In the realm of corporate legal services, procurement professionals encounter distinctive challenges. Unlike conventional procurement categories, legal services necessitate a nuanced comprehension of value, efficiency, and strategic collaboration between in-house legal teams and external law firms. Sacha Kirk, Co-Founder and CMO at Brisbane-based company Lawcadia, in her conversation with SmartProcurement, harnesses insights to elucidate the trajectory toward proficient legal services procurement, guaranteeing not only cost savings but also the provision of outstanding value to the enterprise.
Challenges in legal services procurement
Common pitfalls, such as a lack of clear understanding between procurement departments and in-house legal teams and the traditional focus on hourly rates over value-based pricing, hinder the procurement of legal services. Additionally, the inherent unpredictability of legal matters complicates budget estimations, necessitating a more sophisticated approach to managing legal spend effectively.
The starting point
Mastering legal procurement begins with a deep dive into historical spend data. This involves analysing work types and practice areas and identifying inefficiencies. The goal is to consolidate the law firm footprint based on a combination of qualitative and quantitative insights, aligning legal services procurement with the broader organisational objectives.
Strategies for managing legal spend
Establishing a formal panel of law firms can significantly enhance consistency, focus, and depth of knowledge. This, combined with the right mix of full-service, boutique, and alternative legal service providers, subject to your requirements, tailors the legal services landscape to fit the unique needs of the organisation. The key to this is the adoption of a legal spend management platform that offers a single source of truth for financial data, as well as the management of Requests for Proposals (RFPs) and scope of works, enabling better control and oversight.
Extracting value
The formation of a legal panel is just the beginning. The real challenge lies in operationalising and managing this panel to ensure it delivers tangible value and return on investment. This requires rigorous processes, from engagement principles and billing guidelines to performance management, all aimed at fostering strategic relationships with the panel law firms. Legal spend management platforms that include logic-based no-code automation can be used to provide technical controls and approval processes where required without creating unnecessary burdens on the legal team.
Innovative pricing models
Using matter-based Requests for Proposals (RFPs) and Alternative Fee Arrangements (AFAs) offers a promising avenue to drive savings and efficiency. These models encourage law firms to focus on delivering outcomes within a predefined scope of work, moving away from the traditional hourly rate model towards more outcome-based pricing strategies. However, given the pace at which legal matters evolve, it is necessary to adopt a consistent approach to agreeing and managing changes to the scope of work and the associated fees. While this can be administratively challenging, legal spend management platforms can streamline this process and even interface with law firms to elevate transparency and accountability.
Fostering collaboration
The relationship between procurement and legal teams is at the heart of effective legal procurement. Understanding and managing these dynamics through early engagement, transparency, and shared objectives is critical. This collaboration breaks down barriers, enabling both functions to leverage their unique strengths in pursuit of common goals.
Conclusion
The procurement of legal services is a complex yet rewarding endeavour. The expertise of procurement professionals, combined with the experience of senior in-house lawyers, can be invaluable in instilling a strategic approach that prioritises value over cost, effectively manages legal expenditures, and cultivates collaborative relationships. Where possible, look to systematise procurement principles in the day-to-day operations of the legal team. This will give the procurement function confidence and assurance that appropriate corporate governance and value-based decision-making is prioritised.
