Law Department Management Blog
A company has just been sued or wants to bring suit or has decided on a transaction. It presents two law firms, each capable of handling the matter, with the facts as they are known and asks for one of them to state how much they will charge to represent the company. That firm submits a budget, with a twist.
The twist is that the second firm will review that estimate and can choose to take on the case for the amount. Knowing that possibility, the first firm – the budget-submitting firm – will estimate costs as leanly and accurately as possible. Too fat a budget, and the other firm will snatch the matter; a lean budget and the other firm will pass, which leaves the company contented with the cost.
A variation on this technique lowers the risk of collusion if two firms do this more than a few times. Every now and then, invite a third firm to take part or randomly assign the roles among the three.