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Estimates not guesstimates

Posted by Derek Rodgers

28-03-2017

A couple of weeks ago, Gardner Leader staff organised a charity quiz in aid of Newbury & District Cancer Care Trust. One of the challenges was to guess the number of sweets in a jar. The correct answer was 366 and there were quite a few guesses which were very close to that. The range of guesses went from 73 at the lower end to 1368 at the top end. Quite a range!

One of the most common causes of complaint against solicitors is when work costs far more than the original estimate. Part of the problem is that it is not always easy at the outset to know exactly how much work is going to be involved. Two pieces of work may look much alike but once people become involved – clients, third parties, other solicitors – they can go in very different directions. At a previous firm, I was once asked to prepare what should have been a very simple shareholders agreement but because the parties kept changing their minds about what they wanted to do, it was (incredibly) six years before they finally signed it! That could not have been predicted at the start.

Transactional work involves third parties and other solicitors and the extent of the time involved often only becomes clear once you get a feel for how everyone is going to approach it.

The sweet jar estimate above shows that even when presented with a finite and defined problem, estimates can vary wildly!

None of this is an excuse for not being able to give our clients the best possible estimate at the start of a matter. That may mean being very specific about the scope of what we are estimating for and any assumptions being made. It may mean that we can only give an estimate up to a certain point, rather than for the whole job, with a review once that point is reached. But it should not be beyond us to ensure that at any point, the client knows as far as possible what it is likely to cost for the work they are committing to.

At Gardner Leader, we have put a lot of time and resource over the last couple of years into training our lawyers to be better at this. We make sure that before any estimate is given, a detailed scope of the work is drawn up – the client needs to know what we are going to do, what we are not going to do and have a clear basis for being able to tell if the job is turning into something different from what was anticipated in a way that might impact on the cost. We also make sure they know any assumptions we have made in coming to our estimate – for example, that all the parties are based in the UK, that only a certain number of meetings will be needed, etc.

We require our lawyers to discuss their proposed estimate with a colleague before giving it to the client to make sure that they are being realistic and have not overlooked anything.

Most important of all, we aim wherever possible to offer a choice. Our estimate will normally be based on an hourly rate (and a surprising number of clients still prefer this), but having calculated that we will usually offer a fixed price alternative in appropriate cases which may be attractive to clients who prefer certainty. We have other options available to share the cost risk of the cost with the client – perhaps a lower fee if the matter aborts, but a higher one if it succeeds; or a lower hourly rate for any time above the estimate but sharing the savings if we come in below.

The key aim of all of this is to give the client peace of mind that they know, as far as is possible, what they are in for and that they have choices to enable them to select a pricing option which meets their own particular priorities. Fortunately the very positive feedback we have had from clients since we adopted this approach suggests we are better at this than at guessing how many sweets are in a jar.

 


Derek Rodgers

Managing Partner
Corporate & Commercial Law

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