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Procurement managers bring value for money in-house
Increasingly procurement managers are taking control of legal spend in place of in-house counsel as the drive for costs efficiencies continues. Energy giant E.on, for instance, took legal spend out of the hands of the in-house department three years ago and put strategic sourcing specialist Anne-Marie Amatt in charge.
The result? Over the last three years Amatt has helped the company shave 20 per cent off its annual legal spend.
It hasn’t all been plain sailing for Amatt. When she first started out on her journey she was faced with a sceptical legal department wary of a non-lawyer claiming to understand how legal services work.
Hers is not a lone tale. All too often lawyers in-house and in private practice reserve a gentle disdain for their non-lawyer counterparts.
Amatt had to spend time convincing the in-house team that a revamp would be a successful venture. She questioned why the in-house team instructed certain lawyers and whether they felt they were getting best value for money from panel firms. She also questioned why the company simply accepted annual rate rises from their panel firms.
It is a routine that has been repeated in several major corporates across the country with procurement managers trying to prise open the in-house relationships.
It isn’t all about costs, says Amatt. At the blind e-auctions held for lucrative panel places. firms were asked about two areas - rates and value. In the first round legal bidders were asked to submit a fixed hourly rate figure. They could see what their competitors were bidding but they didn’t know who they were. The effect was to bring down the rate of the top billing firms.
In the second round, which the firms were unaware of at the outset, they were asked about how they would add value. This included what savings the firm could offer the company over the year, how well aligned they were to the core values of E.on, such as efforts to reduce its carbon footprint.
All this is new to the traditional law firm rainmakers who value relationships above everything else. One senior magic circle partner warned that if clients demand too much they might find themselves locked out of the legal market.
No so, another in-house lawyer says. If the traditional firms won’t step up then the new entities created in the post-Legal Services Act environment will.
This is the world post-2008. With significant costs savings to be made there is no going back now, it’s adjust or die.