One of the most challenging tasks for legal teams when it comes to the collection, review and production of electronically stored information (commonly known as “eDiscovery”) is how to estimate how much it might cost before beginning work. At the start of a matter, the team is in the unenviable position of not knowing what they don’t know, so preparing a budget might seem like a fool’s errand. However, the pressure to do so has never been greater.  Clients’ desire to understand and manage spend is at an all-time high, whilst the procedural rules in some jurisdictions now focus on proportionality (effectively, not spending more on the case than it is worth) or even require the submission of formal and binding cost estimates.  Taking steps to provide a well-reasoned estimate of costs has therefore never been more important.

While competent budget estimation in relation to eDiscovery might seem like a dark art, some useful practices can minimize or eliminate the guesswork. The key lies in developing metrics based on information that is, or can be made, readily available.  For example, even if the legal team might not know exactly how many and what type of documents might need to be reviewed, they do know the subject matter, the legal issues (including whether data privacy or any other local laws apply), the key deliverables and the deadlines.  From this, they should also have a reasonable understanding of the matter’s geographic scope, the number of potential custodians, the potential data sources and what the collection of that data will involve (including whether any assistance from an external expert will be required).

The most common pitfall for a legal team is the failure to establish the eDiscovery’s scope before diving into project execution. This is a recipe for inefficiency and uncontrolled costs.  Though an individual could offer an educated guess at these parameters, it is far better to take input from a cross-functional project team.  Depending on the project, this would include representatives from the legal and compliance departments, IT, records management, internal forensics, external counsel and eDiscovery/legal process outsource providers.  Between them, this group can determine the scope of the project and therefore produce an estimate of its likely cost.

At a fundamental level, the volume of data and the number of documents this is likely to represent drive the cost of an eDiscovery project.  Therefore, one of the most useful metrics is an accurate estimate of the volume of data per custodian per data source, per year.  From this total volume, the legal team can factor in the likely reduction in the volume of data during processing (which will, amongst other things, remove system files and suppress duplicate documents) of the documents in readiness for being loaded on to a document review database, and any further reduction as a result of filtering (for example, the application of search criteria and keywords). Sophisticated clients who are regularly engaged in eDiscovery projects may have built up detailed metrics from previous projects which can be used to accurately predict this.  Alternatively, it may be possible to sample the data that is going to be the focus of the eDiscovery project and extrapolate metrics from there.  Still further, providers may be able to supply estimates based on their previous experience for that client, or generally.  In the event that this information is not available, rough guides can usually be applied such as that global (as opposed to ‘per custodian/data source’) deduplication will reduce volume by approximately 30 percent whilst  standard filtering can reduce the pool by another 40 percent.

Once those assessments are complete and an estimate of the volume of data is available, the next stage is to predict the number of documents to be reviewed and likely hourly pace of review.  For the former, again, the client, the provider or sampling may provide suitable insight.  For the latter, the legal team’s experience of similar reviews run in the past can be used.  If this is unavailable, there are further rough rules of thumb that can be applied, such as that a gigabyte of data contains 5,000 to 10,000 documents and that the rate for a straightforward first-level relevance and privilege review of typical office documents is 50 to 75 documents per hour. The review speed is where the estimation is more art than science, since it must factor in the number and complexity of review decisions and the length and complexity of the documents.  (In this regard it will be prudent to estimate separately the review time for any file types – such as Bloomberg Chat and audio files – that are especially time consuming to review.) Only with this data at hand is it possible to say with any confidence that the scope of the project has been gauged and that a budget estimate is sufficiently credible.

Even if the scoping stage is well executed and results in a credible initial estimate, the legal team must continue to manage costs because matters can last months, if not years, and will evolve over that time. Having formulated a plan for the carrying out of an eDiscovery exercise (which will record what will be done by whom and by when), a record needs to be made of the progress achieved, when the necessary tasks are completed and what the result was.  This will also enable the legal team to identify early where reality diverges from the plan, the reason for that deviation and extrapolate the effect of that divergence on the budget.  The legal team can then report to the client and a decision can be reached on whether to contain the spend, redirect resources or extend the budget.  In this way, the budget is kept up to date and the client is always fully informed of their potential exposure and can make strategic decisions accordingly.

With clients increasingly wanting more visibility into and more control over costs, accurate scoping and budgeting are essential skills in eDiscovery. As with any skill, this will become easier and more accurate with the right background information and practice. Debriefing on individual matters to identify how the process and the budget itself could be improved next time is a key part of this process. Lawyers who develop these skills will be able to create predictability in an area that clients often cite as being unnecessarily opaque.

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