Avoiding eDiscovery Sticker Shock: A Guide to Proactive Budget Management

Every eDiscovery project starts with a budget. That budget begins with an estimate of the amount of data to be collected. That estimated number is multiplied by the vendor’s filtering rate, and then an estimated cull rate is applied and the result is multiplied by the processing fee and the monthly hosting fee to come up with estimated costs. Then an estimated number of documents is divided by the estimated review rate to come up with an estimate of the attorney hours.  In addition, estimates for other professional services as well as production costs need to be added.

If that strikes you as too many estimates and not enough certainties, you've grasped the root cause of the eDiscovery “sticker shock” that accompanies monthly invoices. EDiscovery isn't cheap, and its cost often comes as a surprise to consumers whose realities exceed their expectations.

Information, planning and critical thinking are essential to managing eDiscovery costs. A few simple steps before, during and after your project begins can reduce and control costs and avoid end-of-month headaches.

Comparison Shop. Begin by shopping a little. You should always shop for eDiscovery services before you need them. Keep in mind that vendors use different terminology and cost structures. Ask as many questions as you need to permit you to make a true comparison. Consider, too, that the lowest bidder may not always be your best choice. Find a comfortable balance of price and quality.

Obtain Enterprise Pricing. Most vendors offer better pricing with the promise of potential repeat business. You need not get locked into a single vendor relationship in order to get the best possible pricing. Develop a list of preferred vendors, and request pricing from suppliers for inclusion on that list. Most vendors will happily offer their best rates to get on that list.

Request Weekly Accruals. At the start of a live project of any kind, request a weekly report estimating current costs and comparing them to your budget. This will allow you to see potential areas of concern while you still have an opportunity to control them.

Collect and Process Selectively. Collect only data that you reasonably expect to need. Collection itself is a cost, but what happens to that data next is even more significant. Process only those parts of the collection that you are required to review and produce. Ask the vendor to eliminate non-data files, which can occupy 80% (or more) of your average hard drive.

Monitor Scope Creep. The biggest and most frequent source of eDiscovery cost overruns is scope expansion. When formulating your budget, always overestimate the data size. Then, as data is collected, carefully monitor the amount of data you’re sending to your vendor to be sure you’re not exceeding your expectation (or if you do, that you’re aware of it and can make appropriate adjustments to accommodate the additional cost.)

Anticipate Professional Services. Every vendor has some tasks for which they bill on an hourly basis. Request a list of those services and ask to be informed any time a billable task is requested. This allows you to actively manage these tasks and to make intelligent decisions about their value.

Monitor Hosting Size and Duration. At $20 per GB, the annual hosting cost for a half a terabyte case reaches $120,000. Take time to understand the elements that comprise your hosting size – it's not only the amount of data that you've processed. Tiff files add to your hosting footprint. Many vendors also charge for the cost of storing the database itself, and some also charge for offline storage of data you’re not even reviewing.  In addition, make sure you’re retiring any data you no longer need. Explore the archiving options your vendor offers and take data offline as soon as it’s not needed for active review or preparation.

Watch Out for Data Anomalies. When your budget is based on assumptions and estimates, things can go awry if the data doesn't behave as you expected it to behave. If your budget assumes you’ll be able to filter out a certain amount of data via search terms, take notice of your hit rate. If it exceeds your expectations, you’ll end up with more data than you wanted. In addition, different data types can produce widely varying document counts. 1GB of data may produce as many as 10,000 documents for review or as little as 2,000. Watch those document counts to keep your review budget on track.

Manage Review Complexity. Unless you are paying for review at a “per document” rate, your budget is based on an assumption of an hourly review rate. If your review criteria are particularly complex, however, the pace of review will be slower and hourly costs will rise. Take care to tailor your budget to the expected complexity of the review and to limit the complexity of review to suit the budget.

There are inevitably some unpredictable elements to any eDiscovery project, and they do often bring unexpected costs. Taking an active, informed approach to eDiscovery project budgets can serve to minimize the impact of unexpected events and project changes.