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Cost Recovery in 2018: Predicting Winners and Losers
Back in March of this year, we predicted changes and trends the results of the 2018 Mattern Cost Recovery Survey would reveal. At that time, we got our crystal ball out and made the following predictions that the Survey would show:
- An increase in the “billable actually billed” percentage which indicates less client pushback and decreasing attorney write-offs.
- A “softening” in traditional areas such as black & white and color copies.
- A renewed aggressiveness for modern areas of recovery such as prints and scans, lit support and e-discovery.
Before we delve into the details on whether our predictions were correct, let's lay the groundwork for the analysis with a few definitions:
- Billable percentage: The percentage of an item charged to a billable client matter versus a non-billable (overhead) number.
- Billable actually billed: The percentage of a billable item actually billed to a client.
- Actual billed that is paid: The percentage of a billable item that is actually billed to a client and paid by the client.
- Net realization: The net of the above numbers.
Black & White and Color Copies: Dramatic Drop in Average Rate
While 93% of firms are still recovering black & white and color copies — which is consistent with the 2016 results — there was a dramatic drop (28%) in the average rate charged to clients from ($.18 to $.13) on black & white copies. We believe there are three likely explanations for this decrease:
- Just as firms are feeling the pressure on hourly labor rates from clients, this has now trickled down to the rates for soft costs.
- Firms are adopting the blended pricing scenario on black & white prints, scans and b&w copies. This is where firms are recovering prints and scans and charging one uniform reduced rate.
- The cost of these services has decreased, and firms are adjusting their rates accordingly.
As to whether this area stayed true with our prediction of a decrease in client and attorney write-offs, the data shows that we were correct with the percentage of b&w copies being billed increasing 9% (decreasing write-offs) and color copies following suit.
As to whether this traditional area showed a “softening” which we define as a decrease in in the billable percentage, we did see a decrease on both b&w and color by 4% and 6% respectively.
Mattern's score: We were correct on both predictions as it relates to copies. In keeping with the summer tradition of baseball, I will award Mattern with 2 runs scored.
Black & White and Color Prints: Renewed Aggressiveness
In 2016, 61% of firms were recovering b&w prints and color prints. In 2018, the percentage of firms recovering b&w prints decreased to 53% and the percentage remained the same for color. We predicted in our earlier article, that both these numbers would increase.
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