Editor’s note: The author of this post is a fellow at CodeX: The Stanford Center for Legal Informatics and is a member of the California bar.
By Monica Bay, Fellow, CodeX: The Stanford Center for Legal Informatics
A trade organization for legal procurement professionals will release its 2016 Legal Procurement Survey on Monday, providing new information on who’s making purchasing decisions, when discounts are expected and other data about legal spend and budgeting trends.
Conducted by Buying Legal Council , the survey polled 92 legal procurement and client-side legal operations professionals. Respondents came from a wide range of industries, with 86 percent of respondents coming from companies that have at least $1.7 billion in annual revenue and 45 percent from companies that have between $4 and $25 billion in annual revenue.
Big Law Business obtained an advanced copy of the 27-page report about the survey and posted several highlights below.
- Who inside the company creates a short-list of law firms?
- GC/head of Legal (87%);
- in-house lawyers (61%),
- procurement (39%),
- business management (30%),
- senior executive management (22%)
- other (4%).
- Who makes the final outside counsel selection decision on any particular matter?
- GC/head of legal (70%);
- in-house lawyers (57%);
- senior executive (26%);
- procurement (13);
- business management (9%).
- What level of legal services purchases does procurement influence in your organization?
- Commodities (86%);
- bread and butter (64%);
- high-end (45%).
The report identified “commodities” as debt collection, non-complex contracts and minor litigation — defined more precisely as “matters of low to medium legal and financial exposure that the company buys in high volume and frequency.”
It defined “bread and butter” as core work with medium to high legal and financial exposure that a company buys regularly.
High-end work was defined as high-stakes litigation or “complex/high-value” legal services.
The report concluded, “We believe that in the next few years, sophisticated Legal Procurement departments will regularly be involved in sourcing high-end, complex legal services. Almost nothing is off limits to using a professional, institutionalized approach that is normal in other areas of an organization.”
- What percentage of the legal budget does the procurement department influence?
- 10% or less influence (30%);
- 11-25% influence (9%);
- 26-50% influence (7%);
- 51-75% influence (22%);
- 76-100% influence (13%);
- not sure (19%).
- How much of a discount is expected in each category of legal services?
- High-end work:
- 13% of respondents said they don’t expect a discount;
- 21% of respondents expect a discount of less than 10 percent;
- 40% of respondents expect a discount between 11-20%;
- 26% of respondents expect a discount of more than 20%.
- Bread & Butter work:
- 17% of respondents said they expect no discount;
- 22 % of respondents expect a discount of less than 10%;
- 39% of respondents expect a discount of 11-20 percent;
- and 22 percent of respondents expect a discount of more than 20%.
- 13% of respondents said they expect no discount;
- 30% expect less than 10%;
- 49% of respondents expect 11-20% discounts;
- 8% expect a discount of more than 20%.
Top 5 Lists
Among the Top 5 lists was a question about what “value-adds” were important in selecting law firms. The results:
1. Free hot lines/access to experts for quick questions. 2. Free or at-cost secondments. 3. Outside counsel’s participation on internal calls. 4. Conducting pre-matter planning sessions. 5. Seminars and business-level training.
Another asked for the best ways to measure legal services:
1. Industry benchmarking analysis. 2. Invoice audits. 3. Forecasting budgets. 4. Rate increase analysis. 5. Alternate fee arrangement analysis
Aric Press , partner at Bernero & Press, and former editor-in-chief of ALM and The American Lawyer, noted one revealing data point: Forty-five percent of the respondents said the procurement department is involved in decisions on high-end work.
“This phenomenon has gone well beyond plain commodity work,” said Press via email, adding, “The message then for law firms is that they need to stay close to their clients and understand who and what is driving their decisions.”
An abridged version of the report will be available to the public; Buying Legal Council members will have access to the full report.