leading practices in strategic outsourcing and alternative ... · to those directly affected,...

Copyright © 2004, Association of Corporate Counsel (ACC) For more leading practice profiles: http://www.acca.com/vl/practiceprofiles.php

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LEADING PRACTICES IN STRATEGIC OUTSOURCING AND ALTERNATIVE SERVICE MODELS:

WHAT COMPANIES ARE DOING

Part of an Ongoing Series of

ACC’s “Leading Practices Profiles” SM

http://www.acca.com/vl/practiceprofiles.php

August, 2004 To those directly affected, outsourcing is a threatening word. It means sending jobs somewhere else. For some it can mean displacement or even unemployment. In today’s world, outsourcing has taken on a new dimension as more and more companies explore the benefits of outsourcing jobs to offshore companies in countries such as India and China.1 Beyond the legal community, it is becoming a source of discussion during major contract negotiations, and is a political hot button in business and labor communities, as well as governmental offices around the world.2 This article is not about politics or sending jobs overseas. It is about the experiences of law departments at seven companies and a national law firm that, for varying reasons, decided to move some legal services they previously provided to outside providers (especially 1 For articles discussing legal service off-shoring, see “A Passage to India,” by Rich Smith (January 26, 2004) at http://www.fool.com/news/commentary/2004/commentary040126rs.htm; “US Legal Outsourcing to India Growing in 2004,” at http://www.practicesource.com/ale/blog/pivot/entry.php?uid=standard-532; “Outsourcing Legal Services to India” (Global Law Review) at http://www.globallawreview.com/outsourcing.html; “More Law Firms Outsourcing Legal Work to India,” by Kate Coscarelli at http://www.newhousenews.com/archive/coscarelli032504.html; and “Legal Research and Back-Office Work To Go Offshore Next,” by Paul McDougall (InformationWeek Dec 9, 2003) at http://www.informationweek.com/story/showArticle.jhtml?articleID=16600553. 2 For an article describing legislative initiatives and views on constitutionality, see “First Legal Analysis of State and Federal Outsourcing Legislation Shows Such Bills May Violate the U.S. Constitution” (U.S. Newswire 4/19/2004) at http://releases.usnewswire.com/GetRelease.asp?id=108-04192004.

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http://www.fool.com/news/commentary/2004/commentary040126rs.htm

http://www.practicesource.com/ale/blog/pivot/entry.php?uid=standard-532

http://www.globallawreview.com/outsourcing.html

http://www.newhousenews.com/archive/coscarelli032504.html

http://www.informationweek.com/story/showArticle.jhtml?articleID=16600553

http://releases.usnewswire.com/GetRelease.asp?id=108-04192004


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focusing on the movement of work to outside providers that are not law firms). It also describes service models used by some to “in-source” work that might have otherwise been performed by outside counsel. Representatives interviewed for this Profile shared information on what work their organizations decided to outsource, why and how they did it, and the results they encountered.3 Some companies outsourced entire practice areas. Others have outsourced certain aspects of practice areas or have implemented creative convergence strategies consolidating outsourced work to a smaller number of firms using fixed fee arrangements. One company describes a legal research model that requires in-house and outside counsel to send work to a legal research vendor. On the support side, a national law firm provides information on sending work outside to a company that provides a full complement of legal administrative support services. Companies also described practices bringing work in-house using contract personnel and centralizing discovery management. Featured in this Profile are programs for the following: Alcoa, Inc.; American Express; DuPont; Golden West Financial; 3M; Piper Rudnick LLP; Reebok; and The Finish Line, Inc. The Golden West Financial program summary also includes information on outsourcing experiences at Stanford University, where the Golden West Financial general counsel was previously employed as CLO. Section I below summarizes key themes and program insights gathered from discussions with representatives from the companies and law firm. Section II describes the programs of each of the seven companies and the law firm and views on leading practices in more detail. Section III provides a list of resources identified by company representatives and ACC as resources that may be of interest to others exploring outsourcing opportunities or alternative service model arrangements. I. SUMMARY OVERVIEW & THEMES FROM PROFILED COMPANIES The companies and the national law firm featured in this Profile have all implemented practices with a view towards providing quality legal support in a cost-effective manner. Benefits described as a result of these service models include cost savings, enhanced results, and greater consistency. Practices and service models described by the featured departments and firm include:

Outsourcing certain practice areas (in whole and in part); Outsourcing legal research (and/or requiring outside counsel to use per defined

guidelines) to a preferred legal research vendor; Using temporary legal staffing to provide services that might otherwise be

performed by law firms; Implementing convergence practices to reduce legal costs for work being

performed by outside service providers; Using outside legal administrative support services on a 24/7 basis to complement

existing support; and Promoting communication on strategic approaches among outside counsel from

various firms handling common substantive matters for the law department. 3 For an article on legal outsourcing decision analysis, see “The Outsourcing Decision: Make vs Buy” (http://www.pwcglobal.com/extweb/manissue.nsf/DocID/8B95B6DA8C8107A185256B26007233BD).


http://www.pwcglobal.com/extweb/manissue.nsf/DocID/8B95B6DA8C8107A185256B2


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Below is information on some themes that emerged from discussions with company representatives. Interviewees also shared their views on leading practices being implemented by their companies, and these are summarized below. THEMES While the details and practices implemented vary, a number of themes emerged and are listed below.

Practice Areas Outsourced: Three companies described outsourcing arrangements for all or most of their intellectual property work. One described an arrangement for outsourcing all of its litigation work to one law firm. Another company described a creative convergence effort to consolidate 50% of its litigation portfolio to 7 law firms (down from around 25). Two companies described outsourcing all/certain aspects of immigration work. One company described outsourcing its real estate transaction work, and another described outsourcing around 15% (and trending up) of its commercial leasing work.

Process for selecting service providers: Several companies developed Requests for Proposal and invited a set number of firms to submit proposals for the work. Some of these companies included an on-line auction component (supported by outside auction service vendors) for the RFP and proposal submission process. Some companies leveraged knowledge of service providers in given areas of expertise and/or worked with clients to identify preferred providers for performing services. Some companies that outsourced more than one practice area used different approaches for different practice areas.

Pilot/test period: Some of the representatives interviewed described establishing initial pilot projects or tests prior to proceeding with the service arrangement. One included running a pilot project for an outside administrative service complement for two of the national firm’s offices before rolling the services out firm-wide. Another included bidding and assigning research work to an outside legal research provider and outside law firms to compare quality, price, and turn-around time. Other arrangements included initial shorter service periods that were later extended or revised to current arrangement configurations.

Transition: Several companies described the importance of having a plan for transitioning work to the selected service provider and integrating the service into the overall service delivery plan. Some described letters sent to other service providers who had been handling legal work in the given service area, informing those other service providers of the new arrangements. One representative explained that the outsourced arrangements took effect almost immediately following selection and that the outsource service provider was on point to decide how it wanted to handle its fixed fee budget and whether to continue to have other firms perform work on cases those firms had been handling or transition them to the newly selected outsource provider firm.

Arrangements include offering positions to displaced lawyers: Some of the outsourcing arrangements included offers of employment by the selected service provider to the in-house lawyers whose practice areas were outsourced.

Training on business and availability of service: Some representatives shared the importance of training in helping to transition to the new service model. This includes training the service provider on the company’s business, culture, client contacts, and approaches. In addition, it includes training company personnel on the availability of the service and on when and how it can be used.



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Location of service providers: Service providers for one of the companies opened offices near company headquarters. One company using on average around 60-80 contract lawyers and paralegals has an arrangement with its preferred provider for the contract personnel to be physically located in space designated for those contract personnel that the contract service provider leases from the company (previous to this location configuration, the contract personnel were located in the law department’s space with other members of the law department). One of the outsourcing arrangements included having outside lawyers providing the services physically co-located in company space.

Points of contact within and outside: Companies and the law firm described identifying points of contact within their organizations to manage the various outsourcing and service agreements. In addition, they noted the importance of identifying key personnel within the service provider organizations.

Fixed fee arrangements desired: Many companies described a preference for implementing fixed or retainer fee arrangements, and commented on how this type of fee arrangement helps to promote better alignment with in-house law department economics. For those implementing fixed fee arrangements, some engagements involve annual fixed fees paid quarterly; some are pro-rated over 12 months or are paid semi-annually; and some are structured as “pre-pays” and include an additional discount for paying the lump sum negotiated fee up front.

Direct client contact: Several companies that have outsourced work in specified practice areas to law firms explain that clients may contact directly the outside service providers performing the services. Some have established workflow processes that involve bringing work and issues to in-house points of contact before sending outside for handling.

Strategic decisions made in-house: Many of the companies explained that strategic decisions on approaches and case management are made in-house. Some also described processes that include having an in-house lawyer review documents prepared outside prior to approving for signature.

Shadow time reports for monitoring: Several companies with fixed or retainer fee arrangements described that the outside firms are keeping and submitting time reports to help provide information on how much time is actually spent and on what types of work so that the company can monitor the continued efficacy of the overall arrangement.

Communications: Representatives interviewed described the importance of good communications in the overall success of the service model. They also described periodic meetings with law department and/or business personnel on point for outsourced areas. In addition, some arrangements include various types of reports required at different frequencies (e.g., weekly, monthly, quarterly, semi-annually). Additional communication tools described by some of the interviewees include identifying outside service providers on company email systems, case management system links, and combined telephone contact lists.

Data on trends and use for management purposes: Companies and the law firm described receiving communications in various forms on different data points to help track service use, issues to explore for possible root cause and preventive law efforts, and to monitor overall portfolio management.

LEADING PRACTICES



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The interviewees were asked to identify aspects of their programs they considered to be leading or best practices. Below is a list of some of the program elements that they viewed to be leading or best practices for their programs. Individual program summaries in Section II provide additional detail on these and other practices and program elements. Fully outsourcing all of the company’s litigation and intellectual property legal

support using fixed fee arrangements: is described as a leading practice implemented by one representative. The litigation arrangement has been in place since around 1993, and the intellectual property arrangement has been in place since Fall 2003. In each case, the entire area of work is outsourced to a single law firm.

Consolidating information to track trends and root causes: is viewed as a leading practice that enables the law department to receive on a consolidated basis information on all of the company’s cases or matters in a given practice area (as compared to situations where many firms on a dispersed basis may be handling various matters and cases and reports on collective status are not prepared).

Moving firms off the “hourly bill”: is described by several of the interviewees as leading practices that help to align in-house and outside counsel economics. Additional benefits shared include promoting incentives for outside lawyers to manage cases within budgets, including identifying root causes and preventive law training to help bring case load down, and enabling outside law firms to ensure utilization of specified numbers of personnel assigned to the outsourced service relationship.

Collaborating to provide effective services: is described as leading practices of several of the service models.

Having/maintaining long-term strategic partnering relationships: is identified as an important factor contributing to the success of some of the arrangements described by interviewees.

Partnering with outstanding service providers with high levels of expertise: is shared as a leading practice that promotes confidence in the relationship and helps to achieve desired overall results.

Understanding client needs: is identified as a fundamental inquiry that needs to be addressed to provide the foundation for overall program success.

II. COMPANY PROGRAM SUMMARIES Following are summaries from discussions with seven companies about their law department practices supporting corporate governance initiatives.

Alcoa Inc.

Alcoa’s law department is a global full-service legal department, with offices in five locations in the United States, six locations in Europe, and in Brazil, Australia, and Beijing. The law department includes around 70 lawyers worldwide, with the majority of the lawyers located at the company’s headquarters in Pittsburgh PA. Since 1993, Alcoa’s law department has outsourced on an annual fixed fee basis to LeBouef, Lamb, Greene & MacRae, legal services for all of the company’s U.S. litigation. In addition, since the fall of 2003, Alcoa’s law department has outsourced on a fixed fee basis to Eckert, Seamans Cherin & Mellot LLC, all of its intellectual property work. Russ



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Porter, Assistant General Counsel for the company, manages the relationship with LeBouef and also has overall responsibility for oversight of the arrangement with Eckert. “I consider the fact that our law department has two fixed fee arrangements for outsourcing two large bodies of legal work to be a leading practice in this area,” explains Porter. “In addition, receiving case data on a consolidated basis from a single source for each body of work rather than from multiple sources greatly improves our ability to analyze trends, hot spots, and evaluate root causes,” says Porter. OUTSOURCING LITIGATION SERVICES Why outsource all of the company’s U.S.-based litigation? Porter explains that the decision to outsource the litigation work was made in the early 1990s as part of a broader company review looking for ways to improve quality and handle work more efficiently at lower costs. The company determined that litigation and associated staff costs had been high, and the company’s General Counsel at the time, R Lee Holz saw this as an opportunity to break the mold for traditional service delivery and look for a new way to do things. Process: The litigation outsourcing process in 1993 involved approaching, using a process something akin to a Request for Proposals, a number of law firms that Alcoa’s legal department had strong relationships with, and asking them to provide fixed fee proposals to do all of the work for at least 25% less than the law department’s current costs. LeBouef was selected. As part of the overall arrangement, LeBouef offered positions to the in-house lawyers who previously handled the work and opened an office in Pittsburgh. Arrangement: The outsourcing arrangement was memorialized in a letter agreement, which is around 11 pages long. Porter explains that the agreement has essentially remained the same throughout the working relationship this past decade. A notable difference is that the duration provision in the agreement now includes an evergreen clause in place of the initial three-year term. Strategic decisions and overall settlement authority remain in-house with Porter. Among the key components of the letter agreement described by Porter are:

Price: Alcoa receives services annually on a fixed fee basis. Fees to LeBouef are paid quarterly, calculated on a pro rata basis using the current annual fee amount.

Mechanism to periodically review fees: The letter agreement includes a mechanism with an escalator clause that allows for periodic review and uses certain variables to help determine changes to costs.

Scope of services: Another critical element of the agreement is a provision that clearly defines the types of matters and services that fall within the scope of the arrangement.

Information flow: Including a provision that describes how information will flow, and the frequency and type of information required from the outsource service provider is another important element. Porter shares that this element has evolved over time.

Term: Porter shares that the initial term of the arrangement back in 1993 was for 3 years, and that the current arrangement includes an evergreen clause.

(A redacted copy of the form of letter agreement may be accessed via link in the Resource List in Section III of this Profile.)



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Communications: A number of communication tools and informational reports are part of the overall process, and include:

Email: The outsource service provider is tied into the company’s email system so that information and documents can be sent as if LeBouef’s litigators were part of the company’s law department.

Invoices/timekeeping: Although fees to LeBouef are fixed and paid quarterly, the LeBouef lawyers working on the various litigation matters track their time and send monthly time reports identifying time and client codes (e.g., business units) to Porter. Alcoa’s law department bills internal business clients quarterly for their share of the overall litigation costs. To derive the amounts invoiced to internal business clients each quarter, a de facto hourly rate is calculated by dividing the amount of the quarterly fixed fee to LeBouef by the total hours billed for that quarter. Each business unit’s share is then determined by multiplying the calculated hourly rate by the hours used.

Reports (cases opened, weekly, monthly, and quarterly); Meetings: An early case analysis is prepared by LeBouef and electronically sent to Porter for any new complaints that are filed. The case analysis includes information on the estimated strengths, weaknesses, and strategic considerations for the matter. In addition, Porter receives a weekly report on significant developments in all of the cases being handled. Porter also has a weekly sit-down session with the lead partners handling the company’s litigation to discuss cases and strategies.

On a monthly basis, Porter receives information on Alternative Dispute Resolution matters on the horizon. On a quarterly basis, Porter receives a report that provides a status summary for every case. In addition, the quarterly report includes a listing of all closed matters, and a listing of all new matters being handled. The second and fourth quarterly reports also include information to help Porter analyze trends and hot spots, organizing cases to show information by subject matter, business unit, and locations. In addition to the above reports and meetings, Porter and the lawyers managing the company’s litigation portfolio meet quarterly with the company’s auditors to evaluate and establish litigation reserves, and also have year-end meetings that include a general litigation review.

OUTSOURCING INTELLECTUAL PROPERTY SERVICES In the fall of 2003, the law department went through another analysis of costs and opportunities and took steps to outsource legal services for its intellectual property matters. The “make or buy” decision was fueled by a number of developments, including the fact that the legal workload in the intellectual property area had significantly grown to such a point that the inside/outside mix of work was at around 25% inside to 75% outside. “We didn’t want our institutional learning on intellectual property matters dispersed at such a high percentage, so we looked for another way to grow our staff” explains Porter. Process: Alcoa’s law department worked with the company’s procurement group to develop an RFP and set up an on-line auction to receive proposals using a company called Free Markets. Prior to the actual auction (which lasted for 42 minutes), the law department hosted several conference calls during which all interested firms invited to



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participate could call in and discuss questions on the RFP. (A redacted copy of the RFP may be accessed via link in the Resource List in Section III of this Profile.) Eckert was selected to handle the company’s worldwide intellectual property work following the auction. As part of the arrangement, Eckert extended offers of employment to the seven in-house lawyers previously handling the company’s intellectual property work, and established an office in Alcoa’s technical center. Arrangement & Transition: As with the litigation work, the arrangement for the intellectual property work was memorialized in a letter agreement on a fixed fee basis with similar key provisions to those summarized above. (A redacted copy of the letter arrangement may be accessed via link in the Resource List in Section III of this Profile.) Porter shares that the intellectual property portfolio was dispersed among various law firms at the time overall responsibility for the portfolio was transferred to Eckert last fall. To facilitate the caseload transition to Eckert, Alcoa sent letters to the various firms informing them that the intellectual property work had been outsourced to Eckert and sharing information on contacts within Eckert. Alcoa’s letters requested that the firms send final invoices for processing together with an inventory of open cases. The decision to “make or buy” the services then became Eckert’s, with the understanding that its quarterly budget would be the fixed payments negotiated as part of the overall fixed fee selection process. (A copy of the form of letter sent to firms to inform them of the outsourcing and transition may be accessed via link in the Resource List in Section III of this Profile.) POLICIES AND TRAINING Porter explains that Alcoa is a “value-driven company,” and that lawyers handling Alcoa’s matters pursuant to these outsource service arrangements undergo training on the company’s values and policies. Porter shares that there is an expectation that lawyers handling Alcoa’s legal matters will conduct their services in accordance with the company’s policies. PROCESS FOR ASSESSING CONTINUED FEASIBILITY Asked whether the law department has a process for reviewing the continued feasibility of the outsourcing arrangements, Porter shares that the quarterly reports provide an ability to measure the effectiveness of the service. The reports allow Porter to judge the appropriateness of time spent on various matters, review themes and hot spots, and make decisions about the overall success of the arrangement. CRITICAL SUCCESS FACTORS Porter explains that having a strong long-term working relationship with LeBouef has been a key to making the litigation outsourcing work. In addition, having the law firm’s interest aligned with the in-house law department’s interest is also an important success factor. “Having law firms manage legal work on a fixed fee basis changes the traditional economics for law firms and gets them to think like in-house lawyers do. Our outside litigators also have an interest in identifying trends and root causes and helping us to



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implement programs to help reduce and avoid litigation costs in the first place,” explains Porter. LEADING PRACTICES As noted above, Porter explains his view that having fully outsourced two large practice areas on a fixed fee basis is a leading practice in this area. In addition, Porter shares “receiving information on all matters in a given practice area from a single service provider on a consolidated basis helps to track trends and root causes and focus needs for services and resources.”

American Express

The in-house law department for American Express has implemented innovative arrangements with 7 law firms to handle 50% of the company’s litigation caseload. The law department’s practices in this area are best described as creative convergence rather than pure outsourcing, and of great interest is the overall process used by the law department to develop and manage these partnering arrangements and the tremendous efficiencies and results achieved through them. PROCESS The process began around 2 years ago when Stuart Alderoty joined the law department as Chief Litigation Counsel, a newly created position within the department. “One of the first things that we wanted to do was to evaluate outside counsel usage in the litigation area and look for opportunities to leverage volume and establish creative fee arrangements,” explains Alderoty. As part of this effort, Alderoty sent letters to about 25 law firms (many of which had been performing legal work in the litigation area for American Express) informing them that the law department was interested in entering into working relationships with a core group of law firms, describing the overall caseload, and inviting the firms to submit creative proposals for handling all or any portion of the work. Firms were encouraged to think as creatively as possible with an understanding that the resulting arrangements would be structured with some sort of commitment on exclusivity in the scoped area and would be subject to an initial 6-month gentleman’s commitment. The solicitation letter also emphasized that the law department hoped to receive fee proposals that were structured in ways other than traditional hourly fee discounts. “We were looking for arrangements that would help to bridge the gap between law firm and in-house law department economics. The traditional economics of outside law firms is antithetical to the goals and economics of the in-house law department. Outside firms make their money based on hours billed and hourly rates. The higher both factors are, the more money they make. On the other hand, in-house goals focus on finding ways to control costs in terms of the ultimate bottom line, and to bring predictability and stability to litigation,” explains Alderoty. SELECTION OF FIRMS; ARRANGEMENTS



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The law department selected a core group of 7 firms, and structured portfolio assignments in silo fashion so that certain types of work (defined by substantive type, business unit, or geographic area) would be handled by each of the selected firms. On average, the core group is collectively handling 50% of the law department’s litigation caseload and Alderoty shares that the partnerships are working wonderfully.

Workflow: Work assignments are generally initiated by the law department’s in-house paralegals who are on point for receiving litigation process documents from the company’s service agent.

Scope of arrangement: As noted above, each of the 7 firms handles work in a defined area. For example, one firm may handle all matters in certain states while another may handle all work for a given business unit or product line or for certain subsidiaries. At the end of each year, the law department revisits the preferred provider relationships and assesses volume and the previous year’s financial statistics. Adjustments are then made for the coming year to best anticipate the coming volume, or in some instances to re-think the relationship if the volume no longer warrants a fixed fee.

Fee structures: Some firms are paid on a fixed fee basis pro-rated over 12 months; some are paid twice a year; and others are paid all in January. For pre-pays in January, the law department receives an additional discount.

Arrangements: The law department memorialized each of the arrangements using its standard retainer letter and “layering” onto it a brief summary of the work that will be performed.

Management: Several individuals within the American Express law department have responsibility for managing the various relationships. Alderoty is on point for managing one of the relationships, and others are coordinated by designated in-house lawyers or paralegals. Alderoty explains that strategic decisions are made by in-house lawyers and paralegals on point for managing the relationships.

Monitoring; Tools: Legal service providers are linked to the law department’s case management system. The system is interactive and web-based, and allows for creative reporting and tracking. In addition, the in-house contacts for each of the preferred providers maintain very close contacts with the lawyers on point for handling the various cases for each relationship partner.

Shadow Hourly Invoices: Although the arrangements are designed on a fixed fee basis, Alderoty explains that the law firms are asked to keep “shadow hourly invoices” of time spent on a case-by-case basis so that the law department can periodically check to see that the pre-determined fixed fee amount is commensurate with the work that is being done on the cases. “The shadow invoices are also helpful in the event a firm comes to us and says that they have put significantly more time in for the year than the fixed fee anticipated and allows us to evaluate whether the firms were efficient in their approach to the cases,” says Alderoty.

PREVENTIVE LAW TRAINING; COUNSELING Part of the overall monitoring of the relationships includes semi-annual sit-down meetings with lawyers from the partner firms to discuss the previous 6 months and ask for recommendations on things that the company could do to address litigation risks and call out root causes. In addition, as cases are processed, the law firms bring to the attention of the in-house contacts suggestions for improving policies, procedures, and practices.



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These preventive law/counseling efforts are included within the scope of the negotiated fees. KEYS TO SUCCESS Alderoty describes several keys to the success of these core partnering relationships. First, he explains that both sides need to recognize that the overall relationship is a partnership. “What the law firms are doing is extraordinary, and we also expect from our in-house lawyers and paralegals a high degree of attention and commitment to the relationship so that no one feels abused,” says Alderoty. In addition, Alderoty shares that it is important to communicate to the outside service providers the value placed on their service and, where appropriate, to provide them with additional opportunities within the law department for enhanced visibility and work. LEADING PRACTICES Asked for thoughts on which elements of his law departments efforts in this area he would consider to be leading practices, Alderoty shares “the ability to move firms off the ‘hourly bill’ mentality and get them to begin to think about the economics of the cases as we do is a leading practice.” Describing the economics further, Alderoty explains, “we have been able to realize an additional discount above and beyond a straight hourly discounted rate. Some may ask: how can that be? The law firms are not losing money. In a law firm lawyers are generally not able to bill all of their available time throughout the year. This arrangement allows the law firms to commit a core group of lawyers to a steady volume of work. This type of relationship gives firms the ability to ensure time capacity of their attorneys. In addition, the preferred providers get broad exposure to the company and get the opportunity to bid on work outside of the fixed fee, such as M&A, real estate, regulatory, and internal investigations.”

DuPont

DuPont’s activities in the area of strategic delivery of legal services, convergence, and partnering are well-publicized. The law department’s DuPont Legal Model was developed twelve years ago to offer a framework of principles and processes to help improve service delivery in corporate legal departments and reduce overall costs. The DuPont Legal Model includes a network of 42 law firms and 11 service providers to whom the law department sends work to routinely, and firms and providers within the network perform these services in accordance with DuPont’s principles for early case assessments and alternative fee arrangements. (For a description of the DuPont Legal Model and links to resources, see http://www.dupontlegalmodel.com/files/home.asp.) As part of its overall law department management and strategic practices, DuPont has implemented a number of practices and programs to help efficiently and cost-effectively provide legal services to the company. DuPont law department practices featured in this Profile include: use of temporary staffing (on average 60-80 lawyers and paralegals) to perform work traditionally performed by outside counsel; use of a legal research vendor to perform legal research on DuPont matters (on projects initiated by both DuPont law and DuPont’s outside counsel); and “insourcing” discovery management.


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Julie Mazza, Corporate Counsel, Manager Law Firm Programs for DuPont, explains “we have seen the savings implemented by these and other practices. We are able to show that we are spending less money on these activities and see better integration and overall quality of work. We have developed strong relationships with our preferred providers and successful ways for integrating and collaborating on service delivery, which has been a key success factor these programs.” TEMPORARY STAFFING DuPont’s relationship with Kelly Law Services has been in place for around 8 years, and now averages temporary staffing levels of around 60-80 lawyers and paralegals each year. Mazza explains that in the mid-90s the law department determined that temporary lawyers and paralegals had a role to play in the overall delivery of in-house legal services. The process for selecting Kelly involved preparing a Request for Proposals and inviting a number of companies to submit proposals for the work. Kelly (then Wallace Law Registry) was selected, and the arrangement was defined in a Services Agreement, which is reviewed each year. Mazza manages the overall program and provides oversight, and several other individuals within the law department manage different parts of the program with Kelly. Some key features of the working relationship include:

Areas of Work: The majority of temporary service providers are supporting litigation work. Mazza shares that Kelly personnel are also performing due diligence-related services and services in support of intellectual property work.

Location: Until recently, the temporary personnel working on DuPont matters were co-located with the DuPont lawyers and paralegals in law department space. The temporary personnel now all sit together at an off-site location, and have technology and telephone links to DuPont’s law department.

Reporting relationship: Mazza explains that work performed by temporary personnel is supervised by either the in-house lawyer or outside counsel responsible for the particular case or matter. Temporary lawyers and paralegals are employees of Kelly, and report to a Kelly manager co-located with the temporary staffing team.

Service Agreement Terms: The agreement has a rolling three-year term, and is renewable each year. Fees are paid using hourly rates for each individual temporary staffing provider and are based on hours billed. Mazza notes that additional key terms include: - Roles and responsibilities (including provisions describing responsibilities for

assignments and performance evaluations); - Communications (describing frequency and content of desired reports); - Key personnel provisions (defining who is responsible for administering the

relationship for each party); - Confidentiality (provisions requiring the temporary service providers to abide

by confidentiality policies and preserve confidences); and - Conflicts (provisions describing screening processes prior to assignment and

imposing obligation on Kelly to require employees to conform to conflicts rules).

LEGAL RESEARCH



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The DuPont law department evaluated its legal research costs a few years ago as part of a 6-Sigma project to determine ways to improve the process and reduce the costs for performing legal research. As part of this effort, the law department reviewed legal research costs for a 2-year period and looked at who was performing the research and at what rates. The law department contacted LRN to learn more about its research services and conduct some pilot tests (comparing cost and quality to research projects also assigned to law firms), and determined that legal research could be more efficiently and cost effectively handled in certain situations by LRN. Indeed, Mazza estimates that DuPont law saves around $800,000 per year by having LRN perform legal research on its matters. Arrangement: How does the arrangement work? Mazza shares that she is responsible for managing the overall contract with LRN and that it has a three-year term. As part of the arrangement, DuPont agreed to use and pay for a certain amount of “points” during the three-year period. Each research project is assigned a number of points when the project is called in, and LRN tracks points and invoices the company based on points used. Research projects initiated with LRN by DuPont’s outside counsel for DuPont work are also assigned points that are tracked and billed via the DuPont account. Mazza receives periodic reports on service utilization and point balances, including information on outside counsel using LRN’s services for DuPont work. Process for Assigning Research: The improved approach to assigning legal research now includes guidelines on when to send legal research to LRN and when it can be more efficiently handled by outside counsel. The guidelines include a threshold consideration concerning estimated costs: if the estimated cost of the research project could exceed $2,000, then an inquiry to LRN is required to determine if LRN can perform the research more cost-effectively within the required time parameters. DuPont’s outside counsel are also required to follow the guidelines to determine whether to send research to LRN. Once a call initiating a research project comes in, the LRN contact sends a description of his/her understanding of the research project for confirmation of scope and substance. Once the confirmation is received from the originating lawyer or paralegal, the research is performed. Key Components; Success Factors: Mazza shares that the program’s success depends in large part on a strong focus on service utilization. “Our goal is to encourage our outside law firms to send our legal research projects to LRN whenever it makes sense,” explains Mazza. Asked about important terms to include in these types of arrangements, Mazza shares her view that “including clear descriptions of the types of projects that are covered within the scope of services, and including descriptions of how the research vendor will work with outside law firms to provide the services are very important.” INSOURCING DISCOVERY MANAGEMENT Prior to “insourcing” its discovery management for litigation cases, discovery for DuPont’s legal work was handled independently by each of the law firms handling the litigation matters. A few years ago, the law department implemented practices to insource the discovery management and provide all of these services in-house in a centralized manner. The law department created a discovery management team led by an information



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technology professional and primarily staffed by in-house paralegal professionals. An in-house lawyer also works with the team to help provide overall strategic guidance and direction. Key benefits of this process change include improved consistency and enhanced efficiencies in the way that the law department’s case discovery is handled. In addition, Mazza estimates annual cost savings to be around CHALLENGES Asked for thoughts on the biggest challenges faced in implementing these types of practices, Mazza explains “identifying the right scope of services and determining which projects are amenable to using these services is an initial challenge.” In addition, she shares “remembering to use the service providers and integrating service providers with law firm service providers are additional challenges.” LEADING PRACTICES “The whole process that the DuPont legal department uses for identifying the best resource for a specific task is a leading practice in my view,” explains Mazza. She also emphasizes “having law firms and vendors collaborate to provide efficient and effective high quality legal services to our law department and bringing the best minds to bear are extremely important program components.” Another critical element for DuPont’s overall program experience and success shared by Mazza is “having and maintaining long term and strategic partnering relationships that allow service providers to focus on doing the best possible work for our company.”

Golden West Financial

Mike Roster, Executive Vice President, General Counsel and Secretary for Golden West Financial Corporation, has experience evaluating and implementing outsourcing opportunities for legal services. At Golden West, he has led efforts to develop partnering relationships and efficient innovative service delivery models in the areas of intellectual property and human resources matters. In his former role as General Counsel for Stanford University, Roster’s leadership in partnering and outsourcing legal services was on an even larger scale, with a significant portion of the law department’s services being handled in a partnership structure with outside service providers. Information on key elements of both of these arrangements is shared below. INTELLECTUAL PROPERTY SERVICES OUTSOURCED “If you want someone to be a trusted partner, using RFPs or auctions to award service arrangements can be counter-productive,” says Roster. In determining to outsource legal services for Golden West’s intellectual property work, Roster used his department’s knowledge of the legal market generally and approached a law firm specializing in intellectual property services. The law department selected Harvey, Siskind, Jacobs LLP as its provider and entered into an arrangement to outsource the legal work on a retainer fee basis. “Structuring the arrangement on a retainer basis helps to put the burden on outside counsel to share in the management of legal resources,” says Roster. “This is what in-house lawyers do every day. We evaluate what the needs are, where we are going, and



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how best to handle them. And we have to decide how best to allocate our time and resources. Now outside counsel has the same interest.” Fees are paid monthly, and the overall relationship is described by Roster as ongoing and involving a trusted arrangement. Although fees are not based on hourly billings, the outside firm tracks time spent on matters and provides this information to the in-house attorney who oversees this area so that he can track needs, services and usage. Roster also notes that an associate lawyer for the IP firm is increasingly handling the Golden West matters, and that he likes the idea that younger lawyers are assigned to Golden West’s matters and can grow with the company. Communication tools used by the law firm include maintaining a chart with the status of all matters the firm is handling for the company and monthly status meetings. HUMAN RESOURCES LEGAL WORK PROCESSES Legal support for Golden West’s human resources matters has been provided by external service providers since long before Roster joined the company. To help track and develop strategic approaches for handling matters in this area, Roster has implemented a process that involves hosting a quarterly national conference call. Through these quarterly calls, lawyers handling Golden West’s human resources matters from different firms around the country participate in discussions on cases and approaches. Roster explains that this process has helped to improve outcomes. In addition, the quarterly calls help to track trends and patterns and to improve networking among the various lawyers handling matters for the company, even if they are from different law firms. Asked about the fee structure for the HR work, Roster explains “at present, each matter is separately negotiated, usually at a discounted fee. At some point, especially for firms doing regular HR counseling, we might convert to a monthly retainer.” STANFORD UNIVERSITY OUTSOURCING EXPERIENCE As noted above, Roster’s experience working with outsourced legal service providers extends back to his tenure as General Counsel for Stanford University. He already had experience in this, having chaired Morrison and Foerster’s task force on alternative billing practices. In 1994, the University entered into relationships with three law firms to outsource a large part of the work that was previously handled by in-house lawyers. Each of the three firms received a grouping of defined portfolios (e.g., one firm handled environmental and real estate work; another handled tax, benefits, and medical center regulatory work; etc.). As part of these arrangements, outside lawyers from each of the firms were given offices at the University and were included on the law department’s telephone contact list. Roster describes the group of outside lawyers from three law firms plus the University’s in-house lawyers as “a collective group working together as a single department.” Workflow was set up so that University clients could call lawyers from the outside law firms directly. “We wanted to get rid of a rigid system requiring everything to go through in-house lawyers. Our outside lawyers were part of what I called a unitary legal office. In-house lawyers served as partners rather than solely as managers,” explains Roster.



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The outsourcing arrangements with each of the three firms employed various forms of retainer fee structures. A substantial part of the work was performed on a fixed retainer fee basis. For other areas of work, the retainer applied for work up to a certain limit of hours or dollar amounts and then shifted to a fixed fee per task, hourly basis or other arrangement. KEY SUCCESS FACTORS Asked for thoughts on important factors for implementing successful outsourcing and partnering relationships, Roster describes the following:

Go to outstanding outside lawyers who have very high expertise in the area that is being outsourced;

Select law firms that have compensation systems that are designed so that clients are considered to be clients of the firm rather than clients of a particular lawyer. This avoids issues of hoarding hours or infighting over origination credit;

Choose people/firms who can work together as partners; and Monitor the relationship and services. Even if work is being performed on a fixed

fee basis, structure the relationship so that you receive periodic reports showing what the work is and how time is being spent, and then work closely with the firm’s management to assure both sides are successful.

CHALLENGES Striking the right balance on communications is described by Roster as a challenge in this area. “Outside service providers need to be in tune to what in-house lawyers and clients want to know and how to communicate the information. I’m always amazed that law firms don’t routinely ask clients what kinds of updates on matters the clients want, how often, in what form, and with what amount of detail,” says Roster. LEADING PRACTICES Roster describes having a fixed fee retainer arrangement as the best way to structure outsourcing relationships. He believes it aligns incentives on the inside and the outside, and encourages outside lawyers providing services in this manner to invest effort into preventive law training and compliance efforts. Additional leading practices identified by Roster include partnering with outstanding lawyers who have high levels of expertise, and monitoring the arrangements to assess improvement opportunities and overall program success.

3M

“The 3M law department’s approach to determining whether to outsource certain types of services begins with an overall strategic examination of the activities at the core of client needs and the competencies of the legal function,” explains Tom Boardman, Staff Vice President, Deputy General Counsel, and Assistant Secretary for the company. The company’s law department includes approximately 150 lawyers worldwide, with around 70 lawyers specializing in intellectual property matters. The law department has outsourced legal services for real estate transactions and for certain aspects of immigration. In addition, the law department has increased its use of contract lawyers for handling



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certain types of work and has had around 4 contract lawyers working on-site at any given time during the past several years. REAL ESTATE TRANSACTION SERVICES The law department outsourced its real estate transaction support to a single law firm a few years ago. Boardman explains that the decision to outsource the legal work was based on a convergence of factors. “3M isn’t in the real estate business. We’re not a developer or a builder—but we do have real estate needs. When the in-house lawyer who handled real estate matters for the company retired, the law department decided to explore outside service arrangements to meet the company’s real estate transaction needs,” explains Boardman. Process: The process involved working with the client to establish a primary relationship with a single law firm near the company’s headquarters, which is where the real estate clients are located. Arrangement: Preferred hourly rates were negotiated with the law firm. “We had information on historical levels of work and anticipated future work but the episodic nature of the work didn’t provide the certainty at the time to support entering into a fixed fee arrangement,” explains Boardman. The arrangement is memorialized in a retention agreement and is managed by one of the in-house lawyers at 3M. Clients go directly to the outside law firm for assistance. Key elements of the retainer agreement include:

Price: As noted above, the arrangement includes discounted hourly rates for services, with monthly invoices based on hours billed.

Staffing: The agreement identifies specific individuals within the firm to perform the work.

Technology and accessibility: The agreement includes a provision on use of technology and accessibility. Boardman shares that an important element is having the outsource service providers be as accessible as an in-house lawyer so that the clients do not experience any decrease in the level of service.

Monitoring the services: Since clients can contact the outside law firm directly for assistance with matters, Boardman explains that the law department’s primary process for monitoring the services is reviewing descriptions of projects on the billing statements. The law department also provides strategic advice to the client, and reviews real estate documents before they are approved for signature. IMMIGRATION SERVICES The law department has also consolidated to a single law firm and outsourced legal services for handling certain aspects of the company’s immigration work. The process for outsourcing the work in this area included conducting an on-line auction. As with services in the real estate transaction area, the law department has entered into a retention agreement with the firm handling its immigration services. Services are billed using negotiated fixed fees for defined categories of services. Process: The process involved developing a Request for Proposals (RFP) outlining the need for services in this area, and a number of firms were invited to participate in an on-



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line auction for the work. The firms invited to submit proposals included a mix of firms that the law department had existing relationships with and others who were identified as having expertise in this area. The law department modeled the overall process after on-line auctions performed by other functions within 3M and used an outside vendor, e law forum, to run the auction. (A list of key terms included in the RFP may be found via link in the Resource List in Section III of this Profile.) Monitoring: The relationship with the service provider is managed by an in-house lawyer and a paralegal within 3M. Asked about workflow for services in this area, Boardman explains that clients within the company contact the in-house paralegal and work is then assigned to the outside law firm. USE OF CONTRACT PERSONNEL In addition to entering into the outsource service arrangements as a way to enhance overall service delivery, the law department is using a number of contract lawyers to provide legal support on certain types of matters and to provide backfill assistance for lawyers out on leave or assigned to special projects, and for general overflow work. Boardman explains that the number of contract lawyers supplementing the law department’s workforce has been at around 4 for the past several years. “Initially, contract lawyers were brought in to help handle repetitive-type work on contracts. As familiarity grew and needs within the department changed, the contract lawyers have helped in different areas,” explains Boardman. SUCCESS FACTORS Asked for his thoughts on success factors and challenges, Boardman explains “the key to successful outsourcing is making sure that what the law department is outsourcing isn’t core to the client or to the mission/vision of the department as a provider of legal services.” On the key to successful relationships with contract lawyers, Boardman shares “finding outstanding people who subscribe to the values of the law department and to the department’s service and commitment levels is of great importance.” As part of its overall monitoring for these arrangements, the law department performs periodic reviews of the services provided, and contacts and surveys clients to help determine satisfaction. LEADING PRACTICES Boardman explains his view that knowing the needs of the clients and finding the most efficient, cost effective, and productive way of filling those needs is extremely important in this area. “Our decision to explore outsourcing relationships and think outside of the box for service delivery began with a strategic analysis of needs and competencies, and this is fundamental to the overall inquiry,” explains Boardman.

Piper Rudnick LLP

The law firm of Piper Rudnick has entered into an arrangement with CBF Group located in Fargo North Dakota to have CBF provide a full complement of legal administrative services to Piper’s lawyers, paralegals, and administrative support staff across all of the firm’s offices. CBF’s services are available 24/7 to Piper’s personnel, and project assignment can be initiated via phone, email, hand-held portable devices, mail, or fax.



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Projects initiated in a manner other than personal phone call are followed up via email to confirm to those initiating the project that the project has been received and assigned for handling. This supplemental outsourced service arrangement has been in place for almost two years. “Initially, we saw an arrangement with CBF as a solution for reducing overtime costs for evening and holiday word processing support. Our experience to date has shown that the value and benefits of having a 24/7 legal administrative service provider extend well beyond these initial cost savings. CBF helps to provide flexibility to our lawyers (they can receive administrative legal support any day, any time, when they’re anywhere), and has enhanced efficiencies in our overall processes for providing legal administrative services,” explains Mary Ann DeCastro, Director of Administration for the law firm’s Reston office. The law firm has reduced on-site data processing services at most of its office locations, and has moved towards new attorney/support staff ratios in many of its offices. PROCESS FOR “MAKE OR BUY” DECISION Karen McWilliams, a partner at Piper Rudnick, served as a champion for initiating the overall arrangement with CBF Group, which provided similar administrative services for her former law firm. As part of the firm’s cost reduction strategies, McWilliams suggested that the firm consider using CBF’s services and, following preliminary meetings with CBF executive management, DeCastro set up a 6-month pilot project for the firm’s Reston, VA and District of Columbia offices. The law firm tracked hours used and costs saved, and expanded its arrangement to include all offices located throughout the United States. ARRANGEMENT The overall arrangement with CBF Group is described as a month-to-month. DeCastro is on point to manage the overall relationship, and serves as the law firm’s primary liaison. Some additional features of the service relationship include:

Costs: The law firm pays a flat fee per attorney for use of the services. The flat fee structure requires that Piper pay up front for all attorneys in the firm rather than charging only for attorneys using the service, and allows CBF to make available a defined set of resources for the work. DeCastro shares that costs/expenses are generally not billed to the firm unless they are unusual. “The economics make sense for us even though about 50% of our attorneys are using the services. The users are increasing on a monthly basis, and we hope to achieve 60% utilization during this upcoming year,” explains DeCastro.

Range of Services: The range of services described by McWilliams and DeCastro is very broad, and includes data processing, tape and voice mail transcription, after hours phone services/call forwarding, emergency call-in center services (so that in the event of an emergency, firm personnel can call into the center to provide information on whereabouts), time sheet transcription, mailings, rolodex entry, and concierge services. “It’s the job of the CBF personnel to be there and available on a 24/7 basis. This means flexibility for lawyers in when and how we send work in, receiving support during otherwise ‘off-hours,’ and not having to feel awkward about asking a firm secretary to work nights, weekends or holidays,” explains McWilliams.



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Workflow: Piper personnel can call, email, fax, or mail work into CBF on a 24/7 basis. CBF has a 1-800 number that has been distributed to all Piper personnel for these purposes. Once the work is sent in, CBF sends an email confirming receipt and identifying the individual(s) handling the given project. Deadlines are discussed up front to confirm that CBF can handle the project, and McWilliams shares that she has found them to be extremely capable, responsive, and timely.

Technology: CBF is not linked to the law firm’s servers or databases. Instead, electronic document projects (for assignment and as returned work product) are transmitted as email attachments. DeCastro shares “having different word processing software has required smoothing a few kinks along the way, but that overall work quality has been very good.”

Quality checks: DeCastro and McWilliams share that the service includes a number of levels of internal quality checks prior to returning finished work product to the initiating firm personnel. “In one case, I needed work back sooner than expected and CBF was up front about where they were in the proofing and quality process. I was comfortable with receiving the project back to move forward and they sent it as requested,” explains McWilliams.

Confidentiality: DeCastro explains that CBF personnel have signed confidentiality agreements, and that the overall arrangement with CBF includes a confidentiality provision.

TRANSITION; MONITORING As part of the transition to implementing the arrangement with CBF, DeCastro and CBF representatives rolled out firm-wide training programs on the service and availability. DeCastro receives monthly reports with information on total hours used, hours by office, number of users per office, and hours calculated by work-type category (e.g., database entry, word processing, concierge, etc…). In addition, the reports identify the number and location of new users each month. “The periodic reports show us how the services are being used and help to show where our utilization opportunities are,” says DeCastro. “There are some individuals within the firm who may never use an outsourced legal administrative service provider because they prefer receiving support from someone they can communicate with in person, and that is alright. However, there are many people within the firm that are increasingly using CBF’s services and recognize their value,” she says. KEY SUCCESS FACTORS Asked for thoughts on the key success factors, McWilliams and DeCastro explain that having top management support for outsourcing legal administrative services is a critical success factor. In addition, they suggest beginning with a pilot program that explores implementing an arrangement on a test-basis for a practice group or office. Another key success factor is investing time and energy in training personnel on how to use and link with the outsource service provider and on the menu of services they can provide. “I’m a huge proponent of using an outsourced service provider for these types of services. I can forward work for handling via my BlackBerry if I’m at my child’s soccer game, can assign work late at night to be completed by morning, and can work from home and have administrative support as needed on weekends and holidays,” says McWilliams.



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Reebok

At Reebok, the law department philosophy on in-house staffing focuses on the areas of legal work performed “day-in-and-day-out” for the company, and making sure that the law department has the right substantive expertise to handle these matters in-house. “We want to align lawyers in our department with clients and their business needs, and that means ensuring we have the expertise in-house to handle matters that arise on a daily basis,” explains David Pace, Senior Vice President and General Counsel for Reebok. “If matters or practice areas are not key substantive areas that frequently come up for our clients, then my view is that it is appropriate to examine opportunities to partner with outside service providers,” says Pace. Reebok’s law department has outsourced legal support for immigration matters to a single law firm in Boston MA. In addition, the law department has outsourced to two law firms most of the legal support for the company’s trademark matters and patent /technology work. In-house lawyers manage the outsourced relationships with the law firms handling each of these three areas and have flexibility to design working relationships and communication structures that they find to be most appropriate for their areas. They also monitor these ongoing relationships by communicating with clients to receive feedback. On point for monitoring immigration services is Keith Wexeblatt. In addition, Stephanie Cucurullo is on point for the law firm handling trademark work, and John Banse on point for liaising with the law firm working on patent /technology matters. IMMIGRATION SERVICES OUTSOURCED The law department’s arrangement to outsource legal support on immigration matters has been in place for around 3.5 years. Prior to outsourcing the legal work in this area, the immigration work was handled predominantly in-house. In deciding to outsource these legal services, the law department approached a law firm that it had a previous relationship with for work in this area. PATENT TECHNOLOGY SERVICES OUTSOURCED The outsourcing relationship for legal services for patent technology matters evolved over time. As with the immigration work, the patent technology work was ultimately outsourced to a law firm that the law department had a historical relationship with and that had experience handling these matters for the company rather than going through a RFP or auction process. Workflow to outside counsel comes directly from business and technology clients. Pace explains that initial transition efforts relating to outsourcing the work included having the outside lawyer on point for the company’s patent technology matters meet weekly with Banse and the technology and product development groups. As the relationship has evolved, the meetings now occur bi-weekly, and the outside lawyer handling these matters also participates in client staff meetings as well as monthly law department meetings. TRADEMARK SERVICES OUTSOURCED



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Pace explains, “although our trademark rights are very core to the company, this is an area where we decided that it made sense to outsource legal services.” Following an RFP process that involved approaching six law firms and inviting proposals, the law department outsourced the legal work to one law firm. Workflow in this area is described as a mix—with some clients contacting the outside lawyer directly, and others contacting either Cucurullo or Patrice McInnis, an in-house trademark paralegal, to discuss and assign the matter. In addition to handling prosecution and registration matters, outside lawyers handling the company’s trademark work also have helped to develop preventive law training programs on trademark-related matters. FEE ARRANGEMENTS The fee arrangement in each of these relationships varies, but typically includes a combination of fixed fee and discounted hourly rate. Reebok’s preferred approach is to establish a fixed fee covering the work that is fairly steady and predictable year-to-year and work on a discounted hourly rate for additional, unanticipated matters. The law department uses historical costs as a guideline to determine the fixed fee. Additionally, Reebok reviews with outside counsel actual time sheets to monitor the actual work performed and adjust the fixed fee if necessary. KEY SUCCESS FACTORS Asked for thoughts on the key factors for successfully implementing outsourcing arrangements for legal services, Pace shares that the law department and the service providers put in a lot of time and effort up front to educate the outside lawyers on Reebok’s business and to develop the right level of confidence in outside counsel so that clients would be comfortable with the new service delivery model. “To be successful, there needs to be a commitment to making the arrangement work on both sides, and both sides need to be diligent and flexible. The culture within our company is very accepting of this type of approach. The law firms that we selected have a good understanding of the underlying business and operations of the company and a good appreciation of the level of risk that the company is willing to take,” explains Pace.

The Finish Line, Inc.

The Finish Line’s in-house law department is led by its General Counsel, Gary Cohen, and has grown from 3 to 5 lawyers within the past year. The company is an athletic retailer specializing in name brand footwear, apparel and accessories. Core to the business and the company’s needs for legal support, is leasing work. “We anticipate adding 70 to 80 new stores within the upcoming year, and that means reviewing and negotiating on a time-sensitive basis a substantial number of leases,” shares Cohen. Part of Cohen’s strategy for supporting the company’s growing lease portfolio includes outsourcing around 15% of the legal work to selected law firms with recognized leasing expertise. Cohen shares that he “anticipates this percentage will increase due to the company’s aggressive growth plan.” Among the firms handling this growing area for the



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law department are two national law firms, a law firm in New York City, and a law firm located near the company’s headquarters in Indianapolis, IN. PROCESS FOR OUTSOURCING LEGAL WORK Rather than preparing a Request for Proposals to evaluate and review law firm approaches and capabilities, Cohen used his knowledge of the market and experiences in the leasing area to select firms to partner with. “Commercial Leasing is such a specialty area, especially in regional malls, and different states are different animals when it comes to leasing law. Our approach has been to link with firms that have experienced individuals, and group work so that a given firm may be handling a number of leases in a certain geographic area or with a given landlord,” explains Cohen. The law department provides the law firms handling its work with the company’s preferred leasing template form, and firms are expected to negotiate terms in accordance with the company’s preferred positions. WORKFLOW Cohen meets weekly with the company’s Vice President of Lease Administration to determine leasing needs. In addition, all internal requests for lease reviews or outside legal assistance in this area are made to Cohen, who determines whether the work should be handled by the company’s Vice President of Legal Affairs, the company’s Leasing Administrator, or by an outside law firm. The company has identified within each law firm on point for leasing work, certain individuals that it wants staffed on its matters. For Cohen, a critical aspect of the service is timing—time is of the essence. ARRANGEMENT The law department has developed new engagement letters as part of this outsourcing initiative, and Cohen shares that arrangements include hourly rates with caps per lease and flat fees. Cohen also explains that he intends to make use of incentives to the law firms if projects are completed within a certain time frame in response to the time-sensitive nature of some of the lease deals. The law department’s overall process includes having an in-house lawyer review the leases negotiated by outside law firms prior to signature. “Monitoring the work being performed by outside law firms in this area is so important. Failures in outsourcing may not be uncovered until 2-3 years down the road when the company believes that the lease provides certain rights but the actual language may not match up. For this reason, our process includes a strong internal monitoring component,” explains Cohen.

________

ACC thanks Renee Dankner, former senior counsel for Mobil Oil Corp., for her work in preparing this profile.

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III. RESOURCE LIST Please note that this listing does not constitute a recommendation or endorsement for any product, service or company. Please find below a list of resources identified by companies interviewed or by ACC as possible resources that may be of interest in evaluating and developing in-house legal practices for exploring outsourcing opportunities or alternative service model arrangements. COMPANY RESOURCES Alcoa, Inc. Letter Agreement (redacted) for Litigation Services http://www.acca.com/protected/forms/lawdman/outsource_agreelit.pdf Request for Proposals to Outsource Intellectual Property Services http://www.acca.com/protected/forms/lawdman/outsource_rfp.pdf Letter Agreement (redacted) for Intellectual Property Services http://www.acca.com/protected/forms/lawdman/outsource_agreeip.pdf Letter to Outside Counsel Informing of Outsourcing and Transition http://www.acca.com/protected/forms/lawdman/outsource_notice.pdf 3M RFP List of Key Terms for Outsourcing Immigration Services http://www.acca.com/protected/forms/lawdman/outsource_keyterms.pdf ARTICLES; PUBLICATIONS; MISC. Article: “The Metrics of Alternative Staffing Models,” by Steven C. Parker, Assistant General Counsel, Prudential Insurance Company of America (ACCA Docket, March/April 1998) http://www.acca.com/protected/pubs/docket/ma98/altstaffing.html Article: “Reengineering the Legal Function,” by Michael Roster (regarding the redesign of Stanford University’s legal function as referenced above) (Sept./Oct. 1995, ACCA Docket) http://www.acca.com/protected/pubs/docket/so95/Reengine.html Article: “The Outsourcing Decision: Make vs. Buy,” PricewaterhouseCoopers Law Dept. Services Group

http://www.pwcglobal.com/extweb/manissue.nsf/DocID/8B95B6DA8C8107A185256B26007233BD

Article: “Legal-Work Outsourcing Cuts Costs; DuPont’s pitch to in-house counsel: Save millions by sending legal work to companies other than firms,” by Renee Deger http://www.corpcounsel.com/other/3rd_party/outsourcing.shtml


http://www.acca.com/protected/forms/lawdman/outsource_agreelit.pdf

http://www.acca.com/protected/forms/lawdman/outsource_rfp.pdf

http://www.acca.com/protected/forms/lawdman/outsource_agreeip.pdf

http://www.acca.com/protected/forms/lawdman/outsource_notice.pdf

http://www.acca.com/protected/forms/lawdman/outsource_keyterms.pdf

http://www.acca.com/protected/pubs/docket/ma98/altstaffing.html

http://www.acca.com/protected/pubs/docket/so95/Reengine.html

http://www.pwcglobal.com/extweb/manissue.nsf/DocID/8B95B6DA8C8107A185

http://www.corpcounsel.com/other/3rd_party/outsourcing.shtml


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Article: “Outsourcing of Work Means Influx of Legal Issues,” by John Covaleski (NJ Law Journal 5-20-2004) http://www.law.com/jsp/article.jsp?id=1084824762314 Article: “Law Firms Offered Outsourced Support Staffs,” by Anthony Lin (New York Law Journal 6-7-2004) http://www.law.com/jsp/article.jsp?id=1085626382900 Article: “Legal Outsourcing Looks to the Heartland,” by Anthony Lin (New York Law Journal 6-16-2004) http://www.law.com/jsp/article.jsp?id=1087242916938 Survey Summary: The Outsourcing Institute’s Top Ten Outsourcing Survey (1998)

http://www.outsourcing.com/content.asp?page=01v/articles/intelligence/oi_top_ten_survey.html&nonav=true

Article: “Library Outsourcing: A New Look,” by Carol Ebbinghouse http://www.infotoday.com/searcher/apr02/ebbinhouse.htm Article: “Legal Research and Back-Office Work To Go Offshore Next,” by Paul McDougall (InformationWeek Dec 9, 2003) http://www.informationweek.com/story/showArticle.jhtml?articleID=16600553 Article: “US Legal Outsourcing to India Growing in 2004,” (Australian Legal Eye) http://www.practicesource.com/ale/blog/pivot/entry.php?uid=standard-532 Article: “A Passage to India,” by Rich Smith (January 26, 2004) http://www.fool.com/news/commentary/2004/commentary040126rs.htm Article: “Outsourcing Legal Services to India” (Global Law Review) http://www.globallawreview.com/outsourcing.html Article: “Legal outsourcing going to India” http://www.citizenreviewonline.org/march2004/outsourcing.htm Article: “Legal Services Going Offshore- A Critical Trend,” by Charlie Robinson (April 2004) http://www.abanet.org/lpm/lpt/articles/mgt04041.html Article: “PLC Global Counsel best practice indicators: outsourcing to external counsel,” by Alex Morrall (Global Counsel, Sept. 2003) http://ld.practicallaw.com/jsp/article.jsp?item=32104 Web links on Outsourcing Administrative Support http://www.lawyerlounge.com/outsource/index.php


http://www.law.com/jsp/article.jsp?id=1084824762314



http://www.outsourcing.com/content.asp?page=01v/articles/intelligence/oi_top

http://www.infotoday.com/searcher/apr02/ebbinhouse.htm

http://www.informationweek.com/story/showArticle.jhtml?articleID=16600553

http://www.practicesource.com/ale/blog/pivot/entry.php?uid=standard-532

http://www.fool.com/news/commentary/2004/commentary040126rs.htm

http://www.globallawreview.com/outsourcing.html

http://www.citizenreviewonline.org/march2004/outsourcing.htm

http://www.abanet.org/lpm/lpt/articles/mgt04041.html

http://ld.practicallaw.com/jsp/article.jsp?item=32104

http://www.lawyerlounge.com/outsource/index.php

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