Understand the elements that drive costs in eDiscovery, know how to design and execute the project with these factors in mind, and develop the scope of an eDiscovery project based on the value of the case and the expectations of the client are essential skills for any eDiscovery practitioner.
In project management, the process of estimating and controlling costs is called cost management.
In the legal field, one could speak of the management of proportionality.
The goal is to prepare a cost estimate and budget for an eDiscovery project. Practitioners, whether lawyers, paralegals, or eDiscovery professionals, should identify the scope of the project, including the time, resources, and materials needed to complete the project. It will be necessary to gather information, such as the cost of resources and the people doing the project work, as well as any vendors who may also play a role.
A method of budgeting and estimating costs is called bottom-up estimation. This process uses a work breakdown structure or WBS to divide the project into its smaller parts. In project management, we use a WBS to break down work into its smaller components. Each activity is broken down, using a project management technique called “breakdown”, and the cost and time of each activity or task are identified. The costs are then aggregated upwards across project activities to arrive at an overall project cost.
Begin this process by breaking down each phase of an eDiscovery project into its components. Using a list of tasks, measurable expenses and the resources needed, it is possible to establish an accurate estimate of the operating costs.
Identification and preservation
Cost estimates in the identification and preservation phase will be based on the number of consultation and advisory hours spent on the project. Multiplying the number of hours required by the hourly rate of those involved (lawyers, paralegals, project managers, litigation support, or vendors) will result in a reasonable estimate of the cost of identifying and preserving CSE for the project.
Assess the number of custodians, data sources, and volume of the overall collection (usually in gigabytes). Collections are usually performed by a technician who bills by the hour. Knowing the volume of data allows the technician to estimate the number of hours needed to complete the collection. Multiply the hours by the technician’s hourly rate and that should be an estimate of the cost of collection. Service providers may also charge a fixed fee per custodian. If the work is performed by the client’s internal staff, use a reasonable hourly rate based on their salary and benefits or a rate the company regularly charges for their services.
Costs are based on the volume of ESI collected and the various processes to be performed on the data during processing. In most cases, processing services are billed per gigabyte. Multiply the cost per gigabyte by the number of gigabytes and that’s the processing cost. Sometimes there is also a charge for project management time at an hourly rate.
This is the most expensive phase of an eDiscovery project due to the human element and the time involved. Lawyers’ billing rates for document review can be high. Even when using temporary or contract attorneys, who charge much lower rates, review costs can be significant.
To prepare a cost estimate for a document review, it is necessary to know the volume of documents to be reviewed and the hourly rates of the people involved. It can be difficult to estimate how many documents can be reviewed in a given time period. It varies depending on the types of documents, the density of the document content, and the skills and motivation of the reviewers. An estimate for document review is prepared by dividing the number of documents by an acceptable review rate and multiplying by the hourly rate. For example, if a document review is for 100,000 documents, and if a single document reviewer who charges $100 per hour can complete 500 documents in a 10-hour day, it is possible to conclude that it will take 2,000 hours (or 200 days) and cost $200,000 to complete the review. It’s rare for a single document reviewer to review this volume of documents, but understand that adding additional reviewers to the review will result in a faster, but not necessarily less expensive, review, as time still needs to be spent on examine the documents.
These costs are simple. Whoever prepares and checks the quality of the production charges his time by the hour. Multiply the number of hours needed to set up the production by that person’s hourly rate and you have your estimate.
Finally, it is good practice in cost management to include what is known in the project management world as “reserves”. An eDiscovery project manager can add a 10% contingency cost to a budget to account for expected but uncertain events or so-called “known unknowns”.
Ultimately, aggregating the costs of each phase of a project using the bottom-up estimating process will result in a reasonably accurate estimate of the cost of an eDiscovery project.
Remember that volume is the biggest driver of eDiscovery costs, and the number of custodian sources included in the collection is the biggest driver of overall volume. Reaching agreement on the number of custodians and taking steps throughout the process to limit the volume of ISEs to be reviewed will ultimately help control costs.