Procurement Meets the Corporate Law Function: Happy Marriage or Culture Clash?
Participants at previous Counsel to Counsel events had raised the possibility that corporate procurement departments may attempt to take the lead in the selection of external law firms. In October of last year Richard Tapp, director of legal services and company secretary, Carillion plc, along with Andrew Parker, general counsel, BT Retail co-chaired this C2C event discussing counsels’ experiences of such a development, and debated how they could ensure such a process would run as smoothly as possible.
Participants at previous Counsel to Counsel events had raised the possibility that corporate procurement departments may attempt to take the lead in the selection of external law firms. In October of last year Richard Tapp, director of legal services and company secretary, Carillion plc, along with Andrew Parker, general counsel, BT Retail co-chaired this C2C event discussing counsels’ experiences of such a development, and debated how they could ensure such a process would run as smoothly as possible.
A welcome development?
To some extent, it is logical that a company’s procurement function should try to take part in the selection of law firm advisers. External lawyers are an expensive resource, and it is part of the procurement department’s remit to drive down the cost of such suppliers.
However, several in-house and private practice lawyers said they did not particularly welcome this development. Several in-house lawyers at the meeting said they regarded it as an unnecessary and unwelcome incursion into their job description. Private practice lawyers, meanwhile, did not think it was helpful to be forced to pitch for work within the constraints of an Excel spreadsheet—a common requirement when dealing with commodity purchasing.
More tangibly, neither group of lawyers understood how the procurement function could “add value”
to the law firm selection process. In contrast with the purchase of physical goods, a procurement department is not normally capable of making a value judgement about the “quality” of a firm’s legal expertise. In addition,
a relentless focus on “cost per hour”
ignores the intangible value of law
firms’ technical competencies, or their
willingness to provide ancillary support
services, such as secondments or
training materials.
Nevertheless, several speakers—both
private practice and in-house—said that
the involvement of procurement in the
selection of outside lawyers was certainly
a growing phenomenon. Indeed,
Paul Smith, a partner and board member
of Eversheds LL P, told the meeting
that the company’s procurement
department is involved in every single
“request for proposal” (RFP) that he is
currently working on. “Some RFPs are
a curious hybrid between the legal and
procurement departments—and it’s
clear there’s an ongoing ‘healthy’ debate
between them,” he said. “Other
RFPs are run entirely by procurement,
with no involvement from the legal department
whatsoever.”
For an increasing number of in-house
counsel, the issue is therefore not whether
procurement should be involved in
the selection of outside lawyers—it is
how best to make use of them.
One way in which the procurement
department may be useful is as
a support function. In particular, they
can provide administrative and datagathering
support when a law firm
panel is either being established or
rationalised. The department may also
provide dedicated tendering software,
“best practice” checklists, or assistance
with fee negotiations.
Invariably, the procurement function
tends to gather information from
law firms regarding their rates and fee
structures. That is simply what they do,
and counsel may be well advised to
let them get on with it. Nevertheless,
even if the legal team does not intend
to base their recruitment selection on
price alone, this information is normally
useful to have at their disposal.
One in-house speaker recalled how
their procurement department had
“beat law firms up” on price while producing
a shortlist of potential advisers,
but had then left the final decision on
which firm the company should instruct
to the in-house legal function.
For in-house counsels, this two-stage
approach has a certain Machiavellian
appeal: it provides them with the opportunity
to play “good cop” to the
procurement department’s “bad cop”.
However traumatic the involvement
of the procurement department may be
in law firm selection, counsel should
be reassured that the pain is normally
short-lived. Once the selection of outside
lawyers is complete, both sets of
lawyers can concentrate on building a
cordial working relationship. “When
it’s all over, the procurement department
magically disappears,” said
one private practice lawyer, wearily.
“Perhaps they go off to organise the
purchasing of paperclips.”
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visit http://counseltocounselnews.com .
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Last updated -
23 April 09
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