Pioneering the sole supplier model

Many general counsels (GCs) have found that, despite growing internal teams and consolidating panels, their legal costs do not come down. Budgeting remains an uncertain process.

When one global infrastructure business sought to change that by recalibrating the client/private practice relationship away from the billable hour, we were quick to seize the opportunity.

The challenge

FTSE infrastructure giant Balfour Beatty decided some years ago to change its model for engaging with legal suppliers. It asked several firms to respond to an RFP which proposed a new way of working in the UK. The goal was to take significant cost out of the system while retaining the appropriate level of legal quality.

Under the new arrangement external spend was to be split into two categories:

• ‘Everyday’ legal work, which needs to be done well and as efficiently as possible to prevent escalation
• More complex, value-adding work, which is inherently more difficult to predict and to price

Balfour Beatty was targeting significant savings in its UK ‘everyday’ legal spend. This would be achieved by consolidation of spend, economies of scale and continuous improvement.

The solution

Pinsent Masons responded with a blend of technological innovation and imaginative pricing. The new model aimed to shift the relationship away from the hourly rate, and to incentivise efficiency.

Our proposal was based around the number of matters. This gave Balfour Beatty a level of certainty over its legal spend for business as usual (BAU) work for a number of years. Significantly, it also placed the emphasis on the external advisers to conduct work efficiently and maintain acceptable levels of profitability.

This required a significant amount of innovation, and we developed a suite of technology-driven solutions to achieve that aim. These included bespoke case management and matter opening systems. No instructions can be made or accepted without passing through an online instruction portal. This in turn gives senior management total visibility and transparency over the matters being instructed and subsequent workflow.

The technological infrastructure means detailed management information can be fed back into the business, including:

• The types of work instructed
• The level and type of demand from different business divisions and corporate entities
• Geographical breakdown of work

Strategic issues can thus be identified, resolved and in some cases pre-empted in a way not seen before.

The result

The arrangement is proving to be a major success for both parties, and several thousand matters have been instructed. The goal was to take significant cost out of the system while retaining the appropriate level of legal quality. We are on course for achieving greater savings than those originally targeted. Satisfaction levels within the Balfour Beatty business are consistently good, and Pinsent Masons is increasingly being instructed on complex and critical matters for Balfour Beatty.

Across the legal market as a whole, the deal has had a significant impact. Pinsent Masons has been appointed as sole adviser to E. ON UK Plc on the vast majority of its legal work. Several other clients have expressed significant interest in exploring a sole adviser relationship.