Allen & Overy and DLA: the unlikely best friends

Why two very different firms have decided to form an alliance on IT projects.

It was a relationship fostered at Barclays, and now DLA and Allen & Overy (A&O) are best friends again, this time teaming up to work on the world’s largest IT project: the £2.3bn national NHS IT programme.

The two firms were thrown together by their presence on the Barclays panel when thebank instructed them to work as a team on various IT projects. But if Barclays can be credited with the idea behind this unlikely alliance of Northern upstarts and City toffs, DLA and A&O established a strong enough bond to try the concept again on the NHS project.

DLA’s cosmopolitan crew would be horrified to be described as upstarts, but irrespective of any natural reluctance to share knowledge with a rival firm, there is a cultural divide to cross.

A&O’s lead partner is the brilliant Israeli Laurence Jacobs (for DLA it is Richard Bonnar), but it is difficult to envisage Jacobs being happy working within the restrictions of a large Government procurementproject. Equally, while the effortless charm of DLA’s George Wheeler-Carmichael would see the IT specialist fit comfortably into any City firm, might not his brusquer colleagues upset A&O’s more delicate sensibilities?

And with each firm at various times employing up to 40 lawyers on the national programme, there is also the mechanics of the alliance.

As surprising as it may seem, one DLA partner says the alliance is now stronger than ever and will certainly be used on future projects.

The national programme is divided into six contracts: one national application service provider project (NASP), which is also known as the ‘spine’, and five local serviceprovider (LSP) projects.

Each project requires around eight lawyers, split between IT and projects specialists. Before each project, a DLA partner and an A&O partner will sit down and prepare a team sheet. One firm will lead on each contract and the firms will try to coordinate their teams with the bidders, so if the same bidders are on different contracts the law firm teams will be consistent. SchlumbergerSema won the first contract – an electronic bookings system that is part of the national project, or ‘spine’ – a fortnight ago.

A&O took the lead on drafting the terms and conditions for most of the contracts. While the arrangement has invited snide remarks from some quarters (“A&O do the brainwork and DLA do the grunt stuff”), DLA partner Brian Clark says it was very much a joint effort. A&O, he says, drafted certain sections and DLA others, with both checking each other’s work.

However, one lawyer for a supplier noted that, although it is a Government contract and therefore fairly standard, “it has all the hallmarks of Laurence Jacobs”.

“The first contract to use those terms is the e-bookings [part of the ‘spine’] project. Those terms have now been accepted by the market, albeit that they’re not what suppliers are used to. I think the terms are setting a different standard for IT procurement,” says Clark, who advised on the project and who has been seconded to the programme.

You can say that again. Clark says “accepted” but the market will say “forced to accept”. “You don’t need much negotiating resource because there’s no negotiation,” says one partner, who is advising one of the bidders.

Under these terms, which one partner describes as “totally unprecedented in terms of risk transfer”, suppliers have to get systems up and running and assessed by clinicians and technical evaluators to give it the okay before the systems go live. The Department of Health will not pay the suppliers a penny before the systems are live. Usually suppliers receive some cash to help them cover costs.

“History is littered with examples of authorities shellingouton softwareandsystems development, and it comes to the big day and it’s either late or the whole system doesn’t work,” says Clark.

DLA led the e-bookings project, the competition for which was closed 190 days after it was launched. In order to keep to such an aggressive timetable, very close relationships must be formed by the lawyers, who need to be involved at an early stage. To this end, DLA has seconded three lawyers to the procurement function with Clark – not just advising, but leading the procurement processforthe whole programme.

“Allen & Overy have been extremely good at responding to a fairly unusual situation, where not only do they have to work with DLA, but they’re working with me, who’s effectively the client,” says Clark.

In December 2002, two lawyers, one from Field Fisher Waterhouse and one from Kemp Little, were seconded to the Department of Health to form an in-house team for the programme. By this June they had been sent back to their firms as DLA and A&O took a firm grip on the project.

Former Deloitte & Touche consultant Richard Granger is the director-general for IT and is responsible for the programme. When he ran the beauty parade, DLA and A&O pitched separately; but when asked which firm they would like to work with, both recommended each other. It was a key moment. None of the other four firms that tendered had such a close friend.

“I think that when you get projects of this size, any one law firm will struggle to resource up that level of specialist IT lawyers,” says Clark. Other law firms, which were sceptical when both were appointed a year ago, now agree. The two firms have formed a model of cooperation that others will need to follow if they are to muscle in on projects of this magnitude.

But projects of this size are currently public sector projects, and whether A&O will maintain its interest in the public sector when the private sector picks up is open to debate.

A&O will not comment on rates, but it can be assumed that the magic circle firm has reduced its rates significantly to work on this project. Could it be that this is just a marriage of convenience until A&O’s more lucrative private sector clients start spending more cash?

The £2.3bn National Programme for IT in the NHS
The £150m national application service provider project, or ‘spine’
Led by Richard Bonnar at DLA

£300m local service provider contract for London
Led by Richard Bonnar and Lee Brierley at DLA

£310m local service provider contract for the North East and Yorkshire
Led by Laurence Jacobs and Vanessa Blackmore at Allen & Overy

£390m local service provider contract for the South East and South West
Led by Laurence Jacobs at Allen & Overy

£530m local service provider contract for the East and East Midlands
Led by Laurence Jacobs at Allen & Overy

£500m local service provider contract for the North West and West Midlands
Led by Nick Ogden at DLA