When the going gets tough, the tough get going. Obtaining better value for money from your law firm by setting up a panel is one way to ease the effects of the downturn
With the downturn in the economy, obtaining better value for money from law firms is crucial. One way of ensuring value for money is by putting in place a panel of firms. After all, most contractors seek to manage their suppliers and subcontractors in this way, so why should it be any different with lawyers?
Not everyone is in favour of a panel as establishing it can be costly and time-consuming. For example, management must review tenders, interview candidates, make the final selection and provide feedback to those who have not been selected.
The implementation of a panel can also become political if individuals within a company have developed strong relationships with firms that are not given an opportunity to tender. Some commentators say panels have not cut costs because lawyers’ salaries have continued to rise.
In my experience the implementation of a panel allows a company to negotiate reduced fees, even if its rates are increasing overall. Having a smaller core of preferred firms will allow you to negotiate volume discounts and lower hourly rates in exchange for a steady stream of business. By working together on a more strategic basis, firms are more willing to explore ways in which to share the risk associated with, say, PFI schemes or litigation.
For Costain, having a panel not only makes financial sense, it also adds value since mutual market benefits can be derived from a shared customer base. To achieve this you must choose firms that operate at the forefront of your sectors to ensure they understand your markets and, more importantly, can share those market opportunities with clients. In return, they gain market knowledge from their clients.
Having a smaller core of preferred firms will allow you to negotiate volume discounts and lower hourly rates
But what if a company is too small to have a formal panel or its own in-house lawyer? In such a situation it is important for those handing out the work to secure value for money. For example, you could still limit the number of law firms instructed, thereby ensuring that you do understand what you seek to achieve.
Also, agree the billing arrangements beforehand. Is the work undertaken on a fixed, capped or hourly rate? If the work is billed on an hourly basis, then you should obtain an estimate beforehand. Be sure to question a bill if you feel it is too large. In these testing times a healthy discussion on the fees may produce surprising results.
Finally, the partnership between the law firm and a company will only work if both parties invest time and effort in the relationship. This is equally true if a formal panel is in place. For this reason, in April this year Costain held its first ever legal panel conference. Thirty-seven lawyers from our panel gathered (at no cost to Costain) to learn about Costain’s business and sector focus.
By understanding where our sectors are and where we are aiming to go, we hope that our panel will continue to provide innovative solutions to help us achieve our goals.
Tracey Wood is head of Costain’s legal department