney within our organization as the primary point of contact for outside counsel.
- Clearly communicate the contact details and expectations regarding communication channels.

3.2 Regular Updates and Reporting
- Specify the frequency, format, and content requirements for status updates and progress reports.
- Emphasize the importance of timely and accurate reporting.

4. Billing and Cost Management

4.1 Fee Arrangements
- Discuss and agree upon fee structures, including hourly rates, fixed fees, or alternative fee arrangements (AFAs), as applicable.
- Establish guidelines for proposing and evaluating AFAs.

4.2 Invoicing and Billing Guidelines
- Specify the invoicing format, itemization requirements, and submission deadlines.
- Include provisions for automatic invoice rejections for non-compliance.
- In the event of non-compliance with the invoicing guidelines, our organization reserves the right to automatically reject invoices that do not meet the specified requirements. Outside counsel will be notified promptly regarding any rejected invoices and will have the opportunity to rectify the non-compliance within a reasonable period.

4.3 Expense Reimbursement
- Define the process for reimbursing reasonable and approved expenses incurred by outside counsel.

5. Confidentiality and Data Security

5.1 Confidentiality Obligations
- Highlight the importance of maintaining strict confidentiality of our organization's information.
- Require outside counsel to sign confidentiality agreements or maintain strict confidentiality obligations.

5.2 Data Security and Privacy
- Ensure outside counsel complies with applicable data protection laws and regulations.
- Mandate appropriate safeguards for the protection of personal data and sensitive information.

6. Termination and Dispute Resolution

6.1 Termination
- Define the conditions under which either party may terminate the engagement.
- Specify the notice period and any obligations upon termination.

6.2 Dispute Resolution
- Establish a preferred method of dispute resolution, such as mediation or arbitration, to address any potential conflicts.

7. Acceptance and Confirmation

Please sign and return a copy of these Guidelines to indicate your acceptance and commitment to adhere to the outlined terms. Your signature can be provided electronically using an authorized e-signature method.

By signing, you acknowledge that you have read, understood, and agreed to comply with these Guidelines.

[Your Organization's Name]


Proven approaches to enforcing outside counsel guidelines for optimal outcomes

Proven approaches to enforcing outside counsel guidelines for optimal outcomes

Crafting outside counsel guidelines is just the first step in ensuring a successful and mutually beneficial partnership. To truly enforce these guidelines and maintain compliance, it's essential to establish a mechanism for ongoing monitoring. 

Implement a system that regularly monitors the adherence to your guidelines. It's a proactive approach that allows you to stay on top of things, ensuring that the guidelines are followed and the expectations are met.

#1 Audits

Conduct periodic audits to review the compliance of outside counsel with the established guidelines. This can involve assessing billing practices, quality of work, responsiveness, and other relevant factors. The audits provide an opportunity to identify any deviations and address them promptly.

#2 Performance reviews

Establish a system for evaluating the performance of outside counsel based on predetermined metrics and benchmarks. You can then objectively assess their effectiveness and identify areas for improvement or recognition.

#3 Feedback loop

Foster open lines of communication between your organization and outside counsel. Encourage feedback on their experiences with the guidelines and the partnership as a whole. 

#4 Training and education

Provide ongoing training and education sessions to outside counsel regarding the guidelines and any updates or revisions, enabling them to better meet your organization's expectations.

Embracing technology for effective outside counsel guidelines enforcement

Embracing technology for effective outside counsel guidelines enforcement

Leveraging the right tools and solutions can streamline the process of managing outside counsel, enhance efficiency, and ensure effective compliance monitoring. 

Leveraging tailored solutions for tracking and monitoring compliance

Implementing technology solutions specifically designed for tracking and monitoring compliance can significantly enhance your ability to enforce outside counsel guidelines. These solutions can help automate the monitoring process, track key metrics, and provide real-time insights into outside counsel's adherence to the guidelines. 

By using such tools, you can quickly identify any instances of non-compliance, take appropriate actions, and ensure that the guidelines are consistently followed.

Utilizing e-billing and matter management systems

E-billing and matter management systems offer invaluable benefits in terms of invoice processing, expense tracking, and matter management. They provide a centralized platform for managing invoices, tracking expenses, and monitoring the progress of legal matters. 

You must enable your outside counsel to use these systems to ensure greater transparency, accuracy, and consistency in billing practices. Moreover, these systems enable efficient invoice review, invoice validation against guidelines, and generation of reports for cost analysis and budgeting purposes.

Ensuring data security and privacy in technology implementation

While leveraging technology for guideline enforcement, it is crucial to prioritize data security and privacy. Ensure that any technology solutions or platforms employed adhere to the highest standards of data protection. 

Implement robust encryption measures, access controls, and regular security audits to safeguard sensitive information. Additionally, establish clear guidelines for outside counsel regarding data handling, confidentiality, and privacy to ensure compliance with applicable laws and regulations.

Remedies for non-compliance of outside counsel guidelines

Remedies for non-compliance of outside counsel guidelines

In order to effectively enforce your outside counsel guidelines, it is important to establish clear consequences and remedies for non-compliance. 

While the goal is to maintain a positive working relationship with your outside counsel, it is equally crucial to hold them accountable when they fail to meet the agreed-upon standards. 

#1 Immediate intimation

When non-compliance is identified, the first step is to promptly notify the outside counsel of the issue. This notification should clearly outline the specific non-compliance, provide supporting evidence, and initiate a discussion to understand the reasons behind it. 

#2 Corrective actions

Depending on the nature and severity of the non-compliance, you may require outside counsel to take appropriate corrective actions. These actions could include revising and resubmitting invoices, updating documentation, implementing additional safeguards, or improving communication practices. 

At the same time, don’t forget to engage in conversations with the outside counsel to understand the reason behind non-compliance. Give them the benefit of the doubt; they want to do good work and that’s why they’re in this association with you.

“I tried to ensure that our guidelines were not too onerous, to the point of stifling creativity and good legal work and that if something was ‘off’ in a bill or with behavior that we spotted it early and picked up the phone to talk about it. Was it a mistake on their part or something that needed further explanation and changes to ensure compliance going forward? Of course, if we had to have these types of conversations too many times the response was not more phone calls and emails, we simply dropped you from our list of counsel at the first opportunity.”

~ Sterling Miller, CEO and GC at Hilgers Graben PLLC

Ten Things: Preparing Outside Counsel Guidelines – The Keys

#3 Escalation and termination

In cases where non-compliance persists despite notification and corrective actions, you may need to consider escalating the matter within your organization. You may need to involve senior management, legal department leaders, or other relevant stakeholders to address the issue and explore potential solutions. 

In extreme cases of repeated or significant non-compliance, termination of the engagement may be necessary to protect your organization's interests.

Laying the groundwork for a successful partnership with your outside counsel

The development and enforcement of effective outside counsel guidelines are of paramount importance for any organization seeking to optimize its legal operations and reduce costs.

Furthermore, outside counsel guidelines should not be viewed as mere rulebooks but rather as tools to promote success. They should offer positive directions, resources, and support that help both your organization and outside counsel thrive in meeting client expectations and delivering favorable outcomes.

Remember, effective outside counsel guidelines are not just a formality, but a powerful tool to cultivate fruitful collaborations, protect your organization's interests, and achieve desired outcomes. So, embrace the process, invest in open communication, and lay the groundwork for a successful partnership with your outside counsel.

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