Maintaining good working relationships with external lawyers is much more important than introducing alternative billing arrangements when it comes to managing legal costs, according to legal counsel surveyed by WA Business News.
Maintaining good working relationships with external lawyers is much more important than introducing alternative billing arrangements when it comes to managing legal costs, according to legal counsel surveyed by WA Business News.
Keeping a lid on legal bills is one of the key performance measures for most legal counsel.
The traditional time-based billing system used by law firms opens up the risk that legal costs can blow out, especially when companies get involved in complex litigation or big takeovers.
St John of God Healthcare general manager legal services Mark Murphy speaks for many in-house lawyers when he says the best way to manage that risk is to work closely with the external lawyers.
“The best way to manage costs is to talk about it up-front and stay informed as the matter progresses so there are no shocks,” he said.
But this does not equate to micro managing.
“If you get to a point where you have to regularly ask people, why did they spend two hours on this matter, I think you have lost the relationship,” Mr Murphy said.
“I would start to question if our interests were aligned.”
St John of God chief executive Michael Stanford believes that in-house lawyers help a business get much better value for money from external law firms.
“It can be expensive briefing out, and that’s partly because when you aren’t a lawyer you don’t necessarily know what level of person you need; is it a partner, or a junior lawyer,” Mr Stanford said.
“An in-house legal team that is involved early will help you ask the right questions of the external lawyers.
“I’ve seen cases where people ask a question and they get a perfect response that cost $10,000 but it wasn’t the right question.
“The (external lawyers) didn’t bother to try to work out what you really meant or what you needed to ask.”
Woodside Petroleum will be testing the value it gets from external law firms by undertaking a thorough review of its legal service providers in coming months.
Legal counsel Robert Cole said he was about to embark on the review, which would look at current relationships, the services offered by different firms and, importantly, how they charged.
“I have got a completely open mind to examine the way we are doing things,” Mr Cole said.
Woodside uses traditional time billing and seeks cost estimates from law firms, but has not used alternative arrangements such as caps or rebates.
Great Southern legal counsel Karen Fleischer believes her in-house team delivers substantial cost savings to the business, in part because they handle a lot of relatively routine work related to land acquisitions.
“The nature of our work lends itself to having a fairly large in-house team,” she said.
“I think we do it much faster, we are consistent with what we do in each state and we keep control over the whole process.”
Like many other companies, Great Southern uses external firms to handle specialist tasks such as big acquisitions and to help it manage fluctuating work volumes.
It also uses external law firms to handle property settlements in states outside Western Australia.
Ms Fleischer said Great Southern’s use of several external firms made it easy to evaluate the value-for-money that each provided.
She also emphasised the value of working closely with external lawyers.
“We have a very good relationship and that is important,” Ms Fleischer told WA Business News.
Great Southern seeks cost estimates for big jobs but does not seek fixed quotes, because its main priority is to ensure the work is done correctly and in a timely manner.
MDA National Insurance legal counsel Dianne Browning is a fan of fixed-price work and admits she has encountered strong resistance from many law firms.
She said most other professions offered fixed price quotes and does not see why lawyers should be any different.
