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For in-house legal departments, relationships with Outside Counsel are integral to overall management of matters and outcomes. A solid relationship creates synergy and partnership; a dysfunctional one creates frustration and typically increases costs. One of the most common tools to enhance client/firm relationships is setting effective Outside Counsel Guidelines (OCGs). 
Maintaining OCGs is currently a common practice, but setting comprehensive and clear guidelines is less prevalent. Drawing on my extensive experience drafting OCGs, I offer valuable insights on their purpose and effective approaches. Following are some tips for drafting effective and impactful Outside Counsel Guidelines. 

1. Use OCGs as an Instructions Manual, not an Engagement Agreement.

Law Firm engagement agreements and OCGs should work in tandem to establish the relationship with your law firms. Both are documents reflecting mutually agreed upon contractual obligations, however, there should be distinct differences between the two. The engagement letter outlines the terms associated with representing the Company (i.e., conflict process, liability, IT security requirements, and pricing); while guidelines explain what is expected in the operational aspects of the relationship, such as invoicing, staffing of matters, what constitutes billable work, and cost management methods (i.e. accruals, budgets). 

2. Be Clear & Simple. 

Don’t complicate the instructions. Highlight the most important aspects and provide details of what is and what is not required/accepted for each topic. Focus on areas such as:
    a. Methods of submitting invoices (e.g., eBilling tool, PO process) and requesting rate increases (specifying timing and
    b. Acceptable and unacceptable types of work (e.g., doing research, training, clerical) and billing behaviors (e.g.,
        forbidding block or embedded billing, requiring narratives)
    c. Staffing requirements (e.g., change notice, alignment of task/level with experience and matter complexity)
    d. Non-Billable items (e.g., phone, unapproved travel, online research tools)
    e. Invoice Requirements (e.g., frequency, format, approved fees/expenses)
    f. Budgeting Expectations (e.g., by matter, frequency, and updating budgets)
    g. Accrual Submission (e.g., define accruals, deadlines, and timing, matter vs. firm)

3. Be Mindful of Practice Area Differences. 

Most instructions found in OCGs apply across practice areas, but sometimes there are nuances  and specific instructions that should be provided for areas with the biggest impact on spend, such as Litigation, IP, and M&A. For example, if your department has a lot of litigation and eDiscovery, be specific about how matters should be billed, such as use of UTBMS codes. I recommend requiring the use of approved third-party vendors (such as eDiscovery or translation providers), to leverage bargaining power and control costs. No longer should you just accept any pass-through costs. 

4. Be Mindful of Global Differences.

Most instructions found in OCGs apply to U.S. law firms, but occasionally there are specific instructions and nuances that should be provided for legal services provided by law firms based outside of the U.S. Consider providing instructions related to selection of corporate entities, VAT tax, and currency. For example, IP practitioners often work with international law firms, so the OCGs might need to specifically address the cost of currency conversion.

5. Leverage Company Policies.

Don’t re-invent the wheel. If your company has travel and expenses policies, incorporate them into your OCGs. Remember, outside counsel should not be given more latitude than your own in-house team. 

6. Communicate & Train.

Communicate to firms early and often when you’re getting ready to launch (or revise) your guidelines. Give firms enough time to digest, disseminate, and implement the guidelines to ensure their compliance with your expectations. Consider hosting sessions for the billing coordinators to highlight key aspects and maintain the dialogue with occasional update sessions (e.g., quarterly). 

7. Request Value-Adds.

Enhance the firm/in-house relationship by creating opportunity for knowledge sharing and thought leadership. Many legal departments leverage firms to provide CLE programs, and Legal Departments with more advanced vendor management programs sometimes host OC Summits where top firms (partners and key personnel) come together to discuss business objectives, legal department goals, and challenges in the legal landscape. Opportunities like these are a mutually beneficial chance to share perspectives and insights on how best to partner and represent the Company.

8. Enforce & Provide Feedback.

Ultimately, guidelines are only truly effective when they are enforced. To achieve that, all members of the in-house legal team, including lawyers, should be familiar with the guidelines, especially if they are invoice approvers. If you were charged for something that is not allowed, provide immediate feedback to the firm. It is helpful to leverage eBilling tools and/or third-party invoice reviewers to ensure compliance to the guidelines. More mature Vendor Management programs feature an annual review with a scorecard-based evaluation that includes scores on compliance to OCGs. 

9. Revisit & Update.

OCGs should evolve as your Vendor and Spend Management program matures. For example, you initially might not be leveraging alternative fees (AFAs), but one or two years later you may (a) be leveraging an RFP tool; (b) have established a preferred law firm panel; or (c) have adopted software to facilitate the relationship with outside counsel. Naturally your guidelines should reflect these new processes, tools, and approach. I strongly encourage reviewing and updating guidelines at least every 18 months. 

10. Set the Tone.

The overarching approach to Outside Counsel Guidelines should reflect your company and legal departments’ goals and culture. They are a tool to enhance the relationship and are not meant to be adversarial, rather, OCGs should create an opportunity for discussion and partnership with your firms. 
Having an effective Outside Counsel Guidelines (OCG) process is key to building relationships with Firms and managing spend. Drafting effective Outside Counsel Guidelines should be a proactive process and an opportunity for your in-house legal departments to align expectations with firms. 

The information in any resource collected in this virtual library should not be construed as legal advice or legal opinion on specific facts and should not be considered representative of the views of its authors, its sponsors, and/or ACC. These resources are not intended as a definitive statement on the subject addressed. Rather, they are intended to serve as a tool providing practical advice and references for the busy in-house practitioner and other readers.

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