Given the current intensity over cost cutting, consultants are needed to advise where there's fat in every business function. And it is all the better if a consultant can add value to the process while cutting costs. That’s precisely the value proposition of Legalbill, a consulting firm focused on helping clients make the most of their legal expenses. To learn more about the opportunities in this space, Consulting One-on-One sat down with the firm’s Chief Technology Officer Jeff McCandless.

Consulting: On what size clients does Legalbill focus? And what services do you provide?

McCandless: We primarily serve midsized and large legal departments in the U.S. and Western Europe. At a minimum, they tend to spend at least two to three million dollars on outside legal counsel annually. We tend to start by setting up basic billing guidelines for the outside counsel, such as: how much they can charge the client per copy, how many people can bill their time for inter-office meetings, etc. And we make sure all members of the outside legal team understand those rules. And then we’ve got paralegals that certify whether the firm billed the client correctly. In addition, we have peer reviewers – lawyers with at least 10 years of experience in whatever area they are reviewing for us – that handle the more subjective questions. Their job is to ask if a certain expense was truly necessary, such as: ‘Why did you spend $2,000 on an all-day deposition?’ If the appropriateness is called into question, we request further explanation. And then we inform our clients which items in the invoice we suggest are not to be paid for. There is an appeals process. At the first stage, my business partner arbitrates it. And if the law firm is still not satisfied, it’ll go to the client’s general counsel. So far, less than one percent of our reviews have been appealed. We’re not looking to find something that isn’t there.

Consulting: As a result of your reviews, how much are your clients saving?

McCandless: Every client and outside lawyer is different, so we don’t guarantee an amount. But typically, in the first year or two, our clients save 10 to 15 percent, net of our fee. And then, the savings tend to dip to three to six percent in future years. The savings decline because after an annual review or two, outside lawyers know what we won’t let them get away with.

Consulting: Beyond cost savings, what are the other advantages of hiring your firm?

McCandless: We can help a client’s legal department set budgets. We’ve reviewed so many cases that we can develop a hard number analysis to help the client know which cases to settle, which to litigate, and whom to use to litigate. We often get asked for referrals to a lawyer who has worked at one of the firms we’ve audited to get the best bang for their buck. While we don’t share fee data from client to client, we can analyze it in aggregate. And from that data, we can tell a client what an average workman’s compensation lawyer charges per hour. We can lay out, by quartile, what everyone else is charging for similar cases in, say, Ames, Iowa.

Consulting: Is demand for your services counter-cyclical or do you expect to stay busy even after the economy improves?

McCandless: The sales cycles on our projects typically take six to nine months, so we’re just now seeing a spike in demand. But there’s demand regardless of economic conditions. There are always lawsuits going on. But in this economy, we’re hearing from clients that are saying that their CFO wants to shave 10% from every department. Without the context of where you might be overspending, how else would you know where to cut back on your legal bills?