Unlocking the Potential of Panel Management and Legal Spend
When running a successful organisation, managing expenses such as legal spend is a logical thing to do, as it affects the success and bottom-line of an organisation. But what does legal spend mean? In-house legal teams need external support, which can take the shape and form of either external counsel, such as law firms, or specialists, i.e. medical practitioners. Irrespective of their category, they provide a service to in-house legal teams, and therefore require payment for delivering said services.
This article is based on Legal Interact’s view on “Panel Management and Legal Spend”, and how we, through our experience working with in-house legal teams, have obtained in in-depth understanding, and gained insight into the management of both panel and associated spend.
Understanding Legal Spend Management
Legal spend management is the process of actively managing your suppliers (external panel firms) and associated spend. In actively managing your legal spend, you will gain a holistic view of your panel and matters, enabling you to compare your suppliers, build better budgets based on history, and identify ways legal departments can balance costs, improve quality, and increase efficiency.
The legal services category is complex; saving money while enhancing quality and service levels is not an easy task, but a challenge that can be taken on.
Panel Management – Your Legal Procurement Process
It is imperative that when you start looking at formalising your legal procurement approach, you initiate dialog with your suppliers.
Creating your Panel
When looking at external service providers you may find value in:
- Assessing the number of service providers and their associated costs based on historical data
- Working towards rationalising the number of service providers thereby giving more work to the fewer providers
- Entering negotiations with external service providers based on factors that include, but aren’t limited to, historical data of costs, contract durations, service quality, and quantity of services, etc.
- Communicating clearly defined, and executed legal procurement processes and procedures to your panel.
In formalising the procurement process, you will get a chance to share the metrics that are important to your legal department. The responses to this process will give you access to the market data, which in turn will provide you with the necessary guidance to best negotiate for the required work.
Billing Guidelines for External Panel
In creating the billing guidelines, you need to consider the following:
- Scope of Work:
In our experience, we have found that most consumers; within the legal services sector, start the process by scoping the work that’s required for the various matter types they work with. By doing this, a skill and time duration estimation can be drawn, which also provides a guideline for marketing costs. It is important to consider how different complex scales will affect the rate. It is often in the high-volume/low complexity work, that you can derive the most benefit.
- Fee Arrangement:
When focusing on the fee arrangement, one should be mindful that entering negotiations for the work required, is just one step of the process. These negotiations should include an all-inclusive service overview that discloses the work that would not be paid for. In our experience, some legal departments get irate when having to pay for certain services that they consider to be inclusive in the course of work.
- Invoice Format
To review costs over a period, one would need the data. In this case it is critical that you define the content of an invoice you expect to receive. What we have seen, is that the invoice must include line items for the scope of work and should include the following information: Date of Service, Narration, Narration Code, Quantity and Value.
An accurate budget, per matter, will assist the legal team in the long run to manage legal spend. By tracking matters and time spent on matters, the organisation will be able to decide on the necessary costs to run the matter. Not only will it reveal the cost of a matter, but also the areas where services and associated costs can be reviewed. Over time an exact budget can be set for each matter. When an invoice is received, the organisation can track their legal spend against the budget set for the matter. The organisation would also be able to tell whether they need to update or review their budget. It is also an ideal way to monitor the external panels, and track if they are adhering to the agreed SLAs.
Panel Management and Legal Spend – Why it Matters?
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