Task-Based Billing

By Alan Gahtan - Home Page: http://gahtan.com/alan/ - June 20, 1995

Task-based billing is another layer placed on time billing systems which allows the categorization of legal fees for clients according to the nature of the work performed. The use of task-based billing codes ca provide clients with more informative and consistent legal bills and assist in the establishment of litigation budgets and greater control of outside counsel costs. They can also provide clients with an ability to more accurately assess the efficiency of the outside counsel by comparing the costs incurred to perform similar work.

Although more prevalent in the U.S., task-based billing, like other legal trends, will probably start creeping up in Canada. It is probably already a fact of life for Canadian law firms doing business with large U.S. clients or U.S.-owned multinationals.

More and more large corporate clients are requiring that their outside counsel report their time using task codes. The use of task codes can also provide benefits for the law firm. The historical information collected on actual costs incurred on past matters can provide a useful database for projecting costs on future work. Firms can then provide better estimates of work involved in similar matters when submitting future budgets or bid proposals. More accurate estimates should lead to more satisfied clients and lower financial risk for the firm on fixed-price arrangements.

Many firms faced with such a requirement have produced the billing reports using a spreadsheet or database which is not integrated with their core time and billing system. Such manual or "off system" billing procedures are very labour intensive. Financial system vendors have been working hard to modify their systems to better capture task information.

A major roadblock which has stood in the way of efficient implementation of task-based billing has been the lack of standards. A firm can develop its own set of task-based codes. However, large corporate clients employing multiple law firms have sought consistency so that they could evaluate the performance of the different law firms in performing similar work. The proliferation of multiple client-specific task codes within the same firm can become a nightmare. Automated translation routines can be used in some cases to map firm codes to client-specific codes but runs into problems when the client code set is more detailed than the firm code set. A solution for American firms may however be near.

A consortium of fifty law firms and law departments was organized by Price Waterhouse in the U.S. In cooperation with representatives from the Section of Litigation of the American Bar Association and the American Corporate Counsel Association, the group has developed a uniform set of task-based codes to facilitate the planning, budgeting and billing of legal services in litigation. Another group is in the process of developing codes for transactions and counselling.

The codes contained in the new Litigation Code Set are grouped into five phases and can be used to budget and bill by litigation phase and task. Each phase contains a number of tasks, with definitions to ensure a consistent interpretation. A standard set of expense codes is also defined. Optional activity codes are available as an additional level of detail. The codes cover all contested matters, including judicial litigation, binding arbitration and regulatory/administrative proceedings.

Hopefully a similar group of interested parties can be organized to develop a Canadian code set or examine the feasibility of modifying the Litigation Code Set for use in Canada.

Note: Copies of the Litigation Code Set can be purchased from the ABA Member Services Department at (312) 988-5522 for a fee of US$12.50 (Product Code #5310129).

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