Page 23 - CCCA61_2007

NATL61_034-039 03/08/2007 09:44 AM Page 36 Feature Gaining control Procurement Professionals: FMC’s Carr says that when most lawyers talk about alternative a new wrinkle in controlling costs fees, they’re referring to volume-based discounts. “To me, that’s not an alternative fee, that’s a discount. ”With expenditures rang- ing between US $10- and $14-million a year for outside legal fees—last year his firm paid 105 law firms—Carr is keen to keep Deciding which outside law firms will provide legal costs down in his own department. services usually falls to in-house counsel. But that In rejecting many of the traditional methods of cutting legal could be changing as large corporations involve pro- costs, several years ago Carr began developing a performance- curement professionals (PPs) in the process. based alternative fee method.His trademarked system,the Alliance Procurement specialists, who apply the brutal logic of Counsel Engagement System (ACES), has four variants, two of supply-chain efficiencies to the rest of the company, which he uses frequently. have turned their attention to setting the terms of pur- Under this system, the law firm bills FMC at its regular rates. chasing legal services. The company then withholds 20% of the fees during the engage- Proponents say that PPs are more effective than ment. Depending on the quality and effectiveness of the work lawyers at managing the process of deciding which performed, the law firm may recover some or all of the retained law firms should be hired, since they are trained in amount, as well as a bonus. Using the ACES LT model,“we pay strategic planning, inventory control, evaluating sup- 80 cents on the dollar,” says Carr. pliers and economic forecasting. Periodically, at the end of the matter, or annually, he gives the While some in-house counsel see PPs as a helpful law firm a report card. This weighs several factors, including resource, many are horrified by what they see as effectiveness, efficiency, communication, teamwork, knowledge unnecessary bureaucratic interference. Lawyers and predictive accuracy. “You get a grade from one to five on argue that the decisions involved in choosing an out- those factors,” says Carr. “Depending on how you do, you get side law firm are too complex to leave to non-lawyers, between zero and 100% of the amount withheld.” but other sectors of large corporations have seen (and When Carr went in-house after having practised in a law firm have argued against) the use of PPs in their depart- and run his own consulting and investment banking firm, he was ments, and the results have largely been positive. amazed at how legal departments “thought they were exempt But many lawyers have trouble believing that it’s from normal business processes within the company.” He realized possible for a non-lawyer to grasp the legal issues that things could be done better.“We’re not here to practise law, involved and what’s needed to get the job done. we’re here to help the business achieve its business objectives, as “I believe in certain circumstances that the cold- long as those are legal and stay within our ethical compass.We’re faced procurement manager may be able to do a bet- a service provider. The business of a law department is not to ter job in getting your per unit costs down,” says Eric answer interesting questions of law. It’s not even to win cases, to Miller, vice-president, chief legal counsel, domestic the extent that you’ve got cases. and international of Nexen Inc. in Calgary. But when “The business of a law department in-house is to help the you’re talking about business that is unique you need company achieve its lawful goals and protect its assets. I think lawyers “who are knowledgeable about the latest many in-house counsel kind of miss that.They think that they’re transactions or the latest structuring tax. Those kinds like a little law firm within a company.” Carr views himself and of skills don’t lend themselves to the one-size-fits-all his legal team as a fully integrated part of the business.“It’s my model.” He argues that law departments have an obli- job to deliver cost-effective legal services to the corporation. gation to the corporation to get the best value. And if something goes wrong, I’m accountable for that as well.” Miller says lawyers should ask themselves: “What’s He advises in-house counsel to step back and ask themselves how the value proposition here? Is this something that is they can do better.“What systems, what disciplines, what processes very cookie cutter? If it is, go ahead. But if you’re look- can we use to bring consistent,excellent legal services to the table?” ing to get the right advice at the right time, and you’re There are times when a highly-customized, very individualized always expecting to follow a price list as opposed to service is necessary, but he estimates that about 80 to 85% of the getting people who are the leaders in their field, I think time,the work needed to be done is “commodity-type services.It’s that has a value implication for the company that’s far answering questions. Answering them correctly. Answering them larger than saving on per unit legal costs.” consistently.And giving good advice. It’s counselling.” Carr admits it hasn’t always been easy to convince law firms 36 CCCA Canadian Corporate Counsel Association MARCH 2007