I just read something that made me say “wow, that is soooo wrong.” Out loud. Here is what I read (from Today’s General Counsel, Jun/Jul 2015, p. 42:
Compounding the problem is the fact that most complex cases are unique. An estimate based on past experiences may not be applicable. Furthermore, litigation is unpredictable and the party trying to budget does not have complete control. [I thought this excuse was banned in the 1990s, but the author apparently did not get the memo.]….
The most meaningful budget is one that attempts to identify every project that might be involved in a case, each member of the team that may be involved in each project, and the estimated hours for each team member. These hours can then be multiplied by the team member’s billing rate and then added together to develop the budget.
If litigation is so unpredictable, how can it be predictable enough to identify every project that might be involved in the case? Litigation might be predictable at the periphery, but that does not make it too unpredictable to plan and budget accurately. That’s the benefit of experience. But peel the layers back a bit more. How accurate is it to list a project that “might be involved”? How accurately can you estimate the number of hours involved for each supposed project? Do you even know the amount of the hourly rates over the lifespan of the matter (because a firm that would budget like this would certainly believe it is entitled to raise rates annually)?
Of course, the author’s answer to these problems is to “adjust” the budget. Changing the budget then allows you to declare victory when your final spend is in the same ballpark as your adjusted budget. But this kind of “budgeting” does not work well with in-house budgets. In-house budgets rarely benefit from the elasticity the author assumes is available in his suggested process.
Pricing and budgeting today is much more nuanced and sophisticated, and clients have seen far past the unpredictability excuse that served for too long as a litigator’s mantra.