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How to bring down the gavel on legal fees

Procurement BPO legal services market insights: There has never been a better time to take a fresh look at how your organization purchases legal services.

Overview

On a percentage basis, fees paid to law firms comprise a large portion of overall corporate spending, but despite being such a large area of expenditure, the process for procuring legal services within most companies is broken. With legal needs becoming increasingly specialized, and with significant changes in market dynamics, organizations have new incentive to tackle legal spend with rigor.

Key Findings

Corporations have been reluctant to treat legal spend like other spend categories for a number of reasons. First, the need for legal services is highly unpredictable, which makes budgeting, predictability, and management difficult. Meanwhile legal complexity—including the emergence of highly specialized needs and increasing requirements changes—remains on the rise.

Additionally, large corporate merger and acquisition activity is rebounding, with many transactions taking new, more complicated forms than in recent years. With requirements for increased specialization within the legal profession coming from so many areas, it is not practical to broadly create a “one-size-fits-all” approach to optimal sourcing of legal services.

To tackle the opportunity and start getting a better handle on legal spend, we recommend focusing on three broad areas to drive the most value and the best outcomes for the organization:

  1. Strategic Approach: First, given the rise of specialization, consider the benefits of both a best-of-breed portfolio approach, and a one-stop-shop model.

  2. Alternative Fee Arrangements: Second, consider new alternative fee arrangement models to drive value-based outcomes, not just hourly rates.

  3. Innovative Techniques: Finally, look to new or unlikely areas for opportunities to add innovation while containing costs such as: e-Discovery (leveraging technology to quickly triage and review massive amounts of documents for discovery during litigation); litigation support services; and technology/automation systems (such as electronic billing and matter management systems) to help get your legal staff back to practicing the law, not reviewing and assessing legal bills.

Recommendations

Construction spending and new capital investment is finally on the rise after years of relative dormancy. It is important to proactively prepare for upcoming capital projects with a holistic and integrated approach that links the strategic capital planning process with the engineering and procurement functions. If not, you may be at increased risk of not meeting on-time delivery targets, and you are likely leaving millions of dollars of savings opportunity on the table.