Legal procurement, the department or corporate function responsible for acquiring goods and services, is rapidly gaining importance. In many corporations legal services used to be exempt from the intense cost scrutiny other business units and functions have been facing for years.
Now most companies with significant legal spend regularly involve procurement in the evaluation and selection of legal services providers. Among the first industries to embrace legal procurement were highly regulated industries such as pharmaceutical companies and financial services institutions as well as energy companies and utilities.
The Buying Legal Council 2016 survey identified the following top five reasons companies bring in Legal Procurement:
- help the legal department manage spend
- introduce a more effective way to negotiate
- initiate more efficient procurement process management
- measure best value
- achieve a more objective comparison of legal services providers
So what responsibilities, skills, and qualifications should the leader of a legal procurement department have? Together with executive recruiter Graham Locklear we developed this job description template. We invite you to use it when you select your own Legal Procurement professionals.
The goal of this position is to ensure that your organization receives the best possible return on investment for your legal spend. This position will help manage the development and implementation of strategies that focus on obtaining the highest quality legal representation and services, while minimizing costs and meeting goals associated with budget targets. With direct lines to senior leadership, your Head of Legal Procurement will actively engage and manage legal vendors with the common goal of securing value, optimizing efficiency, and managing the risk associated with the purchase of legal services.
- Identify qualified and appropriate suppliers (law firms, other legal services providers, software companies, consultants, and other vendors)
- Create and lead the selection process, using creative bid structures if required to achieve optimal offers (reverse auctions, etc.)
- Negotiate price, terms & conditions, and framework agreements
- Approve/review adjustments and addendums to agreements that need to be changed due to variables throughout engagement
Supplier Relationship Management
- Enable a Supplier Relationship Management (SRM) model that supports collaboration, leverage, internal and external change
- Map and manage internal relationships (company secretary, human resources, audit and legal contacts) that support the initiatives and opportunities identified
- Build and maintain relationships with legal services providers (law firm and non-law firm), legal software companies, consultants, and other vendors
- Develop a strategy to optimize the supplier base for the organization
- Leverage relationships during negotiations and throughout engagement
- Create grading system (scorecard) for suppliers agreed to by in-house counsel and external firms for periodic measurement
- Create and oversee the selection process of outside counsel and other suppliers balancing merit, industry experience, and diversity and inclusion principles
- Assure the legal department and all vendors are in compliance and without conflict
Legal Spend Management
- Partner with general counsel, chief financial officer, and/or chief legal operations officer to create budget and spend/cost-savings goals for legal spend, supporting total cost of ownership (TCO), net present value (NVP), and return on investment (ROI) metrics
- Develop strategies and initiatives to achieve cost-savings goals and identify opportunities to further efficiency
- Develop performance metrics that support spend and performance measures
- Report monthly/quarterly/yearly the status of legal spend, cost savings and budget tracking
- Use data to create predictive cost modeling tools and leverage in new matter negotiations
- Design and model alternative fee arrangements (AFAs)
- Review AFA proposals and lead negotiations to finalize agreements
Knowledge Management and Market Intelligence
- Lead initiative to compile, organize, and analyze fee data to quantify ROI of outside counsel engagements
- Develop and implement a quality review program with key external counsel, utilizing data analytics and key performance indicators
- Gather competitive intelligence through general research, legal spend surveys, and other approved publications
- Stay abreast of the newest legal technology and trends in legal industry
- Build and maintain relationships with key players in the legal field
- Develop and implement a periodic market intelligence report to inform senior leadership
- Create a 3 to 5-year category strategy that provides agility to market changes and enables change effectively in line with market intelligence, including business process outsourcing (BPO), artificial intelligence (AI), stakeholder mapping, and spend and cost analysis (TCO)
Members of the Buying Legal Council will be able to to download the Job Description Template. Click here
An increasing number of companies today involve procurement when selecting outside counsel and ancillary legal services providers. This is particularly true for companies with significant legal spend and in regulated industries; banks, insurances and pharmaceutical companies were among the first to bring in procurement professionals. Now, many Fortune 500 companies and international equivalents bring in legal procurement to support the legal department cut costs, ensure quality and drive efficiency in legal services.
To better understand legal procurement practices and detect trends, the Buying Legal Council®conducted a survey in January 2016. This research represents the view of 92 legal procurement and legal operations professionals.
What the Findings Mean for Law Firms
Legal procurement is still a new profession, but increasingly influential for buying legal services. We expect that legal procurement’s influence will continue to grow in the next few years.
Procurement gaining influence means that firms need to show more efficiency and cost-consciousness. In particular, the large corporate client expects firms to behave like a prudent business partner who continues to innovate and evolve. For many firms, traditional approaches that treat every matter like a unique scenario will have to give way to a more professionally managed, industrial approach. Clients are increasingly expecting firms to apply the learning curve principle to the delivery of legal services. Here’s a list of what you need to do to evolve:
- Speak with your clients to learn more about how procurement works in their organizations, what influence procurement has and how legal and procurement collaborate. Law firms should be aware of procurement’s goals, objectives, challenges and strategies.
- Start building a relationship with your clients’ legal procurement professionals. Most are open to engage with their firms and happy to discuss ways to manage spend and getting the best value from the right firms.
- Embrace the business side of the legal practice: rethink how you market yourself, as well as how you deliver and manage legal services. Procurement professionals demand predictability and project and budget management even more than most general counsel. Understand which metrics are used by procurement when evaluating law firms. Procurement believes that if you know your business, you should know how long it takes to deliver your services and how much something should cost.
- Understand what your client’s procurement department wants and values. Firms can win “points” if they can demonstrate that they solved a similar issue for another client and can hit the ground running without needing to conduct extensive – often expensive – research. Procurement also likes to see industry experience and a robust project management approach as they promise the efficiency procurement seeks. Procurement looks for compliance with billing guidelines. Make sure you deliver what you promise.
Read the article on the Legal Marketing Association’s website and check out the beautiful info graphics!
Law firm revenues increased by 4.1 percent in the first half of 2016 according to Citi Private Bank’s most recent quarterly report on the legal industry. The increase largely stems from higher lawyer billing rates (average billing rates increased by 3.2 percent) rather than greater demand for services. It is possible that rates will continue to go up as many major law firms just increased associates’ salaries. For example, first year associates’ annual salaries went from $160,000 to $180,000.
This is an interesting development, since clients continue to consolidate the number of firms they work with and pay much more attention to legal billing. (Read Elizabeth Olson’s article in the New York Times here.)
Given this development, it will be more important than ever for you to master the pricing of legal services: Understanding what goes into law firms’ calculations, what are cost drivers, how you best negotiate, and what information you need to provide law firms to so they can give you more than a very rough ballpark figure that no-one feels accountable for. Many law firms believe that as their cost go up, their prices will go up as well.
Become a master of pricing of legal services – sign up for our PRICING BOOT CAMP
Join your peers and counterparts – legal procurement and operations professionals, and law firm pricing and business development professionals – for an intense pricing boot camp for legal services. Learn about Pricing Strategy & Tactics, Negotiations, and Implementation in New York on November 3. Click here for more information.
This pricing boot camp focuses on active, hands-on learning for both client-side professionals and law firm pricing/business development professionals. Experts will help describe best practices in “alternative” or “value” fee arrangements and best practices in effectively responding.
You will work on complex pricing case studies that are based on real-world experience. This is an active pricing boot camp, not an introductory session on legal services pricing. You will be expected to actively participate and need to read the case studies ahead of time.
You will have the opportunities to learn, network, exchange thoughts and experiences. You will take home practical, real-world lessons and how to navigate the turbulent waters of today’s legal market. Master the pricing of legal services – whether you are a buyer or a seller.
Online Boot Camp
If you can’t come to New York in November, participate in our ONLINE PRICING BOOT CAMP and learn about Pricing Strategy & Tactics, Negotiations, and Implementation remotely.
- Session 1: Wednesday, January 11, 2017
- Session 2: Wednesday, February 1, 2017
- Session 3: Wednesday, March 22, 2017
- Session 4: Wednesday, April 26, 2017
You will receive a pricing case study to prepare for each 90-minute session (remote access). You will get information from the experts and the opportunity to share your insights.
Sign up Now: Early Bird Pricing ends September 12, 2016:
- $250 for in-person participation (after September 12: $400)
- $150 for remote, online participation – for all four sessions (after September 12: $250)