Page 6 - CCCA Magazine Summer 2015

{ PerForMance in the Law DePartMent }

SourCing externAl CounSel:

StrAtegiC or tACtiCAl?

By Richard Stock

Dr. Silvia Hodges Silverstein is the editor of the recently released while most of the others have business
degrees.
Legal Procurement Handbook, a collection of 27 articles written ■ Procurement is moving into higher-
about the business aspects of retaining external counsel. value legal services.
■ Procurement gathers market data and
Contributors include procurement specialists, law departments,
conducts benchmarking studies.
law frm pricing offcers, business development specialists, ■ Procurement is more adept at fee nego-
academics and consultants. tiations and defning billing guidelines.
In their article, “Procurement Needs a
New Metric,” Charles Green and Bill
s DuPont’s former GC, Tom Sager, legal procurement Young highlight six areas of confict as
wrote in the foreword to the hand- In his article in the handbook, “Strategic procurement moves from managing the
Abook, “The balance that needs to be versus Tactical Buyers,” Geraint Evans, buying process to being more strategic
struck in the procurement of legal ser- Head of New Business at CMS Cameron when retaining external counsel. They
vices and all that fows from that deci- McKenna LLP, describes procurement’s consider price versus value assessments,
sion is of critical importance to the rep- “tactical buyers” as those who tend to commoditization of the fnal selection,
resentation, reputation and risk profle focus on supplier terms and conditions, reliance of the law department on im-
of the company and how these services discounts, payment terms, and master plicit contracts with law frms after they
are priced and effectively managed.” He service agreements—an approach which are selected, pressure to be more involved
goes on to say that in-house counsel “is can be divisive and counter-productive in the early stages of scoping legal work
uniquely positioned to blend the sourcing with both law frms and law departments. and business objectives, superfcial calcu-
discipline into the procurement process On the other hand, “strategic buyers” fo- lations of cost-savings, and the diffculty
to ensure that the company’s interests are cus on the company’s business objectives in managing legal spending for strategic
adequately protected and advanced.” and law department. They understand and complex activity. They conclude by
Over nearly 20 years, I have helped the legal category and legal market inti- proposing a new performance indicator
more than 75 companies retain law frms mately. They are informed about the lat- called the “spend control index”—some-
in 100 countries. In only a handful of cas- est developments on alternative business thing that is better aligned with corporate
es were procurement or strategic sourc- structures, legal process outsourcing, and and business objectives.
ing involved in the proposal process, fee alternative fee arrangements. Busy law departments should un-
negotiations, selection and subsequent Dr. Hodges Silverstein reports the 2014 derstand how capable—or not—their
relationships with external counsel. Re- fndings of her research on the state of procurement departments are. Can they
grettably and regardless of the size of the legal procurement in her article, “How to support the legal category beyond man-
company, most GCs and their procure- Win GSK’s Business.” While procurement aging the process of a call for proposals
ment departments are behind the curve is not making the fnal decision on which and securing a discount on the hourly
when it comes to collaborating with each frms get retained, its role and functions rate? How well do they know the current
other on behalf of their employer. Law have evolved so that: service providers? How up to date are
departments are only now beginning to ■ Procurement acts as buyer, infuencer they on alternative fee arrangements and
upgrade the classic relationship-based, and gatekeeper, especially in mid-sized alternative business models? Every GC
hourly model with leading-edge practices and larger companies. should be calling for a more robust legal
to select law frms, manage costs and im- ■ Almost 20% of legal procurement services procurement capability within
prove performance. professionals have a legal background the year.

6 CCCA MAGAzinE | SuMMEr 2015 été