Australian Corporate Lawyer, 01 June 2014

This is the second instalment in our ongoing series on Legal Project Management (LPM) based on our LPM framework.

This is the second instalment in our ongoing series on Legal Project Management (LPM) based on our LPM framework outlined in figure 1. In our previous article, we discussed the critical importance of scoping legal projects and how effectively applying this LPM tool delivers significant benefits to organisations. These benefits include clear project direction, greater cost control, reduced risk and increased stakeholder engagement.

The next step in the LPM model is to ensure that the right resourcing model is leveraged on a project to deliver the apposite mix of
skills and experience in the most cost effective manner. In this article, we discuss how to design such a model, and how the rise of legal process outsourcing (LPO) providers are fast becoming an indispensable component of disaggregated resourcing models.

Designing a resourcing model

When considering the resourcing model it is necessary to:

identify the roles and responsibilities required on the project
identify the skill sets required for these roles
identify where the experience lies, internally and externally
ascertain the most cost effective method for obtaining the requisite skills.

Internal or external resourcing?

For discrete projects with a spike workload, the best place to commence looking for resourcing is in-house. If your organisation holds the requisite experience internally and they have the capacity, this will likely be the most cost effective option, as your people best know your business. If, however, your organisation lacks the requisite internal experience or there are other projects competing for those resources, it will be necessary to look at external options.

If the resources to complete the work in-house are not available, it will be important to ask the following questions when considering how best to resource the work:

what type, level and breadth of external resources are required from the external legal services provider (LPO, niche, mid tier, top tier)?
what level of experience is necessary with this kind of project?
would asking selected panel firms to submit proposals in response to a project scoping document be beneficial?
could a team of panel firms be engaged to provide different services throughout the project?
are there any parts of the project that would be most effectively conducted by briefing independent counsel?
is an independent project manager needed?
what is the likely cost for each option?

Disaggregated resourcing models

Lacking in-house expertise, organisations will often engage law firms to provide all of their resourcing on litigation or transactions. Engaging law firms as the sole resource on major projects may not be the most cost effective approach. Clients are increasingly finding that they are in fact paying for junior solicitors to be trained, with these resources taking longer to complete tasks albeit at a reduced hourly rate. This is inefficient, and does not reflect clients’ needs for more experienced lawyers. Even when firms do not charge directly for juniors, their cost must still be absorbed elsewhere in the firm’s pricing structure, often through higher mid-level and partner rates.

A disaggregated model is often the most cost effective solution when using and managing external resources. Disaggregated models
are approaches to resourcing that bring together a range of types of resources under a project manager who directs and manages the ongoing resourcing for a project. This approach allows flexibility as the project manager can adapt staff levels as the project
progresses, selecting the appropriate team for each phase. It acknowledges that all projects evolve and that resourcing must remain flexible. It also empowers clients by putting them in control of resourcing.

The resources available in disaggregated models include:
• dedicated project manager
• internal legal resources
• external law firms
• barristers (including junior barristers in place of law firm lawyers as a more cost effective option)
• contract/secondee lawyers to support the internal team (and who are about half the cost of equivalent expertise in major law firms)
• LPO providers.

In our experience, cost savings of between 20-25% are routinely achieved using a disaggregated model when compared to the traditional model of outsourcing a project solely to an external law firm.

Dedicated project manager

Your organisation most likely has the resources and knowledge to efficiently run smaller scale commercial transactions. When the transaction becomes larger or more complicated than your internal resources can manage, such as an acquisition or construction or procurement project, it will be appropriate to consider using the disaggregated model or blended team approach. This will ensure the project is run more efficiently and your internal team is utilised efficiently.

Dedicated legal project managers are becoming more common in the management of large commercial and litigation projects, especially those involving government and other industries where the use of project managers is already widely accepted. The legal project manager can ensure that, when using multiple service providers, those providers are working in a coherent fashion. We are even seeing some law firms appointing dedicated legal project managers, most often as a result of client demand. However, the potential conflicts inherent in managing the supply of an organisations’ own resources are almost impossible to avoid in any sector.

A dedicated project manager will need to have oversight and control over who is doing the work when a law firm is engaged. Some thought must also be given to the type of firm that is needed to conduct the particular part of the transaction. Importantly, it will be essential to ensure that over-skilled resources at high rates are not performing or overseeing routine or simple legal tasks.

Contract lawyers

Over the last few years a number of contract lawyer firms have become established in
the legal services market. These service providers have a wealth of talent available on flexible arrangements that can be used on commercial or litigation projects on a short term basis. Of course, law firms have a tradition of seconding their own lawyers to clients and we are increasingly seeing law firms being more flexible on how those lawyers are deployed – a function of the increasingly competitive market.

The role of LPO

Over recent years the LPO industry has matured and become a valuable asset in any general counsel’s arsenal. The most
advanced providers have moved away from the industry’s initial emphasis on “process” and “outsource” and, although both concepts still sit at their core, changing acronyms now suggest greater similarities to many of the traditional services provided by law firms. This new breed of “Legal Service Optimisation” (LSO) provider can deliver significant cost savings in commoditised areas of law typically delivered by junior lawyers, paralegals and administrative staff.

LSO providers excel in areas such as document review and contracts work, patent and IP services, and compliance and regulatory monitoring. Although the use of LSO providers is often driven by cost savings, the most experienced providers also drive up quality, reduce cycle times, and increase resource flexibility. Cost savings alone without these advantages should never provide sufficient reason to embrace alternate delivery structures, making the careful selection of LSO provider essential. A typical document review, for example, can be delivered at 30-40% the cost of a traditional law firm by an experienced LSO provider. With multiple shifts on a 24 hour rolling basis that review can also be turned around much quicker, with the dramatically lower delivery cost allowing for far more comprehensive quality checking (up to 100% if desired) than is economically possible in the traditional model. Furthermore, in this example, the qualified LSO lawyers (albeit sitting in Mumbai, Manila, or elsewhere) are often “career document reviewers”, enabling LSO providers to build up significant centres of excellence in areas which are traditionally left to junior lawyers desperate to move onwards and upwards to more interesting tasks.

Technology enabling data centres to remain onshore in the cloud, or even on a company’s own servers, whilst optimally located LSO staff do work on that data remotely, has removed many data security concerns. The best LSO providers understand that data security is their lifeblood, and have built mechanisms for its protection that often exceeds that provided by many traditional law firms.

The best providers start with optimisation of legal service delivery, rather than outsourcing per se, as the end goal. That optimisation is achieved through a combination of approaches, including better use of technology and process improvements, not just outsourcing to lawyers and administrative staff that may be based in your building (traditional contract lawyers), onshore (but outside the office), or offshore. The best LSO firms bring this full range of options to an in-house team to meet individual needs, rather than simply “selling what we have”.

LSO providers work directly with in-house teams or are engaged alongside traditional law firms to handle high volume, repeatable elements of broader projects. In doing so companies benefit from the efficiencies an LSO provider brings either as a pass-through disbursement from their law firm, or as a direct expense. The most advanced law firms have already accepted the need to drive greater efficiencies through structural change in their delivery, harnessing LSO providers and fixed pricing to protect (or indeed grow) their margins. So whether general counsel embrace LSOs directly or not, the value LSO providers create is rapidly being introduced into the market. The question is, where will that value be captured?

Next Steps

Scoping and resourcing are two critical elements of LPM. But stopping here does not realise the full potential of LPM. In the next journal we will continue the series looking at budgets. To revisit the scoping article, please refer to the March edition
of The Australian Corporate Lawyer.