There is often inherent friction between the legal department and the procurement function when it comes to buying and managing legal services. From procurement’s perspective, they want to get their arms around the indirect enterprise spend, of which legal services constitute a significant portion. However, unlike other procurement categories, legal procurement demands a nuanced understanding of value, efficiency, and the strategic partnership between in-house legal teams and external law firms.
From the legal department’s perspective, they are the experts in legal services and understand that not all legal advice is created equal. Engaging the wrong lawyer for a matter may lead to increased risk and adverse outcomes for the organisation. Consequently, some General Counsel may seek to shield the legal department from procurement’s influence and resist changes to decision-making processes or ways of working.
However, there is no need to discard effective strategies due to these tensions; many tried and tested procurement strategies can empower your legal team, promote process improvements, and enhance overall outcomes. Recognising that procurement isn’t disappearing, a collaborative approach will yield better results than a combative one.
Here are five strategies that in-house legal teams will find useful:
1. Deep Dive into Historical Spend Analysis
Mastering legal procurement begins with a deep dive into historical spend data. By analysing work types, practice areas, and identifying inefficiencies, you can consolidate the law firm footprint. The adage “less is more” rings true here; focusing on fewer suppliers enables stronger relationships, more work for select firms, and greater shared knowledge and expertise. Furthermore, consolidation, based on qualitative and quantitative insights, ensures alignment of legal services procurement with broader organisational objectives.
2. Establish a Formal Panel of Law Firms
Your external law firms must be considered an extension of your internal legal function, necessitating strategic alignment on values and goals. Therefore, consider establishing a formal panel of law firms. Getting this right will influence how you engage, work with, and evaluate your law firms, significantly enhancing consistency, focus, and depth of knowledge. Remember, you don’t need top-tier law firms for everything; smaller and boutique firms can excel in specific practice areas. A good panel will comprise a mix of full-service, boutique, and alternative legal service providers tailored to your organisation’s unique needs. Formalising a panel is also an opportunity to communicate expectations around performance, ways of working, and billing guidelines.
3. Operationalise and Manage the Legal Panel
Forming a legal panel is just the beginning; the real challenge lies in operationalising and managing it to ensure tangible value and return on investment. Rigorous processes, from pre-engagement to performance management, foster strategic relationships with panel law firms and provide transparency and accountability.
This could include:
- Adopting a structured approach to providing instructions
- Incorporating approvals at decision-making points
- Ensuring an agreed scope of work and budget is provided and approved
- Carefully managing scope of work variations and budget changes
- Adopting automated invoice review to ensure invoices comply with agreed rate cards
Automation and spend management platforms can assist with operationalising and managing the legal panel by providing workflows and process controls that don’t burden the legal team.
4. Adopt Modern Pricing Models
Explore matter-based Requests for Proposals (RFPs) and Alternative Fee Arrangements (AFAs). These models offer promising avenues to drive savings and efficiency by shifting the focus from discounted hourly rates to value-based pricing. Value-based pricing aligns legal services with business objectives, providing predictability and creating efficiencies for both the legal team and the law firm. For matters using hourly rates, persist with requesting fee estimates and an agreed scope of work. Procurement will also encourage and seek validation of agreed rate cards, so consider the use of automation to flag non-compliance.
5. Reporting, insights and data
Reporting, insights, and data play a crucial role in the buying and management of legal services. They provide a factual basis for decision-making, allowing for the assessment of legal spend and the identification of cost-saving opportunities. Accurate data analysis can reveal trends and patterns that inform strategic planning, while regular reporting ensures transparency and accountability. In an industry where precision and compliance are paramount, these tools are indispensable for optimising performance and outcomes in legal service management.
Conclusion
These strategies aim not only for cost savings but also for delivering exceptional value to the business. They help navigate the unique challenges of legal services procurement and ensure an effective method of purchasing legal services. This approach fosters a more productive relationship between in-house legal and procurement, as procurement gains confidence in the effective processes and strategies in place for success.
In summary, mastering legal procurement involves data-driven analysis, strategic panel formation, effective operationalisation, and modern pricing models. By implementing these strategies, in-house legal teams can optimise their procurement processes and deliver exceptional value to the business.
What to learn more? Download Lawcadia’s Best Practice Guide to Effective Outside Counsel Management.
