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Investigation Budget Cost Analysis
Investigation and facts development are expenditures competing with other necessary tasks for precious case specific resources. Cost decisions for investigations are difficult due to uncertainty of results. But then most case budget items are predicated on reasonable judgments of outcomes. Balancing costs with projected payoff decisions may be easier if results are measured in terms of creating informed decisions, rather than simply the aggregate of accumulated facts and information. Facts valued as a means to achieve the desired goals of informed decisions are considered investments in the quality of those decisions. Either the decision is an informed one, or some degree of less than informed. The less informed the decision, the greater risk that is assumed in the projected outcome.
Deciding how to balance resource allocations in facts, involves a risk tolerance assessment, much like in the world of finance. Perhaps too many of us have taken the stock tip from a co-worker or simply purchased shares because we wanted to be part of that action and not really knowing much, if anything, about the company. Buying the high flyer is akin to placing a bet at the casino. It’s OK, so long as the future will remain unaffected if things go sour. If that investment or stint at the tables had the potential of affecting our future, few of us would proceed. Yet in my thirty-five years of investigating moderate-to-catastrophic exposure cases, I would estimate that fifty percent of cases were litigated on average eighteen months prior to any significant facts being developed. Of course, the bulk of those matters were logged during periods of recession when money was tight. Nevertheless, that means about half the time a suit was filed and continuing investments of time and resources were made in initial discovery before anyone was in a position to make an informed decision on the merits of the case. Most of us would never do that with our own finances, but clearly it is done in the business of litigation. I suspect a lot more investment in facts would occur if we assessed and kept risk tolerances at the forefront in our approach to resource allocation.
As a case matures it may look very differently than in the beginning. Strategy, as well as the underlying infrastructure may change in kind. Accordingly, costs may be reduced if the defense were not reacting, but rather proactively pursuing reasoned courses of action as assertions change. Investment of resources that address unsupportable claims are bad investments because there will be no payoff. At some point, logically, unsupportable claims will be abandoned in favor of reasoned positions based on sets of facts. The sooner counsel is in possession of those facts, the earlier informed decisions can be made in addressing claims and it follows, targeted resource allocation in defense planning.
If facts are weighted as an end in themselves, money spent on them will assuredly disappoint. Facts are neutral; they are neither good or bad, pro-plaintiff or pro-defense. Facts do not chose sides, parties chose facts to incorporate in their cases. If a party chooses not to use a fact, the fact remains. Therefore, the primary cost outlay for an investigation should not be viewed as developing facts to support a certain position. Rather, the investigation expenditures should yield sufficient facts such that the lawyers can make informed decisions about case management and planning. The investment in investigation is directly related to the quality of the decisions that can be made. Good decisions are a payout of a good investigation.
Allocating resources for building better decisions can be accomplished several ways. The easiest way of budging for investigation is to set a dollar amount that you are willing to spend. Businesses often budget investigations as a fixed fee. No matter if the exposure is catastrophic or moderate, straightforward or complex, the same outlay is directed to develop facts. Although it may sound ridiculous, most of the time this formula works if the budget ceiling is high enough to allow flexibility within the otherwise stringent system.
The graduated system of investigation budgeting is the most frequently employed system, but it is not the most cost effective. In the graduated system the investigation is broken down into tasks, like collect certain records and photographs, then interview a short list of fact witness and so on. This system allows counsel to exercise the greatest control over the investigators. It also seems less costly, but it really is not. It is inherently less efficient because a skilled investigator cannot seamlessly pursue avenues of query.
The most efficient form of budgeting for investigators is by phases. Think of it as of a hybrid of the former two methods. Phase One: set a budget for initial facts development, allowing enough in time and expenses to determine what the case is about. Once having an idea where the case may be going, a direction can be set for Phase Two.
Phase Two: the second phase of investigation should focus on fleshing out the case theory; determine if there is enough substance to carry the position and expose weaknesses. The universe of facts is target-rich in phase one and narrowed in phase two, so there is a diminishing return on expenditures. By the end of phase two, counsel should be in a position to target written and oral discovery. Exploratory facts collection through oral discovery is inefficient, expensive and dangerous. Fact witness interviews will cut costs and reduce unnecessary exposure by screening potential deponents.
Phase Three: budgeting investigation for the third phase depends on the abilities of the investigator and counsel's level of confidence in him or her. During this phase, the investigator may be used to collect facts that fine-tune the case and do so at less cost than an engineer or lawyer.
Phase Four: budgeting further cost saving by involving the investigator to arrange witnesses to appear at trial and prepare some exhibits.
In sum, phase one should answer the question, “What do we have here?” Phase Two should allow counsel to make informed decisions about, “What do I need to prove to win the case.” Phase Three is nailing those things down. Phase Four squeezes further gains out of the investigator.
Consider this offer: informed decision-making will lead to better resource allocation. If a law firm that expends a million dollars of client money in case costs every year, through better litigation management could cut those costs by ten percent, it would save that client one hundred thousand dollars a year. That is a direct monetary payoff for good investigations. Although a ten percent return cannot be guaranteed, the psychological payoff of knowing the right decision was made is priceless.