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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 PRACTICED
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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COST RECOVERY PRACTICED
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%
n=194Base = those who attempt to recover online research costs
Most respondents include out
of plan charges and document retrieval as part of their
legal research costs.
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COST RECOVERY PRACTICED
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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COST RECOVERY PRACTICED
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?
n=210Base = those who attempt to recover online research costs
Partners are most commonly
involved in setting and
managing the policies around
cost recovery.
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COST RECOVERY PRACTICED
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%
n=190Base = those who attempt to recover online research costs
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 PRACTICED
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%
n=190Base = those who attempt to recover online research costs
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 PRACTICED
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%
n=189Base = those who attempt to recover online research costs
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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COST RECOVERY PRACTICED
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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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. Please use a 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
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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COST RECOVERY NOT PRACTICED
LIKELIHOOD TO START COST RECOVERY
How likely is your firm to start recovering online legal research costs in the next two years?
n=199Base = those who do not attempt to recover online research costs
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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COST RECOVERY NOT PRACTICED
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