The Royal Bank of Scotland has revamped its group and UK legal panels, slashing the number of sub-panels from 13 to five and reducing the number of law firms on the panel by 40 per cent from around 100 to between 55 and 60.
Allen & Overy, Clifford Chance and Linklaters are three of the firms that have been appointed to the bank’s Tier 1 Own-Account sub-panel and it is understood that a few new faces have entered the mix, which could mean that firms such as Weil Gotshal & Manges, which was invited to tender for the panel earlier this year, may have been successful.
In the new structure, the five sub-panels are the Tier 1 Own-Account sub-panel, which covers M&A, equity capital raising or restructuring, corporate restructuring, treasury work, material litigation, competition law, anti-money laundering regulations or sanctions laws, material outsourcing or procurement contract, material employment law matters and disposals for RBS’s non-core division; the Tier 2 Own-Account sub-panel; the Customer Transaction sub-panel, which covers customer-driven work; the Operations sub-panel, which covers commoditised legal services; and an Alternative Providers sub-panel.
Within the scope of the revised panel, only the firms appointed to the Tier 1 Own Account, Tier 2 Own Account and Alternative Provider sub-panels will cover work undertaken by the RBS Group.
The process began around 11 months ago and has been led by deputy general counsel John Collins, general counsel corporate M&A Rushad Abadan and head of management services Gillian Collinge, alongside several other members of the bank’s in-house legal and procurement teams.
The in-house team initially consulted with a select number of law firms with different areas of expertise in the first quarter of 2012 to find out ways to improve the panel and the bank’s review process.
“As we had so many firms to manage and are such a large user of legal services we wanted to do something intelligent to improve the overall relationship with our law firms,” Collins told The Lawyer.
“As the amount of work involved in restructuring and rebidding the panel is significant and can be disruptive for all involved we wanted to ensure we delivered a review process that was better for us and the firms and put the panel on a more sustainable footing. We reached out to a number of firms to find out what they liked and didn’t like about our existing panel and other panels they participate in.
“We didn’t want it to seem as if the relationship didn’t matter, so we asked firms to help us to design key components of our panels. Some colour and texture around the deconstruction aspect of the panel was achieved by asking firms what they thought we could do in order to work more efficiently,” he added.
Although the number of sub-panels has reduced from 13 to five the overall coverage of the panel has stayed roughly the same, according to Abadan.
“The coverage is the same and what we really wanted was to streamline what was a rather sprawling panel while weaving in our objectives for the review,” he commented. “After consulting with firms and our own deliberations, we realised that we didn’t need the panel structure to be as granular as it was and that it was actually making the administration of the panel more difficult.”
Armed with feedback from a selection of law firms it was decided to reduce the number of firms acting on the Tier 1 and Tier 2 Own Account work. “After taking into account law firms’ views, we decided to focus our more complex own account work toward a select group of firms and then drive behavioural change so that matters such as management of large due diligence exercises and document production work can be handled by alternative service providers who have both scale and enhanced project management capacity,”
Although it is unknown at this stage exactly which firms have been dropped from RBS’s own account work, it is understood that the number of firms has reduced by around 36 per cent.
Commenting on the overall reduction in the number of firms appointed to the revised panel, which has reduced by around 40 per cent from 100 to between 55 and 60, Abadan said: “While we’ve reduced overall numbers, what has happened is that some firms that weren’t in the frame for certain types of work are now in the frame.”
A large focus of this year’s review has been on legal process outsourcing (LPO), although Collins remarked that many firms were still not completely on board with the idea of working alongside LPOs.
“Generally firms aren’t yet realising the future and so far haven’t accepted the view that the key to success is having alternative providers and law firms collaborating together,” he stressed.
“Law firms understand what we’re proposing and we’ve started to see moves in the market but firms are yet to get fully on board and embrace it. We wanted to create structural solutions that will help educate firms so they recognise how the market is maturing. The legal profession isn’t immune from process re-engineering: it needs to flex and keep changing and law firms need to embrace that change if they are to remain competitive.”
There have been five appointments to the Alternative Provider sub-panel, which consists of a mix of law firms and LPOs.
Compared with the 2009 process, which had a strong emphasis on squeezing fees, with firms typically asked to drop their fees by around 10 per cent from 2006 levels, there have been reportedly few further negotiations on fee arrangements.
Commenting on this year’s review, Collinge said: “This is the third tender that I’ve participated in and when you’re doing something for a long time it’s difficult to think innovatively. John and Rushad came to the process this year with totally different ideas and it was exciting to speak to firms and they’ve really appreciated that we’ve focused more on collaboration and on different aspects like corporate social responsibility.”
The appointments are effective from 1 January 2013 and will run for a period of three years, although the agreements reached with each appointed firm will be reviewed in 12 months’ time.
For more on LPO see this week’s feature.