Seeing off the competition

The race is well and truly on for the legal services work of the metropolitan and London borough councils which have to subject a proportion of such work to tender under the CCT regime. By law, these contracts have to commence on 1 April 1996. So what is the current state of play in the tendering exercises across the country?

The application of the CCT regime to legal services was clarified by an order and a set of regulations produced by the Government last year.

These provide that each local authority has to subject at least 45 per cent of its legal services work to tender, subject to a de minimis level of £300,000.

The calculation of the exact value of work is a very complicated exercise.

This is exacerbated by a complex situation regarding those aspects of current work which can be counted as 'credits' (like work already market-tested), allowing the authority to deduct them from the value of work to be tendered. Notwithstanding the de minimis limit, most local authorities will have to put out some of their work to competition.

While 1 April 1996 may appear to be some time away the tendering exercises, which will lead to an award of work starting on that date, take approximately 12 months and so are now well under way.

There are various stages which are followed in the tendering process, the first of which is the application stage.

This is where, following the authority's advertisement of the availability of the work, interested parties apply by completion of a questionnaire.

This is followed by the invitation stage, where the authority formally invites a number of applicants to tender for the work, and finally by the tender evaluation stage, where the authority decides which tender offers the best value for money.

A period of one month or so is then usually given for the successful contractor to gear up before commencing the contract. The tender evaluation stage often takes up to three months, depending on the size and value of the contract, and the bidders have to be given a fair opportunity to prepare and submit their tenders, say a further three months. This means that most local authorities will be at the stage of formally inviting tenders over the next few weeks with bids to be submitted later this year or early in the New Year.

Some firms of solicitors have already had a shock over the formality of the whole process. There is no opportunity for the usual informal meetings and negotiations over prices.

Here, it is likely that the first stage will have been commenced by completion of a long and detailed questionnaire by the firm, detailing its financial position, previous experience and a host of other issues. This questionnaire will take time and effort to complete, and failure to do so properly often leads to exclusion. These will need to be accompanied by copious enclosures, including the firm's accounts over a period of up to three years.

If a firm is unwilling to supply such information, it should save itself the time and costs associated with the completion of the questionnaire.

One such firm has applied to a large number of local authorities and has not only refused to disclose accounts but has been curt in its correspondence over the request for such documents.

It is, however, good commercial practice and fully in accordance with the law that such requests are made.

The forthcoming stage will be even more formal. Many firms have previously submitted informal bids to undertake work on behalf of public sector clients, such as the Government or health authorities. However, this form of tendering will differ in that little, if any, discretion is permitted for the firm to structure its bid entirely as it wants. Instead, most local authorities will expect bidders to complete documentation which it has produced and to complete a pricing schedule which will contain mostly fixed or unit prices and rarely involve the favoured hourly rates. A range of supporting documentation will have to be submitted such as insurance documents and bond guarantees. Only those authorities which have given discretion in the manner of performance of the work will allow firms to demonstrate the use of that discretion. This will normally require completion of a 'method statement'.

While these statements are a golden opportunity for private firms to demonstrate their experience in the public sector field, it is unlikely that they will be welcomed as such. After all, how often does any other client ask for a detailed statement on how the work will be done, including by which level of lawyer, in accordance with what procedures and setting out all of the steps involved? It is likely that many more firms will suffer further shocks yet, particularly when lengthy and detailed tendering documents drop on their doormats.

So, which are the firms that are prepared to go through this process, likened to a couple of rounds of the Japanese TV game Endurance? In fact, it is surprisingly few. There are approximately 12,000 firms in the UK and yet research shows that barely 100 firms have expressed any interest in this work to date. This may be because only the larger legal contracts will ever come to the market by virtue of the de minimis allowance.

In addition, government phasing arrangements mean only the metropolitan and city areas are covered in the first phase. Their contracts are by definition usually larger and of a more significant financial value. They are also likely to be more stringent in their tendering procedures.

Of those firms which have applied, there are few players which have targeted this area of work as a basis for expansion. This has been a feature of CCT since the start and is prevalent throughout most of the other defined activities. For example, refuse collection is dominated by a dozen or so companies which have all but cornered the market. Will this be the case in legal services?

So far it is hard to tell, although there are already a handful of firms which have applied for at least three or four contracts. These include the London firms of Berrymans and Collyer-Bristow, the Ian Short Partnership of Liverpool, Bromley-based Judge & Priestley, Lees Lloyd Whitley of Liverpool, Oxley & Coward of Rotherham, national firm Pinsent Curtis, London-based Sharpe Pritchard, Steele & Co in Norwich, and Sternberg Reed Taylor & Gill in Barking.

Many of the other firms which have expressed an interest in work have limited themselves to one or two local authorities, often in their own area. This policy may lead to problems, as such firms often have a conflict of interest, particularly where they represent those who come into contact with such an authority.

If a firm regularly represents the other side, then it would be unlikely to succeed in obtaining the local authority's work unless it agreed to relinquish its current client base. This presumably lies behind the decision of droves of firms to avoid this form of tendering.

The market will become clearer over the next three months. In the New Year, the councils concerned will have evaluated tenders and be in a position to award contracts. Only then will it be apparent whether the efforts of the hardy few private practice trail-blazers have been fruitful.

Stephen Cirell is a partner at Eversheds in Leeds.