The nitty-gritty details of matter budgets

Law departments that conscientiously set and enforce matter budgets with their outside counsel fare better, I believe, in the struggle against creeping outside costs. (See my posts in 2005 of March 24 proposing an approach and Nov. 6 on Dominos.)

But, that being said, the pesky details of establishing and maintaining budgets must be observed. Let me list some of the details.

 The department should have one or two standard forms of budgets that its lawyers can provide to outside counsel. At least there should be a litigation budget form and a transactional matter form.

 The department needs to establish policies that determine when a budget must be sought. (See my posts of Dec. 14, 2005 on TXU at $750,000 and Nov. 15, 2005 on Altria’s definition of “major.”) The problem with setting budgets according to amount likely to be spent is that many lawyers in the law department, who dutifully manage outside counsel, may have few or no budgetable matters of the set size. One or two, the litigators will harvest sheaves of them.

 Other policies need to be set regarding the frequency with which budgets must or should be updated, and on what basis and with what recording of changes to budgets (See my post of April 27, 2005 on the timing of budgets and Sept. 14, 2005 regarding adjustments.). It does no good to continually revise budgets to match actual expenditures and then claim that your matters came in “on budget.”

 A law department that is serious about budgeting must have training and procedures for reviewing the budgets from outside counsel.

 Finally, the nitty-gritty details include reports on performance against budget.

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