The Last Mile Problem: Why Outside Counsel Guidelines Fail Where They Matter Most
Custodia Advisory | Private Equity | Legal Spend | June 2026
In our last post, we touched on why Outside Counsel Guidelines tend to age out of relevance — and why enforcement needs to sit upstream, with procurement, rather than further down the chain. Here, we want to go deeper into why that enforcement gap opens up in the first place, even when the guideline itself is well drafted.
Almost every private equity firm and asset manager we speak with has an OCG in place. It's usually well-drafted — rate structures defined, staffing levels specified, disbursement categories laid out, prior-approval thresholds clearly set. On paper, it looks like the problem is solved.
In practice, it rarely is.
The gap isn't in the drafting. It's in the enforcement.
An OCG is only as good as the mechanism that checks invoices against it. And in our experience, that mechanism is usually missing — not because institutions don't care about cost discipline, but because no one has been specifically tasked with owning the check. Legal teams are focused on the matter itself. Procurement teams are processing volume under time pressure. Finance is reconciling against budget, not against guideline compliance line by line. The guideline exists; the person responsible for holding firms to it does not.
We call this the last mile problem. The guideline is written. The relationship with outside counsel is established. The invoice arrives. And then — nothing checks whether what's being billed actually complies with what was agreed.
What this looks like in practice
When we audit invoice histories against an institution's own OCG, the same patterns surface consistently:
- Rate increases applied without the required notice or approval
- Staffing above agreed seniority levels for routine, lower-complexity work
- Block billing and vague time entries that make it impossible to assess whether the guideline was actually followed
- Disbursements and third-party costs billed outside agreed categories
- Scope creep — additional work performed and billed without the sign-off the guideline requires
None of this is necessarily bad faith on the part of the law firm. Billing systems are large, matters are complex, and without a counterparty actively checking, drift happens. But drift, left unchecked, compounds. A guideline that exists only on paper provides no actual protection — and most institutions don't discover the scale of the gap until someone finally audits the history.
Why this matters beyond the invoice itself
For institutions with fiduciary obligations — to investors, to trustees, to limited partners — legal spend isn't a minor operational line. It's capital drawn from the fund, and it deserves the same scrutiny applied to the investment decisions themselves. An unenforced OCG isn't just a missed cost-saving opportunity. It's a governance gap — one that becomes very visible the moment an investor, auditor, or regulator asks how legal spend is actually being managed.
Closing the gap
Enforcement isn't complicated, but it does require deliberate structure: a defined point in the workflow where invoices are checked against the guideline, people equipped to recognise what a breach actually looks like, and a clear escalation path when one is found. That's the layer most institutions are missing — not the guideline itself, but the discipline of actually applying it, invoice by invoice, every time.
This is the starting point for almost everything we do at Custodia Advisory. In our next post, we go deeper into the specific billing patterns this kind of enforcement is designed to catch — block billing, rate creep, and the other ways law firms quietly over-bill.
Custodia Advisory — custodiaadvisory.com