Royal Dutch Shell has appointed a global sourcing officer from Reed Smith to manage its pricing arrangements with external counsel in a bid to reign in costs and ensure greater value from panel firms.
Vincent Cordo joined Shell’s Houston office in May to analyse and manage the company’s external legal spend, initially focusing on litigation.
He joined from Reed Smith where he was global director of client value for two years. Prior to that he was director of value and project management at legacy Squire Sanders and service delivery director at White & Case.
Cordo’s appointment is the latest stage in a plan by Shell global legal director Donny Ching to put fee arrangements at the forefront of the way the company works with law firms worldwide.
Shell adopted what it terms ‘appropriate fee arrangements’ (AFAs) for all panel firms last June and now no longer instructs any external counsel without an AFA in place.
Firms’ willingness to work on AFAs will dominate Ching’s next panel review, which is scheduled for April 2016 (27 April 2015).
Shell general counsel for global litigation Richard Hill told The Lawyer the new model has contributed to savings of 40 per cent on external spend on litigation in the first four months of 2015 compared to the same period last year.
Hill said the savings “don’t mean law firms are losing out” but instead “creates a focus on working towards real value”.
Agreeing AFAs with firms on individual pieces or dockets of litigation is a “detailed operation” and involves a “finessed discussion to analyse what the work looks like and the scope of the work”, Hill said.
“It’s a harder way of working that means you have to work out what costs a litigation requires, get firms to pitch on it and negotiate on it while trying to manage the case itself.
“There are some challenges involved but if you consider the benefits of reduced costs and greater alignment, I can’t see why our competitors wouldn’t follow this way of working,” Hill added.
Cordo said his goal for his first year in the role was to “get my hands around the support process for tackling all of the pricing opportunities that are being offered to counsel”. He also intends to put together a strategy for more closely reviewing outside counsel fees and a way to track and report on the efficiency of them.
Ching told The Lawyer last month he estimated savings of $9m (£5m) by establishing AFAs globally. He said those firms that have been hesitant to explore AFAs with Shell could find themselves in a weaker position at review time, adding: “They should have a bit of a rethink”.
Shell currently uses nearly 100 firms globally. Its 2009 panel review (19 October 2009) was the first time the energy giant required firms to propose alternative billing structures
Litigation chief Hill said firms who embrace AFAs were likely to benefit from their future relationships with Shell.
In April Hill, formerly associate general counsel for global litigation, succeeded Brad Nielson in the litigation GC role. Nielson had been tasked under Rees with setting up a global litigation team (6 March 2015).