Posted by: johnocunningham | June 28, 2013

Right-Pricing Projects for Clients

One of the very topical and helpful presentations at this year’s LSSO RainDance in June was provided by Christopher P. Ende, Senior Manager of Project Management and Pricing for Boston-based Goodwin Procter. The shift from traditional hourly pricing to value-based, competitive pricing has driven much of the movement toward the hiring and empowerment of pricing directors, and Ende provided plenty of tips on how to do “value-pricing” correctly so that both the client and the firm reap the benefits.

He noted that a “winning” fee proposal made by a firm to a value-seeking client must:

  1. Clearly define the scope of the project so that both sides understand what is and is not being undertaken;
  2. Be based on accurate internal estimates of time, as well as internal and external resources involved;
  3. Present the free structure most suitable for the job (hourly, fixed, blended, containing success “kickers,” etc.); and
  4. Communicate the proposal clearly, succinctly and effectively.

Where many people run into trouble, said Ende, is in the second step of assessing accurately the time and resources involved. To do this, he suggested, you need to consider the client’s goals and definition of success. Are they betting the company and looking to win an adversarial battle at all costs? Or are they looking for a practical solution to a dispute, or even a partnership with a strategic supplier or other party that could play a role in their success? One must be able to gauge whether the client is looking for a cost-effective practical compromise or remedy on an ordinary-course-of-business matter, or seeking a narrowly defined ultimate victory in a critical situation.

In developing an accurate budget, said Ende, you must know the 3 to 5 key cost drivers involved in a project to get it right. He said that there are three factors commonly relied upon in forecasting expenses involved in a project:

  1. The intuition of experienced lawyers;
  2. The quantitative calculation of estimated hours and resources based on the input of people involved in the component parts of a project; and
  3. The analysis of historical data on similar projects in the past.

He also made it clear that a “winning” proposal that benefits the firm and the client must be made with input from all of the key players, including the client and the key vendors or experts that the firm will enlist.

With regard to the last point – the communication of the proposal – Ende offered up some excellent practical pointers:

  • The bottom line on the fee proposal should be clear, unambiguous and readily apparent on page one;
  • The client should be offered options on how to approach a project that will yield different costs, but not so many options that they have a confusing menu to digest;
  • The proposal should contain creative approaches to billing where they are valued and appropriate, such as success kickers to the firm for defined victories, blended rates that use fixed fees for rote stages of a project and hourly fees for unpredictable aspects, or maximum fee caps based on certain key assumptions and understandings.

 

 

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