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Cost Control — Procurement Creeping In

Having recently worked on a project where the company’s procurement staff became involved, it has struck me that more and more of the procurement mindset will force itself on law departments as they retain outside counsel. Procurement likes process, low cost, electronic retentions (by which I mean auctions), evaluations, consolidation — all ideas that may be anathema to some law departments. Procurement thinks large-scale and they think small scale, unit costs for example, and these are views that law departments, with their bespoke hiring practices, never consider. The tectonic clash will continue between purchasing agents and lawyers.

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2 responses to “Cost Control — Procurement Creeping In”

  1. Richard Hall says:

    Excellent post, Rees. I too have observed greater involvement by procurement in establshing and defining relationships with outside counsel. CxO level executives for too long have been frustrated by the perception that the law department is a “black hole” not susceptible to management and financial controls that permeate every other dimension of corporate life. GCs as a group have done little to disabuse senior management of this impression. Now procurement is stepping in to fill the void. However, law departments can regain the initiative and avoid the risks of auction and audit by demonstrating their ability to provide meaningful financial reporting and business unit intelligence. By providing their clients “news they can use” for business decisions, GCs shift the discussion from cost and toward value.

  2. At a client’s request I recently looked into public sector use of tenders to hire law firms. It was eye opening to see how many agencies, municipalities, and some private companies already use open procurement to engage counsel. British Columbia’s attorney general; GE Europe; ING; Royal Bank of Scotland; City of London Ontario. Based on the dates of tenders this has been going of for years. But most interesting was that in the UK and Australia the bidders included almost all of the top tier law firms. Selecting legal work suitable for tender and organizing the process seem to be significant challenges but my subjective impression is that this is about to become a very significant growth area.
    Paul — Excellent points and even better when you can offer some law departments actually doing it. Do you know whether procurement staff were involved? Also, the word “tender” sounds very British to me; makes me think of how some people like meat cooked. Cheers, Rees