Apr

Strategic Sourcing Legal Services – Key Bullet Points

By admin

Many people within companies are looking for persuasive arguments as to why they should shift to alternative billing arrangements with outside counsel, particularly to radically reduce expense. Here are some of the key arguments that I find to be most persuasive:

Too Much Legal Expense. Most companies are spending way too much on legal services. Moving away from the billable hour and turning towards alternative billing models focused on results creates a significantly better return on investment.
Standard Procurement Fee Reduction Efforts Fail. Procurement departments routinely make the mistake of using a strategic sourcing manager without a strong understanding of the legal field, which makes their effort to cut outside counsel fees fail.
Unique Nature of Legal Services. Legal services are a unique animal. In legal procurement, a strategic sourcing manager must dispense with the normal approach of treating a law firm as one company, as a law firm is not much more than a group of diverse people, each with a book of business, and the lawyers and staff that support each book.
Use of Statistics. As a result, law firm wide statistics and quality management are often unhelpful and do not drive across the board quality improvement and spend reductions. You are much better off measuring the performance of the handful of lawyers who are controlled by the equity partner who manages your relationship.
Year Over Year Fee Targets Don’t Work. You cannot set a target of year over year reductions in legal spending because the law department often has no idea, for any given year, what may materialize. A sudden class action lawsuit could be filed, a major construction vendor may walk off the job, or a sexual harassment lawsuit could result. Insisting that the law department spend less money than the previous year without taking this into account alienates the lawyers who are already reticent to support any kind of spend management.
Compare Apples to Apples. The better approach is to compare apples to apples, and try to get year over year reductions in purchasing the same kind of legal service that was previously acquired, as well as looking into whether a particular legal service is needed in the first place.
Where to Start? The best areas to target include M&A, labor and employment disputes, regulatory research, commercial real estate, and litigation amenable to alternative billing models that use clearly defined objectives and efficiency bonuses to drive results oriented, more efficient legal services at lower fees.