Feesability’s manifesto
An Integrated Approach to Costs Management
Introduction
1.1 This paper sets out a proposal for an integrated approach to costs management in civil litigation from estimating, through time recording to budgeting review and assessment. It is believed that if such an approach can be achieved, this will bring great benefits in terms of:
(a) increased accuracy and clarity of costs estimates to litigants which can inform them in the decisions they make in respect of any piece of litigation;
(b) providing meaningful costs estimates, schedules and bills of costs to the court so that cases can be managed efficiently and proportionately; and
(c) where the actual costs vary from the estimate, allowing litigants, their lawyers and the courts to see clearly where the variations have occurred .
2. Problems
2.1 Estimates have been an increasing feature of litigation for some time. However, they have yet to become authoritative or reliable. There are many reasons for this, including to some degree the inherent unpredictability of litigation.
2.2 The central problems though are of both form and (lack of) common methodology. The rather amorphous nature of estimates and bills of costs as currently submitted creates difficulty in comparing estimates with actual costs incurred on a like-for-like basis. This is particularly felt in the majority of cases that do not reach trial when there is no easy way to disassemble an estimate to trial to show how it properly compares to the costs incurred up to settlement or other early disposal.
2.3 A major obstacle is the absence of a consistent system of identifying cost categories from estimate to time recording through to assessment. This proposal seeks to address that problem.
2.4 Solicitors tend now (and in part are required under the CPD) to set out estimates and prepare costs claims grouping items by activity (eg drafting, attending, telephoning) rather than by the tasks to which those activities were directed (eg , preparing a witness statement, compiling client’s disclosure documents). Unfortunately this leads to most estimates and bills of costs being opaque and uninformative.
2.5 A more logical form of grouping is based on task first and activity second. It is also useful to further group tasks into “phases” or “aspects”. If each set of related tasks are attached to an aspect (eg the aspect disclosure might be formed of the tasks including client’s disclosure, opponent’s disclosure, inspection etc) there is immediately a higher level available for measurement, comparison and analysis, allowing a view of the wood rather than the trees
3. A standardised set of tasks
3.1 Central to the approach proposed in this paper is to identify a standardised set of tasks (ideally specified under the CPR) for each piece of litigation so that:
(a) the estimate can be prepared;
(b) time and other costs can be recorded; and
(c) the claim for costs can be prepared and then assessed;
by reference to such tasks.
3.2 Only with such a standardised set of task descriptions can an effective comparison be made and any proper analysis be taken between:
(a) the comparative costs (whether estimated or actual) of each party; and
(b) the estimated and actual costs of a single party (for example to assess the reasonableness of costs claimed and to improve the estimating process for the future).
Developing an agreed standardised set of tasks is thus key to this process.
3.3 Such a standardised set of tasks will have to cater for:
(a) all parties to the litigation, whether they be claimant, defendant, respondent, interested party or others; and
(b) all types of litigation, to include for example normal Part 7 claims, Part 8 Claims, judicial review and appeals.
3.4 For convenience (for example to facilitate time recording by reference to the standardised set of tasks), each task will be ascribed a standard code.
3.5 There is some tension between a set of tasks optimised for estimating and a set optimised for time recording and assessment of actual cost. In respect of the former, it is necessary (or at least useful) to identify specific and discrete tasks in respect of which the fee earner can anticipate the likely amount of work involved. The more generic the task descriptions, the harder it is to calculate a reliable estimate.
3.6 By contrast, with time recording, where the task has to be identified with each item or work undertaken, overly specific task descriptions become burdensome and it can be difficult to determine properly into which task a piece of work can be properly placed.
3.7 Accordingly, a unified and standardised set of tasks to cater for estimating, time recording and assessment of costs must represent a balance between these competing requirements.
3.8
4. The proposed approach
4.1 It is proposed that costs management in litigation proceed through the following steps.
(a) Preparation at the outset of the case a plan and estimate on the basis of standard (or at least common) assumptions and standardised task codes
(b) Disclosure of estimates and assumptions to the other side and the court
(c) Consequent case management by the court
(d) Fee earners on the case (solicitors and counsel) record time by reference to standard task codes
(e) Periodic review throughout the case of actual cumulative costs incurred to date and if necessary a reformulation of estimates
(f) On any costs awards, a review of the costs sought against the estimate
(g) A review at end of the case of estimates against actual costs with a view to informing and thereby improving the reliability of estimating in future.
Preparation of a case plan and estimate
4.2 Estimating the likely costs in litigation remains at present somewhat haphazard and can be unsophisticated.
4.3 For the reasons outlined above, it is suggested that the following steps be adopted by a party to a piece of litigation in respect of an estimate.
(a) The party identifies the assumptions in respect of which the estimate in prepared. In time these assumptions, as developed in practice, may too become standard
(b) The party prepares a case plan and costs estimate. The estimate will set out the anticipated amount of time expected for each fee earner on the case and other costs to be incurred for each relevant standardised task in the case. For larger cases It is advisable to use appropriate case planning software for this. Ideally, reports should be produced which not only set out the likely costs for each task in the case, but also an estimated monthly cost of the case going forward. This provides a useful and early check for the client as to whether actual costs are exceeding the estimate.
(c) The assumptions and the estimate are submitted to the court and other side, in the first instance at the initial case management conference.
4.4 A number of steps can be undertaken to improve the accuracy of an estimate. Setting out at an early stage the assumptions on which the estimate is based is useful in this regard. However, other guidance can be given (which may in time be built into the case planning software), based on experience, to improve the accuracy of the estimate.
Time and cost recording
4.5 Most solicitors now record time spent on fee earning matters on sophisticated practice management systems (“PMSs”). In order the facilitate the approach suggested in this paper, a means must be found to record for each time entry the task in respect of which the work in question was undertaken. This is a challenge which should not be beyond legal technology. Many PMSs have available spare fields for data entry. Alternatively, PMSs invariably allow for a text narrative field for each time entry. This can simply be used to enter the code for the task immediately before the usual time recording narrative. For example:
“4.2 Attending with Graham Smith in preparation of his witness statement.”
4.6 Counsel also record time with some form of narrative. Again, this could be recorded by reference to the standardised task codes.
4.7 The alternative to recording this information pro tem, is for there to be a retrospective allocation of work done to the different tasks on the case. This is likely not only to be less accurate but also more time consuming – adding an unwelcome layer of expense to the process
Periodical comparative review of cumulative actual costs to date with the estimate
4.8 At periodic intervals, as determined by the court, it will be necessary to compare the cumulative actual costs to date with the estimate. If the approach set out above has been adhered to, this becomes a largely automated process and meaningful analyses can be quickly and efficiently produced. At Appendix [], there is a sample comparison of estimate vs actual.
4.9 It is outside the scope of this paper to consider
(a) the appropriate frequency of this periodic comparative review (whether on a solicitor/client basis or between the parties and before the court); and
(b) the consequences of any material discrepancy between estimated and actual costs
Assessment of costs
4.10 Where there is an assessment of costs after an award of costs, one factor which should be taken into account is the comparison, on the basis of the standardised tasks, between the estimate and the actual costs incurred. This will plainly be of the greatest application in respect of full detailed assessment at the end of the matter. Whether this approach would also be at all applicable in respect of a summary assessment of costs or a detailed assessment in respect of part of a matter (for example, where detailed assessment is ordered in respect of an interlocutory application) is perhaps something which can be kept under review
4.11
4.12 The developing use of information technology ought over time to enable many of these more sophisticated documents to be generated as reports from either bespoke software, reconfigured PMSs or popular office productivity applications.