Govt opens litigation doorway

The opening up of the Australian government's litigation work could provide a wealth of opportunity, writes Patrick Stewart

At the start of July, the Australian government opens up most of its litigation work to tender, presenting a unique opening for Australia's law firms to tap into a major new source of revenue.

At stake is a market thought to be worth between A$30m and A$60m per year, with some lawyers talking of figures of A$100m. "The major national firms are preparing themselves for that opportunity," says Brian Wilson, national chairman of Clayton Utz.

But, despite the lip-smacking opportunities for Australian lawyers, Wilson cautioned that "untying of the litigation work will happen over several years".

Firms are moving cautiously, drawing on lessons from the opening of the market in federal government commercial work. That work was opened up three years ago and put the Attorney General's Department (AGD), a government department which previously handled all government files, in direct competition with private lawyers.

Firms built up their offices in Australia's capital, Canberra, and senior well-connected lawyers were poached from the government.

But the department proved to be more resilient than predicted, even though its civil service salaries were far less than those offered in the private sector.

Greg Hammond, London resident partner at Mallesons Stephen Jaques, says that the department "has been more successful in retaining work than expected".

This was in stark contrast to the opening up of legal services at state government level, where firms found it easier to capture good-quality commercial work.

First, the AGD spruced up its act in preparation for competition. Time sheets were introduced, lawyers were seconded to client departments and marketing efforts were made to cement relations. In all, the quality of service improved markedly. "The government solicitor has picked up its game enormously," says one lawyer.

Legislation is now before the Australian parliament to transform the AGD into a separate statutory authority, increasing the trend for it to operate as a business entity a move which is broadly welcomed in a profession that wants to create a more equal playing field between the private and public service providers.

Second, and most important, as Wilson notes, "untying is a lengthy process because of the long-standing and deeply entrenched relationships that the AGD has with all other government departments".

While some departments willingly embraced private law firms typically setting up panels made up of a number of practices, others stuck to tried and tested government lawyers.

This has benefited the government, which has seen an improvement in legal advice. However, the private sector firms were, to some extent, left out in the cold. "Although there has been a significant opening up of commercial work, it is not floodgate stuff and it is a slow process," says Wilson.

Some argue that litigation will be different because there is more dissatisfaction among government departments with the quality of litigation services provided by the AGD. "There is more opportunity for work to flow out," says Wilson.

However, some of the top firms do not consider the new market a top priority.

They argue that much of the litigation work in areas such as tax, social services and workers' compensation is high volume and tightly priced.

"The work is very strongly price driven and it is not an area that we see as part of our core practice," says a partner at a top five Australian firm.

But Jeremy Kriewaldt, a London partner at Blake Dawson & Waldron, is more optimistic and sees opportunities in litigation work arising from commercial cases on which a firm acts.

"Our experience of the opening up of the market in general is that you can make money out of federal commercial work and I would be surprised if the same didn't apply to litigation," he says.

Whatever happens, developments will put a spotlight on the firms' Canberra practice. Traditionally, Canberra was considered a backwater, but has undergone a resurgence in the past 10 years with a number of its indigenous practices linking with national networks, or firms from outside the city setting up greenfield operations.

The results have been mixed. On one hand, some firms have developed relatively large practices. For example, Blake Dawson Waldron set up a stand-alone office in the early 1980s which has now grown to almost 40 lawyers.

But some other major firms keep up modest presences. Allen Allen & Hemsley and Arthur Robinson & Hedderwicks were initially linked to a leading local firm MacPhillamy Cummins & Gibbons, but the association fell apart some years ago. Allen Allen & Hemsley maintained an office in the city, but recently lost lawyers, reducing the number of lawyers on the ground to two. Other major firms maintain small offices.

The staff levels may be an indication of how successful firms have been in grabbing government work. Some practices also believe that you need to be close to government clients to be in the running.

But others argue that Canberra's role has been exaggerated. Says one lawyer: "while there is an increase in the volume of work been done in Canberra, it is more a source of instructions rather than a place where the work is done."