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Calculating your “Total Cost of Electronic Discovery (TCeD)”

You didn’t know this, I’m sure, but electronic discovery costs money. Yes, it’s true, but how true you know even less about. Fios to the rescue, however, in Corp. Counsel, Vol. 13, March 2006 at A6, where Prashant Dubey, its VP and GM of Discovery Management, outlines how corporate law departments can figure out their TCeD.

TCed consists of hard costs, soft costs, and opportunity costs. Hard costs are “anything for which you ask Accounts Payable to cut a check.” Since outside counsels’ invoices do not usually break out discovery-related expenses, Fios urges law departments to consider “performing an invoice review and spending time with outside counsel applying percentages to past invoices” or have your CFO assign to you a managerial accountant to use the technique known as Activity Based Costing (ABC).

Soft costs include the value of the time your IT department and your clients and your law department staff spend when they assist in electronic document discovery. “Soft costs are the most ignored element of cost – however the most pernicious.” Dabney urges ABC as the technique to calculate soft costs.

The third component includes opportunity costs. They are the value of what everyone could have been doing if they had not had to cope with e-discovery. Dubey recommends (you guessed it) ABC to estimate the value of these tradeoffs.

Here’s the take-away: “Bottom line is that, organizations need to baseline their Total Cost of electronic Discovery in order to know how much cost-reduction opportunity exists.”