Avansic Whitepaper: Why E-Discovery Pricing is Complicated
10-07-2011, Avansic - Corporate
Current State of E-Discovery Pricing
In the beginning, e-discovery pricing was based on a per-page model that sought to treat e-discovery the same as paper discovery. But electronic data simply is not the same as information on paper. To reflect this difference, the e-discovery industry has moved towards per-gigabyte pricing model. This way, billing takes into account the variety of types and formats of data that must be processed.

Gigabyte costs vary widely among e-discovery vendors (anywhere from $200 900 per gigabyte for full ESI processing) and are typically charged at various stages of processing (filtering, TIFFing, endorsing, etc.) Vendors may charge by input or output gigabyte at any stage of the process which can make it difficult for attorneys to compare apples to oranges when estimating their project costs. This is made more complex since data can exist in compressed and uncompressed formats: it is common for email files to expand to twice their apparent size. This can make for unpleasant surprises when the bill arrives. Legal professionals owe it to their clients to find the best price for e-discovery services; read below for some common differences in processing and other factors that influence price.

Processing Differences
So how can vendors justify charging such wildly different rates for what appears to be the same service? E-discovery vendors may choose a variety of methods to process data and those differences are sometimes reflected in their pricing. Additionally, a seemingly higher rate may actually encompass a number of packaged services while lower rates might only cover a portion of the processing. This mish-mash of pricing and services are a key factor in why pricing is so complicated. Legal professionals can help themselves stick to a budget by inquiring about how processing is billed and at what stages. Ask for example billing for projects of various sizes to best determine what a dollar actually buys.

One frequent area of contention is what types of data billing is based on. One vendor may cull irrelevant file types from the set before charging for processing. Another may charge for the culling and then bill separately for processing the remaining data. Based on project type, there may be substantial differences in pricing based on the inclusion or exclusion of data types. It is very important to ask for a description of data treatment and subsequent billing.

Since not every vendor will approach a project the same way, you can't assume that a vendor knows how to process data to your specifications until a set of standards have been established and test sets have been used. Vendors with documented standards (both internally for their laboratory personnel and externally for their clients) will produce more consistent results than those that do not. The time to ask for these standards is early in the process of working with a vendor. Ask potential vendors for copies of these standards and discuss workflow and better understand project costs.

Establishing a test set is another sign your vendor is taking steps to ensure quality control. Since there are no industry-wide standards for processing, it typically takes a few attempts to match an attorney's specifications to a final production. This is particularly true with large and time-sensitive projects, but it is always worth the time to discuss the establishment of a test set and dry run of work, so don't be afraid to ask.

Another consideration is how the data will be used. If it is destined for a review tool, discuss this with your vendor. Sometimes processing steps can be combined or skipped if the final format of the data is known. Talk with potential vendors about any efficiency (and commensurate reduction in cost) that may be possible based on the output form of the data.

Pricing Revisited The Future
So where is e-discovery pricing headed? Simplicity seems to be the goal for both vendors and legal professionals. There are increasing numbers of flat-fee bids, particularly for large projects where per-gigabyte models are simply too complex and time-consuming to calculate. These bids typically consider a maximum amount of data that will be processed or a time frame in which services will be provided.

Based on this trend, there are rumblings that flat-fee pricing is the way of the future as the industry becomes more commoditized. When and if this happens, a new set of challenges will arise based on the new modes of work.

But processing isn't the only cost in e-discovery, and e-discovery isn't the only cost during litigation. In fact, processing is typically only a small percentage of the cost of e-discovery: the larger price tag comes with the time necessary to review relevant documents. Therefore, if fixed price e-discovery is being considered as a solution to the spiraling cost of litigation, fixed-price review may be next. Indeed, there are companies that offer teams of attorneys for document review on a variety of platforms; currently, most of these charge by the hour.

E-discovery pricing is complex, but so is e-discovery itself. Pricing differences can come from different methods of processing or simply the way a vendor does business. No matter the price, it is critical to work with a vendor that provides standards and a test set in advance of a project. This is the only way to ensure that your data will be delivered in a format that is immediately useful. Further, it is important to seek bids from a variety of vendors, even if you or your firm has an established relationship with a particular company for e-discovery. Vendors may change their pricing frequently, and attorneys should shop around in order to provide their clients with the best service and best price for their e-discovery project.

Pricing issues are likely to continue as the e-discovery market matures and no single model will fit every situation. In the meantime, read pricing guides with a critical eye and ask questions about which points in the process are billing steps and how the vendor can help you most efficiently and economically process your data. After all, collaboration is crucial for a smooth e-discovery project.