The tension inherent in budget setting with law firms

Ideally, you want your law firms to submit proposed budgets and your in-house responsible attorney to critique them. You want the in-house lawyer to try to drive the law firm’s costs to the lowest level commensurate with responsible representation. To expect that discipline by your lawyer, it is clear to me, inevitably triggers a tension.

The conflict arises because the in-house lawyer does not want to establish a budget which, if exceeded, puts that lawyer in a bad light. Accordingly, an almost inevitable, yet tacit, collusion occurs whereby it is in the interest of the law firm to propose a high budget and come in below as well as for the lawyer to approve a high budget and come in below.

A partial remedy is to aggregate each individual lawyer’s budgets into someone’s larger practice group budget, but the same conflict of interest exists at the higher level. Even a general counsel likes to propose a generous expected budget and beat it.

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