Outside Publication

Selecting Service Providers and Building a True Partnership, Legal Intelligencer

May 20, 2013

Reprinted with permission from the May 8, 2013 edition of The Legal Intelligencer© 2013 ALM media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382 or reprints@alm.com or visit www.almreprints.com.

A recent hot topic, and the subject of many articles, has been law firms and corporations deciding whether to insource, outsource or create a hybrid model for handling discovery services. For those that decide that outsourcing is the appropriate model for them, selecting the right service provider or providers to assist with handling discovery is not as easy as one would think. Different service providers have different strengths and it seems as if every service provider has a different way to price its work or is using different terminology to define various services. For law firms and corporations that do not do this every day, this can be confusing and frustrating.

Typical questions from people selecting service providers include the following: You told me that you could meet these processing and production specifications, but now you can't? I thought these services were included. What did I actually pay for? Why did you tell me the project would cost X, but the invoices are much more than X?

This article outlines some ways to help with selecting not just a service provider, but a partner in the discovery process.

Comparing Apples to Apples

When selecting a service provider, one of the biggest challenges is comparing apples to apples. Many service providers use their own terminology and pricing models. Law firms and corporations receive statements of work that range widely in number of pages and level of detail; some may be simple price lists for a hypothetical project and include assumptions that may or may not be realistic. This makes it very difficult to compare pricing and the scope of services and leads law firms and corporations to select what they believe to be the lowest-cost service provider when, in fact, they may not be comparing apples to apples.

Some war stories of buyer's remorse:

  • A service provider bids the project based on decompressed gigabyte (GB) counts. However, it does not define how it is decompressing the data. You believe that you are sending 10 GB of data to be processed (15 GB after decompression) but receive a bill for 20 GB of data. Why the difference? How is that service provider calculating the GB?
  • A service provider offers lower pricing to process and upload the data into its review tool. However, you do not consider the recurring hosting and user fees. If you need to host the data for an extended period of time, the higher recurring charges may well offset any savings during the processing phase.
  • A service provider says its per-document review pricing includes privilege review. However, privilege review for this service provider means simply running a long list of privilege terms, and every document that hits a privilege term is marked "privileged" for its review, requiring a second-level review of those documents. You may believe that you received a good deal for the review only to now find that you have to pay higher-priced attorneys to perform the second-level review of a majority of your responsive set to de-designate what that service provider originally and incorrectly designated as privileged based solely on search.
  • A service provider says its review costs are calculated per page. However, it does not disclose that it uses TIFF spreadsheet files, which can increase the per-document charge significantly.
  • You send a request for proposal to a number of service providers. In their proposals, the service providers include a price list as well as project quotes. However, you don't notice that the quotes include unrealistic assumptions. And these statements are usually made without knowing anything about the collection methodology, types of documents being reviewed or any negotiations with the requesting party.

It's Not All About Price

Pricing is a big component in selecting a service provider, but buyer beware. In evaluating service providers, we recommend considering a number of factors other than just price, including, but not limited to:

  • Experience and expertise in the service categories for which you may be engaging a service provider. Remember, a scanning vendor that purchased a license to a processing tool does not make it a processing vendor.
  • References, including corporate and law firm clients.
  • Operational team and SOPs.
  • Project management teams.
  • Service-level agreements, including database uptime, processing and production turnaround time.
  • Quality control protocols for each part of the process.
  • Data security and infrastructure, including data redundancy.
  • Reporting capabilities.
  • Scalability, including servers, attorney and technology resources.
  • Strategies and workflows for handling data sources implicated in your organization or specific matter.
  • Strategies and workflows to reduce costs at each phase, including ability to test search terms and use of advanced analytics to reduce review time.
  • Experience documenting and defending processes, if needed.

Not considering these and other factors, and focusing solely on price, can lead to buyer's remorse.

How Do I Make the Best Choice?

Don't be "penny-wise, pound-foolish" when making your service provider selection. In addition to evaluating the nonpricing-related considerations, make sure you understand what is included in the service provider's proposal; i.e., what is included in its pricing and, more importantly, what is excluded and would be out of scope from the pricing provided. Make sure you understand total estimated project costs, rather than comparing a single line item in the pricing. Understand any hidden fees. In fact, the issue of hidden fees is one of the biggest complaints we hear from people in the market in the service provider selection process. When law firms and corporations receive bids, they expect to pay a certain price, but - without any notice or well after it is too late to make a change in their selection process - they find out that the price quoted is not actually what they will pay.

To some degree, this may be unavoidable, as the scope of a project may change. However, there are ways to help manage and mitigate these issues.

In managing the service provider selection process and helping to avoid the "apples and oranges" proposals, we recommend creating a hypothetical project that outlines your expectations and project assumptions. Depending on the services for which you are seeking assistance, your hypothetical may include information like:

  • Total number of custodians and data sources being collected.
  • Location of custodians.
  • Type of data being collected per custodian (e.g., hard drive, portable devices).
  • Whether the collection will be onsite or remote.
  • Number of GB to be processed per custodian, source or total number of GB.
  • The anticipated percentage of data expected to be culled by use of search terms, date filters, deduplication and other available filters.
  • Average number of documents per GB to be reviewed or total number of documents to be reviewed.
  • Legal analysis requested of the review provider (e.g., review is for responsiveness, privilege, key documents and 10 substantive issues, or review is a privilege-only review).
  • Type of redactions expected to be applied and anticipated volume of redactions.
  • Number of documents to be logged for privilege.
  • Number of pages to be converted to TIFF, branded and produced.
  • Number of native files to be produced.
  • Number of months the data will be hosted and number of users accessing the database per month.
  • Specific type of functionality you expect in the review platform (e.g., advanced analytics, availability of technology-assisted review platform).
  • Whether the documents are all in English or there is a foreign-language component.
  • Expected turnaround time, to understand whether there will be charges for expedited work.

You can also take it a step further and make it easier to compare the responses by building a pricing matrix that includes your assumptions in read-only format, requesting the service provider to input its pricing in cells that will automatically calculate total project costs. Because you do not want to lock yourself completely into these costs and want to take advantage of advances that service providers may be offering, we recommend that you still provide opportunities for service providers to explain differences in their processes or pricing that may impact total costs. This will help avoid limiting service providers from bringing something different to the table that reduces your project costs. Your primary goal is to avoid having to guess how each service provider prices the project and better understand the total project costs, while being able to then evaluate which service provider best meets your needs.

Do not let unique pricing models trick you. Make it easier for yourself to understand the project budget, so your goal to reduce the overall costs of your matter, and potentially your entire litigation portfolio, may be fulfilled.

Scott A. Milner is a partner in Morgan, Lewis & Bockius' eData practice and resident in the firm's Philadelphia office. He counsels firm attorneys and clients on a wide range of discovery topics from records management and information governance through production. He can be reached at smilner@morganlewis.com.