I know we all think of legal as special, and in many ways,
we are, but Outside Counsel Management is, at its core, the sourcing of legal services.
Key is to not ignore the principles of sourcing altogether. Companies do procurement the way they do because it works. Good legal service procurement takes what is useful from sourcing but acknowledges the differences in every step.
1. Demand management is the phase before the actual procurement starts. The core question of this phase from a procurement perspective is determining whether a law firm is really needed on the matter (the make-or-buy decision).
The organization is likely to wonder what the in-house legal team for, if not for providing legal services in-house? However, in many situations it is perfectly clear why a law firm is needed (representation in court, legal opinion, market practice, specific expertise etc.) and having to justify this every time, can become frustrating.
Instead agree with your organization that in principle that the legal department is best placed to take the make-or-buy decision. At the same time explain the obvious situations where law firms are needed to get those out of the way for good. Then record your reasoning behind the decision to engage outside counsel in the demand management process for transparency.
If you do decide a firm is needed, some boring stuff needs to be sorted: Which cost center is going to pay? What firms are onboarded for this type of matters in the relevant countries? How much do you think it will cost and who needs to approve those costs? Try to automate this as much as possible because it becomes quite a burden on the organization otherwise.
Just so you know: CounselOps supports all aspects of demand management whether you are sourcing work competitively or are asking one tried and tested firm for support.
2. Scoping of service
In my experience, most gains can be made in the scoping of services. Way too often a law firm is treated like a plumber who is pointed to the bathroom with the instruction to ‘just fix it’. A lot is made of law firms over charging and doing unnecessary work. but honestly. If no one tells them specifically what they need to do, the blame is to be shared between the client and the firm.
For any work that is regularly sent to outside counsel, have the team come up with scopes that capture, in detail, what you want the law firm to do. Include the phases in which you want them to do it and what the desired end-product of each phase is. If you are unsure or there are too many variables, include a general arrangement for when the scope creeps.
Just so you know: If you use the CounselOps platform, as part of the onboarding, we’ll support you in drafting the scopes for your most common service requests. We will use our experience to get you scopes that work and they will be available in your company’s scope library to use.
3. Requesting the service
You will have the most potential to save on your legal fees when you request a firm to provide you with an offer for the services. This is when the proverbial iron is hot. You have a concrete job for them that they run the risk of not winning.
This is why you should never just pick up the phone and start talking. Right away you lose that competitive edge that you do have when you in invite a firm to provide you with an offer based on your scope.
This is where the procurement legal services is likely to differ most from other procurements in your organization. The standard will be to ask a number of contenders to bid on any assignment. Even if the expected spend is low. In my view, for legal services a different approach works better.
For larger engagements always send the scope to three or four firms and ask them to provide you with an offer. For smaller engagements still use the scope but send it to one firm only. This will allow you to maintain a working relationship with firms that are the best in a specific practice area or firms that haven’t won work for a while.
Set a spend threshold and agree with your organization that under that threshold or for certain specific scopes, only one firm will be asked to offer. Over the threshold source the services competitively – even if there is little time. Record the intention to ask only one firm in the demand management process.
Just so you know: If you use the CounselOps platform, you will be able to easily and quickly request an offer based on the scope and set the price in an online auction between the invited firms. Quick and easy for you and for the firms.
4. Selection
This is when we address the elephant in the room when talking about sourcing legal services. Will I, as General Counsel, not risk losing the freedom to choose which ever firm I think is best for the matter? Not if you are transparent about the process, in my experience.
Of course, it makes sense to select the firm that gives you the best offer. But there can be good reasons not to. When the scope was done properly, and the firms invited to bid are roughly in the same league, the offers should not be too far apart. With the offers being within a certain range, it is completely normal to want to select a firm that has a leg-up compared to the other firms for different reasons. A partner with specific expertise; a comparable matter they handled well in the past; the overall impression about the availability of the right members of the team etc.
Make sure to always select the firm for the right reason and record your decision if you happened to select the firm that did not give you the best commercial offer. As long as you can show you take the procurement process seriously, you should always have the firm you want at your side.
5. Engagement specific contracting
For this article, I’ve assumed that any firm that you have onboarded for use in your organization, will have some kind of engagement letter in place as a framework agreement for all engagements. I’ll dedicate a separate article on getting those in place.
For now, if you followed all the steps above, the engagement specific agreement should be a breeze. The scope forms the basis of the description of services required. The outcome of the RFx determined the commercial conditions. There is nothing left to negotiate, and the agreement can be signed quickly.
Just so you know: The CounselOps platform allows you to export the auction results for easy incorporation into the engagement specific agreement.
Alexander De Nerée