The ‘Tesco law’ reforms would enable construction consultancies to become one-stop-shops, offering their clients legal advice. But will they do it?
Over the past few weeks you will probably have seen newspaper headlines about “Tesco law”. This is the shorthand term given to the government’s plan for legal advice to be provided in a more consumer-friendly way. At the moment Law Society and Bar Council rules mean that solicitors and barristers cannot be in partnership together; they cannot be in partnership with non-lawyers; and where solicitors are employed by businesses they cannot offer legal advice to third parties.
Currently buyers of legal advice can do one of two things. They can walk into WH Smith or Tesco and buy off-the-shelf tool kits that allow them to deal with such issues as divorce, making a will and buying-to-let. But if they want a professional service and the application of some judgement, they cannot employ barristers direct, so they have to go to the conventional solicitors’ partnerships
The government says it will go ahead with a white paper to introduce more flexibility, which it believes will encourage innovation, improve efficiency and lower cost. But what will it mean for construction? Will the contractors use in-house solicitors to represent them in court and sell this service to third parties? Will the major construction consultancies take on practising solicitors and start offering legal advice? Will we see combined practices made up of surveyors and practising lawyers?
Let’s deal with the contractor question first. It is quite possible that some of the larger contractors with sufficient through-put of disputes will find it more economic to have their own in-house legal representation. Why hire an external lawyer at £275 an hour and pay someone else’s overheads, when you can avoid it? But would they want to sell this as a service to third parties? I doubt it. The main reason being that other contractors and subcontractors would not touch them with a barge pole because they are competition. Look at the O’Rourke frame business – now it is part of Laing O’Rourke other contractors are reported to have stopped using it.
What about the construction consultancies? The cost consultancy and project management based ones like mine will no doubt want to see whether they should employ solicitors and offer legal advice. This would certainly appear to make sense if they already have a construction disputes team. It would enable them to provide a one-stop-shop, which because of the differences in overheads between solicitors and construction consultants would undoubtedly be more cost effective for clients.
Will they do it? The first point lies in the source and quality of their work. Those that mostly service blue-chip clients will not bother. Clients like that will always go to the City lawyers as they want the best and can afford to pay for it.
Why hire an external lawyer at £275 an hour and pay someone else’s overheads, when you can avoid it?
The second point relates to the number of referrals for expert roles, forensic quantum work and delay analysis that they get from solicitors. For those consultancies where this is a substantial percentage of turnover then the O‘Rourke rule kicks in again. Would they employ solicitors if it made them compete with the people who give them the work?
I suspect not.
Claims consultants are the ones who are likely to take the plunge. In fact, some have already. There is at least one firm that has a Law Society-regulated sister company. Clearly because of the current rules about ownership this must be separate from the main group, but I would hazard a guess that the reason it exists is to broaden the service and perhaps feed work back to the main claims operation. It would make sense for it to pull this back within the group when the rules change and I would also expect others to set up similar operations.
Overall, there is likely to be an erosion of construction lawyers’ turnover by the newcomers, particularly in contractors’ and subcontractors’ claims. This will be because they will be cheaper and will offer an integrated service. Those contractors and subcontractors that continue to appoint separate solicitors and cost and delay advisers will do so because they believe they can get the best of each.