The UK is at the forefront of fixed price legal work. Savvy Corporates, The City of London, Investors, Insurance companies and more are constantly striving to control costs and push the commercial risks onto all their suppliers and that includes the legal profession. If this trend is followed to its logical conclusion its only a matter of time before this will kill off time and materials work for all but the most exotic of legal projects.

At first glance this is a highly unattractive development for law firms who have been one of the last bastions of the time and materials business model, however, even time and materials forces firms to find ways of using efficient resources or technology to lower overall chargeable rates to win in a competitive tender process whilst maintaining quality and oversight to prevent PI claims and professional risks to partners.

Fixed Price projects can be more profitable

To effectively determine the right fixed price for any document review component of a project, firms need to estimate the complexity and document volume and apply their experience to estimate the true resourcing costs and margins to arrive at a competitive cost for this component of the project. Other elements of the project, drafting, outreach, negotiation etc. are then included to determine the overall effort. In this process firms who are most familiar with the existing documents (i.e. those who have recently completed similar work for that same client) have an advantage as they may already have a good understanding of what is included in the documentation, stifling competition and often locking companies into the “go with who know” approach.

Law firms can include contractual guard rails to reduce commercial risks from scope creep of increased document volumes or more risk factors/clauses to review, however, clause variability (and overall portfolio complexity) cannot traditionally be quantified. Without any ability to measure document and clause variability a “gut feel” approach is needed which is extremely difficult to estimate and almost impossible to include in any project scope in the terms of engagement. The variability of contracts within the review portfolio is a major factor which can turn a lucrative project into a loss that firms have to manage with little to no detail to go on.

But what if you could accurately quantify the overall complexity of document review and complete document analysis far more efficiently than peers? If this were possible margins could be increased above those used on time and materials projects making fixed price deals more attractive to law firms.

Technology Driven Estimation

Contract Genetica’s (CG) legal contract analytics software can provide statistical insights that measure how standardised any type of contract generally is enabling a more formulaic approach to determining what the profitable bid price for that project is likely to be. Additionally, if the client or the bidding partner knows what the specific areas of concern are for that project, CG’s technology can provide clause level statistics on how variable target provisions generally are. With this information, the “gut feel” element of a bid can be removed, enabling highly effective effort/cost estimates to be produced. Contractual guardrails around portfolio complexity can be included in the terms of reference/bid, significantly reducing commercial risk from the project.

Win the Project, then What?

Using the CG Analyst product, legal reviews can start immediately as there is no training required by the system. Once the documents are available a CG enabled first pass review can cross check expected variability with actual portfolio variability. Clause variability provisions in the tender contract can enable partners to call in change control provisions where documents are significantly more bespoke than is the market norm.

CG’s innovative approach changes the traditionally laborious review process from a document by document review, often reading lots of non relevant text, to a clause variation-based process covering only important elements of the portfolio. Edge case or unusual variations of provisions (where real risk often exists) can be identified immediately providing extra time to identify appropriate remedial activity.

Should any data elements need to be extracted from the documents (e.g. for inclusion into outreach documents or for further detailed reporting), CG completes this through a simple drag and drop of the required data. CG systems learn form this and automatically identify other provisions where similar structures exist and can automatically extract relevant data from all other documents in the portfolio.

Fully traceable reporting from CG systems provides details of all provisions reviewed, confirmed as relevant or non relevant to the transaction, enabling firms to demonstrate completeness of review. This evidence is then filed in the firms DMS system to support the work on who, how, when and what was analysed in completing the review element of the project. This significantly reduces project risk and with a full audit trail of the process this could in turn enable firms to negotiate reductions in PI cover.

Advantages of Using CG Systems

• Deals can be quantified more accurately before work is accepted

• Bids can be highly competitive while reducing the risk of the law firm taking a hit

• No machine learning/training is required to lawyers can action projects immediately

• Where publicly available documents are available (e.g. land registry documentation), its possible to get a high-level overview of the project even before the tender process has concluded. This is a huge advantage to any firm with this capability.

• Where time is tight the tendency to spot check the contracts with the biggest impact is no longer necessary. A fully traceable analysis can be completed, on every document for all relevant clauses in less time and using much less resource

• Traceability from end to end ensures robust controls are in place which is not something that manual resources are able to provide in an accurate and transactionally safe way

• The lawyer is still at the heart of any project, so the usual risks associated with use of technology do not apply so there is no increase in operational risk

Costs come down, margins go up, competitive advantage is increased, helping grow market share and building on the quality of the franchise. What’s not to love…

For more information or to discuss how CG can revolutionise your contract review process, please contact Contract Genetica through our website at www.contractgenetica.com or emailing enquiries@contractgenetica.com