Solo and Small Law Firm - COST RECOVERY ABA GP/SOLO MEMBERSHIP SURVEY RESULTS

Solo and Small Law Firm - COST RECOVERY

ABA GP/SOLO MEMBERSHIPSURVEY RESULTS

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Objectives

This research was intended to gather information to better understand current cost recovery practices and challenges in small law firms.

The objectives of the research were to:

– Identify which components of cost recovery costs are recovered– Understand which costs are not recovered– Determine who at the firm is involved in the recovery process– Identify tools and products used to recover online research costs– Discover what aspects of the cost recovery process are difficult

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Survey Background

• Survey was open from April 23 – April 28th, 2008

• A total of 585 respondents completed the survey

• Response rate - 6%.

Findings

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ONLINE LEGAL RESEARCH SUBSCRIPTION SERVICES

28%

11%

3%

4%

5%

24%

42%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

None/Don't know

Other

CaseMaker

Loislaw

FastCase

Lexis

Westlaw

To which paid legal research services does your firm subscribe?

n=582

2/3 of respondents subscribe to Westlaw or Lexis

66%

1/4 do not subscribe to OLR services

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COST RECOVERY PRACTICED

Does your firm attempt to recover online research related costs by billing all or part of it back to clients?

No, 50%

Yes, 50%

n=417

1/2 of respondents attempt to recover all or part of their online legal research costs

Cost Recovery - Practiced

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COST RECOVERY POLICY

9%

21%

26%

45%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Other

We usually only bill-back extraordinaryexpenses to our clients

We attempt to bill back all costs to theclient

We review costs on a client by clientbasis and write-off those costs we

believe should not be billed to the client

Which statement best describes your firm’s cost recovery policy for online research expenses?

n=209Base = those who attempt to recover online research costs

Nearly 1/2 review costs on client by client basis, while 1/4 attempt to bill back all costs to clients

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COMPONENTS INCLUDED IN COST RECOVERY

What components of the legal research costs are included in your firm’s cost recovery efforts?

Legal Research Costs Included in Cost Recovery Efforts

Out of plan charges (usage outside your contract) 81%

Document retrieval such as dockets, briefs, or other court filings from an online service 69%

Copying charges 54%

Online subscription charges 40%

Printing charges 39%

Downloading 17%

Other 7%


Most respondents include out

of plan charges and document retrieval as part of their

legal research costs.

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PERCENT OF CHARGES RECOVERED

Overall, about what percentage of actual (Westlaw/LexisNexis) out of plan charges does your firm recover from clients?

Overall, about what percentage of actual (Westlaw/LexisNexis) online subscription charges does your firm recover from clients?

Mean: 62%

Mean: 67%

n=76Base = those who attempt to recover online research costs and include online subscription charges in their cost recovery efforts

n=156Base = those who attempt to recover online research costs and include out of plan charges in their cost recovery efforts

On average respondents recover about 2/3 of the online subscription charges or out of plan charges they bill to clients

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PRIMARY LEADERSHIP FOR SETTING AND MANAGING COST RECOVERY POLICY

5%

2%

4%

15%

26%

62%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Other

Librarian

Paralegal / LegalSecretary

Office Manager /Firm Administrator

Attorneys

Partner(s)

Who at the firm is involved in setting and managing the policy for online cost recovery?


Partners are most commonly

involved in setting and

managing the policies around

cost recovery.

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FACTORS CONSIDERED FOR COST RECOVERY

For each of the following statements, please indicate whether or not the factor was considered when setting your firm’s cost recovery policy.

Considerations in Setting Firm’s Cost Recovery PolicyYes No Don’t Know

Attorney’s experience working at other law firms 55% 34% 11%

Other Solo or small law firms’ cost recovery principles 37% 46% 17%

ABA guidelines 28% 51% 21%

Bar associations’ or other legal organizations’ policy papers 22% 62% 16%

Articles or white papers about cost recovery 20% 61% 19%

Other 13% 52% 35%


Over 1/2 indicated that an attorney’s experience at other law firms was considered when setting their cost recovery policy

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COST RECOVERY TOOLS

Which of the following cost recovery tools or software are currently used at your firm for online legal research?

Cost Recovery Tools Currently Used

Yes No Don’t Know

Other tools developed in-house 29% 57% 14%

QuickView Plus (Westlaw) 25% 62% 13%

LexisNexis PowerInvoice 14% 74% 12%

APS LookUp Precision - 87% 13%

Other 13% 66% 21%


Tools developed in-house are the most commonly used cost recovery tools, 1/4 of respondents also use QuickView+

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COST RECOVERY TREND OVER PAST 2 YEARS

Compared to two years ago, would you say the percentage of online research costs recovered by your firm has increased, decreased or remained the same?

Remained the same,

54%

Increased, 23%

Decreased, 11%

Don't know, 12%


About 1/4 indicate an increase in

costs recovered.Most firm’s

recovery rate has remained the same over the last two years.

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REQUESTED COST RECOVERY TOOLS

9%

36%

45%

48%

63%

69%

-10% 0% 10% 20% 30% 40% 50% 60% 70% 80%

Other

CLE

Online Training/Webinars

Articles or white papers

ABA guiding principles

Market research on SLF best practices

Which of the following would help you with your cost recovery strategy and processes? (Firms that practice cost recovery n=171)

Base = 200

Firms that do practice cost recovery would find ABA guiding principles, articles or white papers, and market research beneficial tools to help with

their cost recovery strategy and processes.

Cost Recovery – NOT Practiced

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COST RECOVERY NOT PRACTICED

REASONS FOR NOT PRACTICING

Thinking about the reasons your firm does not recover online legal research costs; indicate your level of agreement with the following statements.

1 – 5 scale where “1” means strongly disagree and “5” means strongly agree.

n=197Base = those who do not attempt to recover online research costs

47%

52%

62%

76%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Competitive Advantage to not bill clients(n=196)

Not worth administrative time and costfor tracking (n=198)

Maintain client relationships (n=197)

Firm traditionally does not charge forOLR costs (n=197)

More than 1/2 respondents cite their firms do not recover online legal costs because it is tradition not to charge, or to maintain relationships with clients, or the time and cost for billing and tracking is not worth it.

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REASONS FOR NOT PRACTICING

Thinking about the reasons your firm does not recover online legal research costs; indicate your level of agreement with the following statements. Please use a 1 – 5 scale where “1” means strongly disagree and “5” means strongly agree.


9%

19%

21%

33%

45%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

OLR chgs not assigned to right client ID(n=195)

Failure to obtain client approval beforeexpense incurred (n=195)

OLR chrgs not assembled, prepared orapproved when client invoiced (n=194)

Client refusal to pay (n=199)

Adjust hourly billing rates to include OLR(n=196)

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LIKELIHOOD TO START COST RECOVERY

How likely is your firm to start recovering online legal research costs in the next two years?


Neither Likely nor Unlikely,

15%

Very Unlikely,

32%

Unlikely, 36%

Don't Know, 3%

Very Likely, 2%

Likely, 13%Most Overhead

SLF firms are not likely to

shift to Recovery

Model in next 2 years

15% are likely to start recovering

costs.

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HELPFUL COST RECOVERY TOOLS

10%

38%

41%

55%

66%

55%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Other

CLE

OnlineTraining/Webinars

Articles or whitepapers

ABA guidingprinciples

Market research onSLF best practices

Which of the following would help you with your cost recovery strategy and processes? (Firms that do not practice cost recovery n=29)

Base = 200

Firms that do not practice cost recovery would find ABA guiding principles, articles or white papers, and market research beneficial tools to help with

their cost recovery strategy and processes.

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SUMMARY OF KEY FINDINGS

– Two-thirds subscribe to legal research services through Westlaw/Lexis

– Half of respondents attempt to recover all or part of their online research costs.

– About half review costs on a client by client basis

– Majority of clients include out of plan charges and document retrieval as part of

their recovery efforts

– Two-thirds of online subscription charges or out of plan charges are recovered

– Typically partners are involved in setting / managing policies around cost recovery

– One-fourth indicate an increase in costs recovered over the last two years

– One-half said their costs recovered have remained the same over last two years

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SUMMARY OF KEY FINDINGS (cont.)

For those who do not recover, common reasons include: • Have never charged for research costs

• Maintain relationships with their clients

• Administrative time and costs involved

Noteworthy:Firms that practice cost recovery and firms who currently don’t practice both state they would benefit most from:

– ABA guiding principles

– Market research

– Articles or white papers about cost recovery

Documents

Solo and Small Law Firm - COST RECOVERY ABA GP/SOLO MEMBERSHIP SURVEY RESULTS