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A possible grand bargain between law firms and corporate clients – Part 3 of 3

Part 3: The bargain in detail

Graeme Johnston and Elizabeth (Libbie) Evans / 25 February 2026

Originally published on LinkedIn

This is the third and final part of an article about managing spend on large complex business law matters. In Part 1, we identified structural challenges with current fee practices and made the case for better scoping, planning and budgeting. In Part 2 we discussed why disciplined budgeting is difficult in practice and outlined the types of changes required to improve it.

This final part describes how a different approach can work in real matters. It sets out the mutual commitments required from clients and law firms, explains how scope and budgets should be managed as matters evolve, and identifies the organisational structures needed to sustain these behaviours over time. It also highlights which legacy controls become unnecessary once this approach is genuinely adopted.

1. The foundation

1.1 The grand bargain: what each side commits to

At its heart, the grand bargain is an exchange. Clients and law firms each give up

familiar protections in return for greater predictability, lower friction, better financial outcomes and more sustainable relationships. Neither side can achieve these outcomes alone; they depend on reciprocal commitments and a shared willingness to change how work is planned, priced and governed.

Clients commit to:

  • requiring meaningful budgets on all matters above a certain materiality level – and holding their teams accountable for obtaining them,
  • accepting that good budgeting takes time and expertise,
  • engaging collaboratively when scope or assumptions need adjustment, rather than treating every variance as a failure,
  • dropping legacy controls that become unnecessary with better budgeting (such as detailed narrative reviews, overly complex outside counsel guidelines and shadow billing),
  • investing to support better planning, project management and learning.

Law firms commit to:

  • taking full accountability for realistic budgeting based on reasonably clear scope and assumptions,
  • providing transparent early warnings when matters deviate from plan,
  • investing in the planning and process discipline required to scope and budget effectively,
  • pricing in good faith – rather than gaming scope definitions or hiding likely issues in vague assumptions,
  • building systematic learning from matter outcomes to improve future budgeting.

Both sides commit to:

  • approaching this as a relationship built on trust, not a set of rules to game,
  • accepting that progress matters more than perfection,
  • using shared data to support learning and improvement over time, rather than retrospective blame,
  • communicating openly about what’s working and what isn’t.

This exchange recognises that both sides have legitimate needs. Clients needpredictability and control. Firms need sustainable economics. Both benefit from less time wasted on unproductive administrative friction.

1.2 Core principles

The practices that follow rest on a small number of principles. These should be reinforced consistently – in matter kick-offs, relationship meetings, and internal discussions – so they become the default way of working rather than isolated best practice.

  • Accept and embrace accountability. Progress starts with both in-house and external counsel taking shared responsibility for defining what’s required and quantifying it in advance in ways which meet the realities of the matter. Support functions like pricing, LPM and legal ops teams can assist, but they cannot substitute for this accountability of the matter team Itself.
  • Relationship over rules. Both sides should approach matters in good faith, focusing on effective process rather than legalistic interpretation or technical compliance.
  • Progress over perfection. This is difficult work. The objective is not flawless execution from the start, but steady improvement based on a clear direction and learning over time.
  • Align with the client knowledge environment. Matter effort is more valuable when it builds on – and contributes to – the client’s precedents, taxonomies, playbooks and risk frameworks, rather than remaining siloed within individual engagements.

2. How matters should run

2.1 Matter set-up

  • Expectation-setting. Expectations for how matters are to be run should be clear and consistently applied. The aim is to ensure that planning, execution and adjustment happen in a transparent and predictable way.
  • Clarify objectives. The first step in any matter is to clarify the purpose of the work: what outcome is sought, why it is important, and how it should be understood within the broader objectives of the organisation and categories of work. Using a consistent way to describe the work helps both sides ground the scope, risks, resourcing, delivery model, and cost. What seems obvious to one person may be unclear to others, particularly if team members are new to working with you.
  • Confirm roles and responsibilities. The matter team must be aligned on how the work will flow, which components will be handled internally versus externally, and the points where input or decisions from the client are required, and where risk and business owners may require updates. This avoids inefficiencies, prevents misaligned expectations and provides a firmer foundation for budgeting, sequencing and risk assessment.
  • Require realistic budgets from the start of matters. Each matter engagement should start with a realistic budget based on a clear assessment of what’s needed to deliver the work to an acceptable standard. This doesn’t mean micro- managing: it means an appropriately balanced proposal by the law firm and review by the client of what’s to be done and a reasonable discussion of how objectives, risk and price will be balanced.

2.2 A proportionate approach

Different types of matters require different levels of upfront effort:

  • Predictable, repeatable matters can often be priced confidently and are obvious candidates for competitive bidding processes and fixed fees
  • Low cost matters which are obviously not going to require significant effort on either side may not be worth scoping e.g. advice on a narrow point from a lawyer who you already trust to be reasonable and moderate. And if not sure, a cap can be useful here, with anything expected to take things above the cap requiring a discussion and a budget.
  • Moderately complex matters can with some effort benefit from better scoping and assumptions leading over time to better budgeting than may initially be intuitive. Over time, you can get better at doing this with a view to having the great majority of matters come in within budget, and those which require re-budgeting having a clear justification for this in terms of something unusual and material coming up.
  • Highly uncertain matters will not be viable to scope fully early on, but they still need structure. In this case: the client and firm agree on deliverables for the first stage of work (e.g. the facts to be gathered, the legal points to be resolved, a strategy and clear decision points for handling the next steps) and a binding budget for that stage. As the matter unfolds and uncertainty decreases, you move into scoping and binding budgeting for subsequent phases.

This approach respects that you can’t predict what you don’t yet know, while still avoiding the trap of blank cheque retainers. With discipline, you can almost always set some meaningful budget and the practice of doing so builds organisational capability over time.

2.3 Managing as the matter evolves

Budgets, scope, assumptions and responsibilities should be actively managed as matters develop. This requires both capability and willingness to engage constructively with changing realities and assumptions. A reset should be triggered when something material changes the assumptions on which the original scope, delivery approach, or budget was based – not for every variance, but changes that would reasonably have altered the original plan if they had been known at the outset.

Example of how this works in practice:

  • Initial budget. Litigation discovery/disclosure phase budgeted at $/£150K, assuming 50,000 documents for review and no disputes over privilege.
  • What happens. Three months in, other side challenges a large category of documents as privileged, requiring detailed privilege analysis and a potential court hearing to resolve. This wasn’t reasonably foreseeable.
  • Old way. Law firm records time and bills an extra $/£75K. Client reviews the bill, questions the spike, requests detailed narratives, and disputes some items. Relationship tension rises.  Final resolution involves some write-off, lingering resentment on both sides.
  • New way. As soon as the privilege dispute emerges, the firm alerts the client: “This changes our assumptions. We need to add privilege analysis and a likely hearing. Our revised budget for completing the discovery/disclosure phase is $/£210K if it goes to a hearing or $/£170k if it does not. Here’s the breakdown and assumptions”.   Client and firm discuss whether to contest the privilege claims or concede some categories to control cost. They agree on the approach and a revised budget before significant new work begins.

2.4 Escalation, resolution and continuous improvement

  • Escalation and dispute-handling. Clear escalation paths should be defined in advance so that material decisions or emerging tensions can be elevated early, before they harden into disputes. Escalation should be understood as a normal part of governance – used when a matter team reaches the limits of its decision-making authority, not as a signal of failure. If major issues arise that cannot be resolved through normal engagement or agreed escalation paths – whether related to scope, assumptions, delivery, or cost – both sides should commit to address them promptly, constructively, and at the appropriate level of seniority. The emphasis should be on rapid resolution of the immediate issue, coupled with understanding what happened and how to reduce the risk of recurrence. Everyone involved needs to commit to handling this rapidly – in days or even hours in some circumstances. Not weeks: unresolved issues just become worse.
  • Retrospectives. For significant matters, consider having regular short discussions among the matter team on what you all collectively could do better. These discussions are effective when approached with humility and shared responsibility, focusing on learning rather than blame. And don’t wait until the end of the matter to do it.

3. Tools that support the work

Legal work benefits from clear structure, but templates and tools should suit the way legal teams actually work: they should be simple, usable, and designed to reinforce – not replace – human judgment and engagement.

One thing to emphasise here is that we are not suggesting you need specialist tools for everything. Look at what you have already and how can you better use it. Really focus your investment. Also consider retiring things which don’t really add enough value to justify the spend.

Key needs to focus on include:

  • Matter intake and scoping templates that prompt the right questions.
  • Process mapping (including typical scopes and assumptions) and budget templates organised around common matter phases.
  • Project management and reporting covering planning, status and flagging of variances.
  • Data capture and reuse using public or internal data standards (taxonomies and process maps) to make matter data comparable and useful.
  • Communication (e.g. short guidance notes, FAQs, and examples) that support consistent expectations and ways of working.
  • Scenario analysis that can help quickly demonstrate consequences of scope changes, changes to assumptions or alternate approaches.

4. Making it stick inside organisations

Individual matters can be run well through goodwill and personal commitment.

But without structural reinforcement, even the best intentions tend to erode over time – particularly as teams change, workloads increase, or pressure rises. Making the grand bargain the default way of working requires embedding it into organisational expectations, governance and incentives.

This is not about creating bureaucracy. It is about making the intended behaviours – early scoping, realistic budgeting, and transparent adjustment – easier to sustain than the old habits they replace.

4.1 Embedding core process expectations

The first requirement is clarity. Everyone involved in managing legal matters – on both the client and law firm side – needs a shared understanding of what is expected and what “good” looks like. At a minimum, this means documenting and consistently reinforcing:

  • what’s meant by scope and assumptions,
  • how matters are categorised by type of work and area of legal expertise, and why that categorisation matters,
  • what sorts of budgets are expected, in what format and at what point in a matter,
  • how and when changes to scope or assumptions should be raised and handled, and
  • what status updates should cover, and how risks to budget or delivery are flagged.

These expectations should be easy to find, easy to reference, and reflected in onboarding, guidance, and day-to day communication – not buried in policy documents. Reasonable flexibility is always necessary – different matters and contexts require judgement. But some level of organisational consistency is essential. Without it, data cannot be compared, patterns cannot be identified, and improvement remains dependent on individual heroics rather than institutional capability.

4.2 Consistency, patterns and learning across matters

While every matter has its own facts and context, most legal work follows recognisable patterns to some degree. Similar types of work, within the same areas of law, tend to move through similar phases, encounter similar decision points, and draw on similar knowledge assets. Making those patterns explicit provides a stronger foundation for realistic scoping and budgeting and helps teams interpret variance intelligently rather than treating it as failure.

Using consistent categories – such as type of work, area of law, and the client’s role – allows learning to accumulate across matters without undermining the need for judgment in individual cases. Over time, this makes it easier to understand what actually caused changes in scope, approach, or cost, instead of focusing narrowly on variance itself. That is far more valuable than retrospective analysis of how work was recorded, because it centres attention on uncertainty, assumptions, and decisions – not tasks performed.

With this discipline, organisations can see which assumptions tend to hold for particular categories of work, which regularly fail, and where uncertainty is genuinely inherent rather than avoidable. This improves forecasting, supports more grounded conversations about risk and tradeoffs, and reduces reliance on heavy retrospective controls.

Consistent scoping and categorisation also improve alignment with the client’s internal knowledge environment – its precedents, taxonomies, playbooks, and risk frameworks. When effort on one matter is structured in a way that can inform the next, uncertainty and rework are reduced for both client and firm. The result is not just better budgeting, but stronger institutional memory and more resilient decision-making over time.

4.3 Governance and reinforcement

Behaviour changes only stick when they are reinforced. This requires light touch but consistent governance on both sides of the client–firm relationship.

Organisations should monitor a small number of meaningful indicators, such as whether:

  • material matters have agreed budgets,
  • costs remain within those budgets,
  • variances are identified early and explained clearly

These indicators should inform performance discussions internally and at the relationship level, not as blunt enforcement tools but as prompts for learning and improvement. Additional metrics – such as forecasting accuracy or confidence levels – can provide further insight when reviewed in context.

Crucially, those on the client side who have real influence over the selection and continuation of law firm relationships must be willing to act on what this information reveals. Without that commitment, metrics quickly become performative rather than effective. The aim is not to eliminate judgement or discretion. It is to ensure that the intended behaviours- early engagement, realistic planning, and transparent adjustment – are continually reinforced as the normal way of working rather than an occasional exception.

5. What we can stop doing

When scoping, planning and budgeting are done well, many legacy practices become unnecessary. Eliminating them is essential – not only because they’re costly in time and attention, but because continuing them signals a lack of confidence in the new governance model. The objective is not to remove accountability. It is to shift it upstream from retrospective invoice policing to forward-looking planning, transparency, and structured oversight.

  • Stop narrative reviews by client.For legal engagements that follow this process and set binding budgets with clear and reasonable scopes and assumptions in-house teams should not need to review (either manually or automatically) the reasonableness of the effort line by line. It may still be useful to have the overall hours available to an in-house team as an indicator of effort, and law firms may well want to analyse these in more detail. But the tendency to review and critique line-by-line should be resisted outside exceptional circumstances of serious out-of-scope spend – in which case, appropriate lessons should be learned about doing better in future.
  • Roll back outside counsel billing guidelines. Under this approach, it follows that outside counsel guidelines should be greatly rolled back and simplified, focusing mostly on enabling effective matter management processes as described in this article, rather than prescriptive rules about who can attend meetings or how much time can be spent on particular tasks. Spend management comes from budgeting and communication not detailed rule-enforcement.
  • Eliminate shadow billing. The provision of time records and the hypothetical sums that would have been charged on a time basis when a budgeted sum has been agreed should be avoided. This tactic simply incentivises excessive time to be spent so that the client can see what a great ‘discount’ they’ve had. It is a route to inflated costs and inefficiency.

6. Conclusion

6.1 Why Now?

People have been talking about improving legal fees for a long time. What feels different now is the convergence of a few factors:

  • Significant hourly rate increases, consistently well above general inflation for many years now, and showing no sign of moderating. See, for example, Thomson Reuters’ October 2025 data analysis for the US and reference to a similar situation in UK, Australia and New Zealand.
  • An increasing emphasis on legal spend control by corporates, as reflected in action by the increased use of ALSPs
  • Increased realisation that the established methods for controlling time-based pricing are not enough, and frustration with their related expense and distraction.
  • Better data and availability of better software for putting it to use for better planning, process control, communication and learning.
  • The potential of ‘AI first’ as well as ‘AI augmented’ approaches to handling at least some work currently done at high hourly rates – even though the wheel is still in spin as to the overall impact of this.
  • More explicit signalling by clients that they are willing to change delivery models – including bringing work inhouse or reallocating it – especially if predictability and control do not improve.
  • Anticipation of likely economic turbulence at some point in the not-too- distant future.

You may have your own opinion on the relative importance of these factors, but we suggest that the combination of pressures, dissatisfactions and opportunities makes this a timely moment to move from discussion to action. The type of change required isn’t an overnight matter, it’s about defining a better direction and then gradually moving in it rather than just being stuck with the same old frustrations. Done right, it will deliver something radically better over time. The sooner you start, the better.

6.2 What will improve

When the grand bargain is adopted consistently, the benefits compound over time.

For clients:

  • Spend is more in line with accepted value.
  • Fewer surprises because material changes and underlying uncertainties are identified, articulated and addressed earlier.
  • Finite overall budgets can be managed more effectively, notwithstanding inherent uncertainties that can’t be eliminated

For law firms:

  • Better and more sustainable economicsas a result of fewer write-offs.
  • Better cashflow because fewer disputes about bills.
  • More attractive proposition for winning and retaining work.

For both:

  • Dramatically lower transactional costs in preparing, reviewing and discussing narrative reviews and managing ebilling-related processes. Yes, some investment of time and money is needed to improve ways of working and to prepare budgets, but it will pay a rather rapid return on investment.
  • Cleaner and more comparable matter data as a by-product of consistent scoping, categorization and benchmarking, supporting benchmarking, forecasting, and more informed conversations about cost, risk and value.
  • Knowledge management improves naturally. Consistent matter structure makes it easier for both clients and firms to capture and reuse what works, build shared playbooks, and strengthen judgement across matters – rather than relearning the same lessons each time.

6.3 Moving forward

The grand bargain is not a theoretical shift; it is a practical choice about how legal work is governed day to day. It requires commitment and discipline from both sides. It asks clients to invest in better processes and trust their law firms more. It asks law firms to take fuller accountability for planning, pricing and early course correction. Both must be willing to learn and improve together.

The alternative – continuing with approaches that frustrate everyone and serve no one well – is no longer sustainable. The pressures on legal spend, the availability of better tools, and the growing maturity of legal operations all point toward a moment of real change.

Organisations that begin moving in this direction now will build healthier, more resilient relationships over time. Those that delay are likely to face increasing pressure to change anyway, but with fewer degrees of freedom and less trust on which to build.

 

Photo credit: Micah Hallahan on Unsplash