“New-found power wielded by procurement departments”

Under this title, Stefan Stern writes in the Fin. Times, June 20, 2006 at 8 that procurement “is precisely where a lot of the vital action is…” Notably, procurement has changed the “tone and nature of the conversations between companies and their service providers.” Stern illustrates this with in-house counsel who historically negotiated terms with the company lawyers – but those “negotiations” could “end up being a bit too cosy.” Take a deep breath.

“Managing these sorts of contracts, with their ‘service level agreements’, professional indemnity insurance and liability clauses, is a task better suited to the experienced procurement professional.” Bizarre instances Stern has grabbed, betraying ignorance about law firms and law departments, and not at all a sound conclusion. Perhaps too fell an appraisal, as an experienced negotiator may do better at negotiation if you set aside content knowledge, but lawyers understand best the services to be provided by external counsel and the lawyers know professional performance norms. Procurement can help with process and some strategies, but it should not pre-empt decisions of lawyers.

Stern also points out how procurement sometimes manufactures “savings.” “A classic dodge is to seek out inefficient, costly service providers to tender for a contract. When procurement then rides to the rescue with a much cheaper alternative, vast (but illusory) savings can be claimed.” Not that a general counsel would contemplate such shenanigans….

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