Tenders and Alternative Fee Arrangements

The UK magazine Legal Week has reported on the review by the gaming group Ladbrokes of its external legal panel. There are a couple of features of the review which merit further consideration. It is clear that one of the objectives was to move the legal panel away from hourly billing to alternative pricing arrangements. This was achieved in three ways:

1. Ladbrokes required successful tenderers to move away from hourly billing by 1 January 2015, the halfway point of the four-year panel term
2. Ladbrokes were quite specific about the "granular approach" they required responders to the tender to take, about the nature of the alternative fee arrangements proposed
3. They focused on the value adds which responders proposed, and developed a "value menu" so that responses could be evaluated against each other.

Ladbrokes have also utilised technology as part of legal spend management, implementing Tymetrix software for billing review and panel appraisal.

The approach demonstrates best practice in legal spend management in a number of ways:

• The tender itself was very specific about the objectives sought to be achieved.
• The tender required responders to be very detailed about the alternative pricing arrangements.  By setting a deadline regarding when hourly billing was to cease, it forced responders to put specific proposals. Too often the request for an alternative pricing proposal in a tender is seen as an optional add-on, rather than the principal focus of the tender. Responders often simply indicate that they are happy to discuss alternative pricing arrangements in appropriate circumstances, without putting forward any specific detailed proposals.  Clearly this kind of nonresponse would not have been available to those responding to the Ladbrokes tender. It would have resulted in their tender response being deemed non-compliant.
• Finally Ladbrokes have taken a holistic approach by utilising sophisticated legal spend management software together with a sophisticated tender. This then enables proactive and positive panel firm management during the life of the tender. One of the failings in legal spend management is the management of panel firms following a successful tender. The tender process itself is simply the first step in an ongoing management process, and there will be little achieved in management of legal spend and outsourcing of legal work if the second and often more crucial part of the process, that is the proactive management and provision of feedback with, is not undertaken.