Canadian Lawyer InHouse

39 CANADIANLAWYERMAG.COM/INHOUSE JANUARY/FEBRUARY 2018 L a w D e p a r t m e n t M a n a g e m e n t need a tax lawyer, we need an employment lawyer, a corporate lawyer and we want to speak to just one person — the relationship managers," she says. Cerminaro says the transportation giant doesn't have as complex an RFP process as some institutions do. "The big blanket pro - posals are not the way we work," said Cer- minaro. "We go to market sometimes with a select number of firms globally or in a specific jurisdiction — many of whom have a long-standing relationship with the com - pany. So it's a bit more of an organic process at Bombardier." About five years ago, Bombardier's legal department looked at legal services and at what it adds to the business and as a result more work is kept inside with the company's 175 internal lawyers. "Our business is a bit particular because on the transportation side we've insourced a lot of things. We do use external counsel, but because we have in-sourced so much, we don't have the typical go-to-market or RFP approach. We have it in a more segregated, precise environment whether on a per-ju - risdiction or matter basis," Cerminaro said. The approach is more standardized at In- frastructure Ontario, says Agnes von dem Hagen, vice president of transaction, legal at the organization that serves as the procure- ment and commercial lead for all major pub- lic infrastructure projects in the province. "We do have a vendor of record list and we use that primarily and can do second-stage RFPs from that list," said von dem Hagen. "We can also go off the list, but the prefer - ence is for firms who have qualified first." But there is increasing pressure at IO for the legal department to follow the procure- ment path other business units follow. "We are a procurement shop for the government and one of the trends I've seen is to get cost certainty on legal. Every other procurement we do for engineers, for financial consul - tants or large construction projects — there is far more cost certainty. We seem to have more difficulty with legal," she said. "We try hard to get different arrange- ments where we have maximum prices the firm can't go over in particular standard projects where the firms know how much it cost. If it's a one-off, then we have different arrangements but are trying to provide more certainty and in the environment we're in everything needs to be defensible. The rules are clear and pricing is clear that we're not deviating from that," said von dem Hagen. When IO retains a law firm, it has to be approved by the general counsel — the eval - uations in an RFP process have always been done by lawyers. Some smaller legal teams have not yet migrated to full RFP mode. Conway says at InnVest she places more value on relation - ships and responsiveness from the firms she deals with. "I have five approved law firms, but in our case, what we value is relation- ship and value of service," she said. "So even though cost is important with us, the most important thing is the lawyers are going to pick up the phone when I call because we don't have the time with minimal resources internally," she said. "It's my responsibility to sign off on the legal bills. I sign off on all our legal spend and put the instruction out to the firm and manage the process." MOVING TO MORE AFAs At CIBC, Brzakala says the legal depart- ment is "moving heavily" toward alternative fee arrangements. "With almost all the RFPs we issue now, there is mandatory requirement for firms to propose an AFA or value-based pricing proposal," he said. "If they do have to de - fault to hourly rate, it's usually a blended rate — one rate for partners and associates. I think the hourly rate is not a very efficient value-based billing model for clients. Very few industries in the world use it. We're in - creasingly moving away from hourly rates to alternative pricing models such as a risk/ reward model, contingency, retainer/fixed fees or blended arrangements. "At the end of the day, my job is to man - age our external legal spend frugally and ef- ficiently, making sure we negotiate the best value for every dollar we spend. Ultimately, the change is going to require the firm to go in the new direction," he said. Von dem Hagen said she "really dislikes hourly rates," especially with larger trans - actions. "You can't control costs and the firm isn't controlling cost either," she said. She suggested firms not be afraid to do a joint proposal. For example, IO had one law firm for a general M&A requirement and a specialist from another law firm who was subcontracted to the matter. "If you don't have it all, then maybe source it from some - where else," she said. Cerminaro says that even though it has taken some organizations a long time to move to AFAs, new technological tools available are going to push legal depart - ments and firms in that direction. "People will be able to measure and understand what the cost is from the firm side. From our point of view, not every mandate lends itself to that. Law firms are not unique in the ser - vice industry, but they are unique to a large degree in billing by the hour. I deal with consultants all the time and we sometimes get billed by the week or by the mandate, but they have clearly figured it out because it's pure service just as law firms are," he said. Brzakala emphasized that it's a competi - tive marketplace and firms would do best to figure out how they are distinctive from one another. "If you're already in the door, don't become complacent and take it for granted. Try to become the go-to firm re - gardless of what you do for the bank. You want to be on the short list, not just on a list of 175 firms," he said. Conway's advice was "be accountable from introduction to the billing — it's about accountability." The panel speakers did not seem keen on uisng reverse auctions for legal services. Cerminaro said that while he hasn't used reverse auctions, his thoughts are that "you risk mixing up cost and value, which I think is dangerous." WHAT STANDS OUT IN RFPs? Cerminaro: "Your firm is not good at ev- erything, so stop saying it on paper. For the RFP, focus on things you know you're capa- ble of delivering. Leave the glossy brochure at the door — for our organization, people are expecting a tailored approach." Bombardier had a law firm cold call it and put forward a briefing of continuing legal education it could do for a transporta - tion company. Von dem Hagen: "Firms will sometimes connect us with another agency and get in- formation exchange. CLEs are also fantastic." Brzakala: "We're impressed when firms call and ask, 'What else can we do?" Conway: I like to meet with the entire proposed team. It's about fit and relation - ship at times. IH

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