Strategic Outsourcing for Legal Services. Recently I came across this intriguing question:
What are most effective methods of controlling “maverick legal spend” (off-panel/off-contract engagements)? I’m interested in hearing how legal departments use systems to engage outside counsel.
I think the best approach is to ensure that the legal department has developed a service model for law firms and only uses firms that meet the requirements of that model. For instance, a department could adopt a speed contracting process model, verified by a Six Sigma project demonstrating quicker deal cycle time using a locked down negotiating and communication strategy along with document assembly software, then require the outside counsel law firm to follow this process model when working on a technology outsourcing transaction. This puts the department in position to take two key steps:
(1) Flat Fee for Legal Services. Use the efficiency and predictability driven by the process model to develop an alternative flat fee, perhaps with performance bonuses to incentivize efficient performance by the law firm.
(2) Attorney Letter Agreement. Cover the alternative fee and process model in a letter agreement for this matter. If the department has one or two key individuals responsible for putting these kinds of agreements into place, than “maverick legal spend” should be clearly reigned in. This approach also allows a department to migrate closer to strategic outsourcing of legal services in its outside counsel budget management.