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
The time to tighten one’s belt seems to be over – at least for some lawyers.
Starting salaries for lawyers right out of law school have just been raised at some firms. According to a Wall Street Journal article, New York firm Cravath Swaine & Moore increased its starting salary to $180,000, effective July 1. It was reported that the (unusual) midyear pay raise has immediately been matched by at least nine other law firms.
After breaking through the $1,000 per hour rate limit in 2011, the highest paid partners in New York have just broken through the $2,000 per hour limit. Similarly, top London lawyers now command more than £1,000 per hour.
All the more reason for Legal Procurement to stay on top of things! So what can you do to manage spend?
Insist on Business Process Management:
No business of any size can work without using some version of Business Process Management. The idea of structuring activities or tasks that produce a certain outcome dates back to 1776 when Adam Smith described the processes in a pin factory. It’s about time we’re applying the principles to the legal category: Understanding and documenting key processes leads to better matter management through better scoping, planning, and budgeting.
Here is how you can distinguish firms that are best in class:
- In your next RFP, ask firms how they will manage your work. Look for examples of business process maps that the firm has used to optimize and manage their work.
- Ask how their work on business processes has contributed to an improved customer experience and higher quality of service (and more efficiency!).
To learn more about Using Business Processes for the Legal Category, become a member and read Ian Stockley’s “Cheat Sheet” in the Members-Only area of our website.
Insist on Alternative/Appropriate Fee Arrangements (AFAs):
Firms often say that clients don’t want AFAs. Why wouldn’t you? AFAs generally aim to align legal cost with the value of the services rendered rather than how long it took outside counsel to deliver the service. However, to successfully embrace AFAs, you need to know whether you’re getting a good deal from your firms.
Here is how you go about it:
- Build your own data set of comparable matters. Know the market and understand how much different aspects cost. What are the price drivers? Introduce competition.
- Survey the market and when bidding out matters, make assumptions so firms can properly price their services. It needs to be clear to both parties how the firm should deliver its services. Who will be working on the matter? How many documents will be reviewed? How many weeks or days of trial do you anticipate?
- Define success. Are both you and the firm clear about what counts as a “win”?
To learn more about Success with AFAs, become a member and read Justin Ergler’s “Cheat Sheet” in the Members-Only area of our website.
If you are not (yet) a member, sign up today. (At currently $500, Buying Legal Council Corporate Annual Membership costs less than one hour of a partner and our Individual Annual Membership of $185 is like an hour of a paralegal. Prices are valid through August 31.)
The concepts of efficiency and productivity have been largely ignored in the professional services context: Professional services are complex in nature due to the relatively higher degrees of buyer-seller interaction and their relatively higher degrees of customization. Efficiency, on the other hand, is driven by the potential for standardization in the process. Efficiency in a professional services setting, therefore, sounds counter-intuitive, says Jas Kalra, Doctoral Researcher in Operations & Supply Management at Alliance Manchester Business School, the University of Manchester, in his recent blog post “Insights from the ‘Buying Legal” conference on our most recent legal procurement conference in London.
Jas notes the triadic relationship between the legal department, procurement, and the law firm. “This was one of the most discussed issues at the conference and highlighted some of the issues that could emerge because of the differing expectations of the budget-owner and the procurement department from the service-provider.”
He explains that this triadic relationship results in the client sending mixed signals to the service-provider and negatively affecting the satisfaction levels. “It is the communication-gap and the instances of maverick buying in these triadic relationships that leads to the service quality breakdowns. This triadic relationship needs to be managed in order to manage the quality of these service relationships.”
Jas says that this reminds him of a study on the purchase of marketing services that recommends that the procurement department should take on a role similar to that of an internal consultant and operate in the advising capacity to the budget-owner and should control the outcome by investing more time in the service-specification processes.
However, Jas notes that few companies today “actually leverage their procurement departments in the early stages of the professional service procurement.”
He believes that procurement departments still have some way to go before they can exercise a more active role in the procurement of professional services. “Understandably, there is an element of resistance from the budget owners, but Supply Managers need to develop and demonstrate project management and risk management competencies and practise a form of internal selling and get a level of ‘buy-in’ from the budget owners and the senior management.”
Read Jas’ further observations and recommendations here.