The Task-Based Data Analytics initiative — a project that stems from the ACC Legal Operations Metrics & Analytics Interest Group — seeks to find the Holy Grail for companies and law firms who are using VBF arrangements — that is, being able to confidently predict the cost and value of engagements so as to ensure that the agreed fee will be fair to both the company and the firm, without resorting to shadow invoices based on the inefficient hourly-rate billing system. The idea is to standardize matter and task-based data analytics in order to aggregate, analyze, and benchmark such data across companies to produce data sets with high confidence levels and predictive value. In other words, to create universal benchmarks to allow corporate legal departments to confidently compare the effectiveness of their legal service providers. According to Harchut, “To do this, we need a new type of coding system that is not based on UTBMS codes which are wholly inadequate for this type of data analysis. That’s why we need a revolution!”
Harchut has experience with radically changing paradigms. He joined pharmaceutical giant GlaxoSmithKline (GSK) in 1985 as a litigator from a large law firm in Philadelphia. After progressing up the Law Department ladder in various roles, such as general counsel for the company’s clinical laboratories subsidiary, he eventually became head of US litigation in 1997 managing product liability cases, governmental investigations, environmental disputes, and other costly matters.
“Needless to say, I became very aware of how incredibly expensive litigation is,” he says. “We dealt with a lot of outside counsel and really got to understand what was driving costs among law firms and ancillary legal service providers. When the economic crisis hit in 2008, one of the top priorities that GSK’s CEO gave to our new global general counsel, Dan Troy, was to dramatically reduce our huge legal spend.”
As a result, Harchut was asked to lead a new Global External Legal Relations Team (GELRT), which was tasked with changing the paradigm by which GSK paid for legal services by moving all outside counsel assignments throughout the world to VBF arrangements, whenever feasible. Per GC Dan Troy’s mandate, GSK Legal included that objective in the performance goals upon which GSK in-house attorneys can earn a bonus. The results of this VBF initiative were dramatic, boosting the percentage of external spend on VBFs from 3 percent in 2008 to more than 68 percent by 2011, and to 84 percent in 2015. In that year, GSK processed 348 VBFs, nearly one every day. According to Harchut: “Even though there are unique aspects to each litigation and business transaction, we’ve proven to the dissenters of task-based flat fees that there are successful ways to make them happen.”
But VBFs were not the only radical change implemented by Harchut’s team. In 2010, GSK Legal worked with its procurement department to launch an Outside Counsel Selection Initiative (OCSI), which is a matter-specific, mini-RFP for all new engagements over $250,000 that utilizes an electronic reverse auction to arrive at a competitive fee, while still ensuring excellent legal representation for GSK. In 2012, the Association of Corporate Counsel recognized GSK and Harchut, along with the revolutionary vision of Dan Troy and the hard work of procurement colleagues Marty Harlow and Justin Ergler, as an ACC Value Champion for cutting legal spend by as much as $36 million through 57 OCSI events.
In addition, the author of a Harvard Business School case study about GSK’s OCSI initiative states: “They are revolutionizing the way that legal services are going to be procured.”
“It’s really fun to be at the forefront of cutting-edge initiatives,” says Harchut, whose GELRT team also includes individuals well versed in analytics and process improvements. “These types of radical-change initiatives really bring out the collaborative energy of our Team.”
Today, Harchut is hoping to encourage that type of collaboration throughout the profession through his work with the ACC Legal Operations Metrics & Analytics Interest Group and the Task-Based Data Analytics initiative.
“We’re going towards best practices and guidance for Legal Ops folks who are trying to find that Holy Grail. Even if not a mandated standard, there will be opportunities for people interested in VBFs to use the task-based coding voluntarily to arrive at value-driven fees that are fair to both the company and the firm,” Harchut says. “Ultimately, it’s not just about cost reduction. We are measuring outcomes and determining what value the law firm brings to the company.”
The ACC Metrics & Analytics Interest Group meets via monthly phone calls, and on June 23, Harchut presented the initial phase of the Task-Based Data Analytics project — deemed ‘Project Revolution’ — at the 2016 ACC Legal Ops Conference in Chicago. There, he demonstrated a “Straw Man” template created by the Group that sets out phases of a matter — in this pilot, a product liability matter — and moves away from hourly billing in favor of defined task-based codes. For companies that embrace VBFs, the proposed system would not only revolutionize how work is coded for a litigation matter, it would also allow for similar templates to be introduced across all other practice areas within a company and eventually to make industry-wide comparisons.
“We would be able to know what a typical product liability matter costs before a certain judge, and what depositions in a particular jurisdiction typically cost on a unit basis, etc.,” Harchut says. “The beauty is that companies can use the template online for law firms to complete and send back their proposed budget for each matter broken down by phases and tasks. They can indicate the number of units needed for depositions and the number of documents needed to be reviewed. That becomes their fee proposal, and if the company accepts it, that proposal ends up being the project management plan.”
This will allow in-house lawyers to quickly identify areas where budget or process adjustments need to be made in real time, rather than the typical 6-month waiting period to review law firm invoices, or worse, being unable to take any action until the end of an engagement.At the end of an engagement, the system will also send out a scorecard for the law firm and the in-house managing attorneys to give their views on the value provided based on the outcome of the matter. “This will allow the firm and the in-house lawyers to see where they are aligned or if there’s a disconnect,” Harchut says.
The June 23rd presentation also included a call to action for more corporate legal departments and their law firms to join the initiative. Harchut aimed to encourage as many interested legal operations professionals as possible to move toward a universal system that can potentially transform how fee arrangements are derived — and ultimately drive greater value and better partnerships throughout the profession.
“As word spreads, hopefully more folks will join the revolution in order to find our collective Holy Grail.”
Bob Harchut is vice president and associate general counsel at GlaxoSmithKline. Mr. Harchut joined GlaxoSmithKline’s predecessor company, Smith Kline & French, in June 1985 as counsel in the litigation group and, since then, has held positions of increasing responsibility including General Counsel of the Company’s now-divested Clinical Laboratories subsidiary and Chief Litigator from 1997 until November 2008. At that time, Mr. Harchut was appointed to the newly created position of Head of Global External Legal Relations. In this role, he has created strategies and implemented processes to dramatically change the paradigm by which GSK pays for legal services and to significantly reduce GSK's external legal spend worldwide, while maintaining excellent legal representation.
Mr. Harchut is a 2012 ACC Value Champion and a current member of both the ACC Value Challenge Steering Committee and the ACC Law Department Executive Leaders group. Mr. Harchut graduated with a B.A. (summa cum laude) from St. Joseph's University and obtained his J.D. (cum laude) from Villanova University School of Law where he was a member of the Order of the Coif and editor-in-chief of the Villanova Law Review. Prior to joining GSK, Mr. Harchut served as a law clerk in the U.S. District Court in Philadelphia, and he was also an associate at the Schnader law firm in Philadelphia concentrating on product liability, commercial, and labor litigation.