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.”

For a complete review of this and other reports of Counsel to Counsel sessions in Shanghai and Toronto as well, please visit http://counseltocounselnews.com . If you are interested in participating in an upcoming Counsel to Counsel session please send an email to c2c@martindale.com

Last updated -22 August 08

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