The operational decisions that determine outside counsel costs

Legal teams are highly structured in how they approach pricing as part of outside counsel management. Rates are negotiated, discounts are agreed, and fee structures are defined with a clear expectation of what the work should cost.

That level of control suggests the outcome is largely set at the outset.

But it isn’t.

Across comparable matters, it is common to see material differences in cost, even where the same firm is used and the same commercial terms are in place. The variation is often significant enough to outweigh the impact of any pricing adjustment agreed at the start.

You can see the problem here. Most cost analysis stays focused on the commercial terms. Whether the rates were competitive. Whether the discount was applied. Whether the structure was appropriate.

But it’s not enough, and we need to do more. The factors that actually determine total spend are rarely examined in the same way.

Why legal spend rarely changes despite formal pricing adjustments

Pricing is handled with precision across outside counsel management. Rates, discounts, and fee structures are agreed to with care and tracked closely as a matter progresses. Yet, even so, the overall cost does not tend to move in line with those adjustments. And that’s because of how those terms are used once work begins.

Here are some examples you’ll recognize:

Lower rates offset by increased senior involvement
A lower agreed rate does not, in itself, reduce total cost. As work develops, a greater share may be delivered by partners or senior associates. That usually reflects how the work is being managed as complexity becomes clearer or closer oversight is needed.

You’ll often see this play out through:

• partners staying closer to execution than expected
• specialists introduced partway through
• additional reviewers added as the detail becomes more involved

The rate remains as agreed. The cost reflects the level at which the work is delivered.

Fixed fees extended through additional phases
Fixed fees provide certainty when the work follows its original structure. But it rarely stays that contained. Additional phases are introduced, timelines extend, and further review is required. Each phase may still be priced as agreed, but the overall scope moves beyond what was originally set.

This often shows up as:

• timelines extending without a formal reset
• additional phases introduced incrementally
• repeated review cycles as issues develop

The structure remains intact. Total spend increases as the work expands.

Discounts applied to rising underlying rates
A consistent discount is often taken as a sign that pricing is under control. But, that view only holds if the underlying rate stays the same. When rates increase, the same discount applied to a higher base produces a higher final cost.

The percentage remains stable. And, again, the amount paid continues to rise.

↪Further reading: Why legal spend predictability breaks down (and what to do instead)

Across each of these examples, the commercial terms remain intact, and on that basis, they appear to be working as intended. What changes is how those terms are used over the course of the work, and that is what drives the difference in outcome.

In many organisations, detailed data is available at the start of a matter in the form of budgets and agreed pricing, and at the end through invoices and billing review. During delivery, there is far less visibility into how work is staffed, how activity develops, and how cost builds over time. 

Why these decisions fall outside financial control

The decisions that determine cost are made during the delivery of outside counsel work, rather than within a financial framework. 

They are made in real time, as the work develops. Legal teams and external counsel respond to the issues in front of them, adjusting how the work is carried out as complexity becomes clearer or risk increases.

From a delivery perspective, this is expected. From a financial perspective, it creates a problem.

You can see the issue here. These choices are part of how the work is carried out. They are made to move things forward, without being recognized as cost decisions when they happen. As a result, they are rarely captured, assessed, or challenged in financial terms at the point they occur.

That is where the disconnect begins.

Financial control is structured around defined points in time. Budgets are set at the outset. And Forecasts are updated periodically. And invoices are reviewed once the work has been completed.

But none of these aligns with the decisions that determine how cost is built. And this has two consequences.

First, variance is identified after it has already been created. By the time a forecast moves or an invoice is reviewed, the underlying drivers of cost have already played out.

Second, the source of that variance is difficult to isolate. Financial reporting reflects the outcome, but not the sequence of decisions that led to it. The movement is visible, but the cause is not always clear.

This brings me to the next point: legal spend can appear unpredictable, even where pricing is consistent and processes are well defined.

↪Further reading: The intersection of legal and financial strategy: Insights for the modern CFO

Why traditional controls don’t address this

Legal teams already have established ways of managing external spend. Budgets are set at the outset, pricing is agreed before work begins, and invoices are reviewed once the work is complete. Each of these provides a point of control.

But they do not operate in the same place as the decisions that determine cost. 

Budgets are set before the detail of the work is fully understood, pricing is agreed before the work is fully defined, and invoice review happens after the work has been delivered. 

Meanwhile, the decisions that influence cost are made throughout the life of the work, as it progresses and develops.

As a result, control is applied at defined points in time, while cost is built continuously.

Where control is applied across a matter

These controls provide structure at the beginning and validation at the end, but they do not give a clear view of how cost is building while the work is underway.

There’s a reason this approach persists. Budgets can be compared, rates can be benchmarked, and invoices can be checked against agreed terms. Budgets can be compared, rates can be benchmarked, and invoices can be checked against agreed terms, which makes them straightforward to report and defend.

The decisions that actually influence cost do not have that same visibility, and that is why these approaches, on their own, do not prevent cost from moving.

Most legal spend controls operate at the edges of a matter, while cost is generated in the middle. If that’s where cost is created, that’s where it needs to be managed. 

From retrospective to real-time visibility: Marex’s approach to legal spend 

Marex, a NASDAQ-listed financial services platform, faced a familiar challenge. As the business scaled and regulatory scrutiny increased, legal costs became harder to track and harder to explain.

Spend was recorded manually, and accruals were based on spreadsheets. Finance had no clear view of unbilled work in progress.

“Before Apperio, we would send out a spreadsheet to see spend—often with very approximate amounts.” — Suzanne Joynes, Cost Accountant at Marex

That meant the financial position was only visible after the fact. By the time costs were reported, the underlying activity had already taken place.

With Apperio, from PERSUIT, Marex introduced a single source of truth for legal spend. Accruals became automated, and finance teams were able to access current data without relying on legal to provide it.

“Massive time saving for the legal team as all the financial work can be done by the finance team... it cuts out 90% of the admin.” — Jason Vera-Torres, Head of Legal, Equities and Fund at Marex

Instead of relying on retrospective reporting, the team could see how cost was developing while work was still underway. That made it possible to track activity as it happened, rather than reconstruct it later.

For a public company, that level of visibility also supported audit and reporting requirements.

“Audit time, risk, and cost has reduced by using accurate real-time accrual data.” — Zdenka Mala, Financial Planning Analyst at Marex

Legal spend no longer sat outside the reporting process. It was visible, explainable, and aligned with how the rest of the business operated. 

↪Read the full case study here.

Cost control depends on how work is delivered

Legal teams have invested heavily in cost control across outside counsel management. Budgeting, pricing, and invoice review are handled carefully, and they provide a clear structure for managing external spend.

But those controls are focused on the period before work begins and after it ends, while the decisions that determine cost are made as the work progresses. 

As a result, attention is focused on the points that are easiest to define and report, rather than the point where cost is actually built. Pricing, budgeting, and invoice review set expectations and provide a basis for review. The outcome reflects how the work is carried out over time. 

Take this a step further and the implication becomes clearer. Teams that want a tighter handle on spend stay closer to how work is being delivered. They pay attention to how it is staffed, how it develops, and how those choices build up over the life of a matter.

Apperio, from PERSUIT, gives legal teams visibility into how operational decisions translate into cost, so they can manage spend while work is still in progress. Learn more here.