The Role Of Lawyers In Contract Management
There is often lively debate over the role of in-house lawyers. To what extent should legal services embrace commercial policy, deal structuring, negotiation and post-award contract management?
A lack of clear definition frequently results in discord and adversarial internal relationships between lawyers, contract managers and procurement groups. In some organizations, there are complaints that the lawyers are too remote; in others, they may be seen as intrusive. Often, the absence of an agreed scope results in highly variable service levels that depend on the experience and interests of the individual attorney.
The legal role is not always easy to define and this is perhaps nowhere more apparent than in the area of contracting. To some extent, lawyers make thier own problem. Many are not good at sharing knowledge and information. They perceive the law as a matter of individual judgment and are reluctant to entrust others with making good decisions. They are of course right that generalized advice can be misused; but is the risk greater than that which is created by an absence of documented guidance (or perhaps that their clients use the internet as an alternative source of advice)?
As trading conditions have become more complex, law departments have reacted to the growing workload through a variety of approaches. These include a drive for more standardization and compliance and, in some cases, a push to develop (or absorb existing) contract management resources. Recently, there is also evidence of reluctant adoption of contract management technologies that can assist efficiency – and also a readiness to consider outsourcing to low-cost providers.
All of these trends and the associated debates are captured nicely in Rees Morrison’s excellent blog, Law Department Management. A recent example is where Rees discusses the need for pre-legal vetting teams. In another, he highlights an article by the General Counsel at Carillion that calls for greater discipline in defining the role of the law department.
There is no doubt that legal resources are under strain and there is little prospect of early relief. As at all times of stress, it is easy to react either aggressively or defensively. As we enter 2010, I hope we can see more organizations encouraging constructive debate over how best to develop their contracting and commercial capabilities. Procurement, Contract Management, Commercial, Business Development and Legal groups need to work together to understand the true scope of contracting and from there, to develop a process and role allocation that leads to increased competitiveness and greater success. Lawyers are generally in a powerful position and can easily frustrate attempts at change or improvement. I hope to see more of them taking a lead in driving positive re-thinking of their role – and in particular, the best way to support successful commercial policies and trading relationships.
Commitment Matters 
Tim, let me know if my analysis is correct — is your primary point that legal departments often don’t know their role, so they should work with other organization departments to define their role?
Sterling,
Contracting is a complex area of business activity, in particular because there are multiple stakeholders. Without clear leadership, this means that it tends to be inefficient and often fails to deliver well-balanced results. The Legal team is often nervous about empowering others to make decisions, yet is not equipped or staffed to fully manage the process itself. A lack of ownership means that contracting is frequently out of step with business needs. In my experience, sustained improvement depends on active collaboration by Legal – and in many cases, has been driven by a strongly business-oriented General Counsel. IACCM has a range of case studies – and in terms of consultants, the leaders in this area are Huron Consulting Group (http://www.huronconsultinggroup.com/).
In most cases the lawyers are incompetent as far as understanding the procurement process is concerned.My arguement is based on the fact that most lawyers are either trained in civil,criminal,human rights or constitutional law ,this has no relevance to legal aspects in procurement / contracting which requires a person who has commercial law training ,in addition to professional training in procurement / contracting since contract management is the entire process of procurement from need identification to contract award.
I personally think lawyers role ( lawyers with relevant training )in contract management should be limited to contract review to ensure legal aspects related to the commercial laws and regulations are properly addressed,so that in case of a dispute that ends up in litigation they can perform they rightful role in the right place,the court,where they can quote all the laws and cases memorised.
Other than that I think lawyers have no substantive role in contract management,contract management is a professional area which require specialised training.
Walter,
I think your assessment may be a little harsh!
You are certainly right that legal training does not do enough to prepare lawyers for the broader business environment. However, many individual attorneys – like specialists from other fields – adapt their core knowledge and apply it very effectively to the wider commercial issues. Problems arise when either you encounter a lawyer who has not taken the trouble to understand the wider business context, or where the legal department is prevented from acquiring this knowledge by resource constraints or deliberate separation from the business.
The points you make are important because there are still some lawyers who consider their profession ‘too pure’ to engage in better understanding of business issues, such as the financial or procedural impacts of their judgments. And while the same weakness applies to other professional groups, it is often more serious when it is the lawyers, because they have greater power and people are more reluctant to ignore them.
Perhaps I speak from a different perspective having worked as contracts manager and later qualified as a lawyer. I mainly work in high tech areas (I also spent 8 year on the coal face as a computing techie.)
The problem with many lawyers is mainly two fold, especially with junior lawyers: i) it’s the training – most lawyers are trained to see a contract from a litigation/risk reduction perspective with little differentiation of the risks for the business and not as a practical commercial document in the same way that a pragmatic commercial contracting person does (and let’s not forget how few hours most lawyers receive on contracting during their legal training), and ii) there’s an ‘if I have not done it then I don’t trust it’ attitude with an “ if anything goes wrong it’s me who will carry the can and it could affect my professional career so I won’t risk it being done by anyone not legally trained’ as a follow up. It’s a particular problem for traditional in house departments or private practice lawyers
If a contracts/commercial person is professionally trained then they should be able to handle most legal issues in the contract too. In one oil company I worked at we, the contracts managers, trained the junior lawyers in contracting and the commercial process allied to the business needs in house. We wrote most of our own contracts with the legal department checking them and inputting a few standard clauses such as insurance and handling international VAT issues.
Once I know that the contract/commercial or procurement people are properly trained and have an appreciation of the legal issues then I leave them to manage the contracting legal process within boundaries, particularly on the standard/low risk contracts (note: not financial value) and according to the company process. If they don’t know what is needed I train them in the necessary so they know when to shout for help. They can use me as a consultant or involve me in the process according to the contract/project requirements or internal process as required. This is done on the understanding that they keep me in the loop and I get involved in pre-contracting reviews, project reviews, pre-contract sign off and with minimal briefing can seamlessly pick up any issues required in negotiations when requested. Preferably I also get involved sufficiently with the business to understand their needs in respect of the contract’s aims. A further luxury is involvement with post contract reviews on the bigger/more complex projects and contracts too so as to improve the contracting process by making use of lessons learned feedback.
On the other hand, I have also seen non-legal staff not call in the lawyer until too late, seeing it as a failure on their part, and then calling me is as the ‘rottweiler’ to sort out the issues when by then it’s difficult if not impossible to do so with a good resolution. I’d much rather be seen as an enabler from day one than as a rottweiler, and participating in the contracting process.
Each professional can learn from the other. In Walter’s case: if the lawyer didn’t know the procurement process – why didn’t he think to ask? Why didn’t the Procurement department offer an orientation to the lawyer on their department/processes? It works both ways. Appropriate training is necessary for all parties involved in the contracting process.
Unfortunately, for many General Counsel commercial contracting is way down their priorities and resources. It also has to be said that contract lawyers have a low status perception among the ‘proper lawyers’. Continental lawyers often see in house lawyers as lesser beings anyway (it’s their systems and training again). All parties need to work together in house to achieve a good contracting process. It can and does have a major effect on the business bottom line and operational capability but also requires investment in standards, processes and systems. Whose budget does it come from?
Basically what I’m saying is that a good contracting process requires all departments not just legal, contract and procurement departments but also finance, and the business to use their skills and work together to achieve the aim of a good contract for the business. After all, to use a soccer analogy: you would not expect the goalkeeper to shoot goals would you? But … he may have many useful observations on the performance of the rest of the team which they can learn from (and I’m not saying who is in the goalkeeper role)!
Great insights and valuable information shared!
Well said Gill, you seemed to have covered a large part of the topic handsomely.
If I may add some additional points; My belief is that if a legal officer were to be involved at the stage of procurement process would be rather scary for the rest of the project team not to say the Employer/Client. Most laywers and ‘briefs’ I have worked with know their limitations in the construction industry and as you mention, they are not usually priced into the pre or post-award budgets at any stage. Company auditing may also present a problem in the sense of ‘lines of responsibility’.
Furthermore, lawyers like to be efficient and there is far too much ‘flux’ at that stage of the project. Even when disputes strike the project they (the lawyers)tend to only want to be heavily involved once the Arbitral Notice(s) has been served, because that is what they are trained to follow. The ‘itsy-bitsy’ exchanges of contracts administration are certainly ‘evidence’ but historically these cannot be changed … only worked with to present a better argument.
I also see a large role for the legal team but I feel personally that such role needs greater and better definition within the construction industry as a whole. Participation with clear boundaries and involvement – after all…and as you clearly mention, constructing a project is still usually a team effort, with all components, liked or disliked.
I have been in-house counsel for 13 years and have a MBA and business background, both of which I have found very useful as an in-house counsel. That said, my experience has been that while many in-house counsel do not come from business backgrounds, the successful in-house counsel tend to embrace the opportunity to learn the business from the business folks, learn the procurement process through (and improve the procurement process with) the procurement folks, join organizations such as IACCM for continuing legal education (both formal and informal), be a critical part of a “team”, and help facilitate a deal (rather than be the obstacle). When I joined the legal department in the transactions group with my former employer, the legal team didn’t get involved in a deal until the NDA/contract was ready to signed. I was part of the team of representatives from legal, procurement, business, finance, IT…to implement a new process where one representative of each group meets on the front end to talk over the proposed transaction and come up with a plan. This way, we all could brainstorm collectively on the front end on strategy and any potential issues, deal points,… Legal took the ball to be the lead on the development of and training on the new process and it worked well. I enjoyed being a part of changing and implementing the process to make sure the right players are on the same page from the NDA to the RFP (if applicable) to contracting, to serving a role on the team for implementing a contracts management solution to make sure contract commitments were carried out. The key to a successful transaction and partnership with the other part[y/ies] tends to be responsiveness, accountability and teamwork. Unfortunately for me, my former employer was acquired by a company that laid off the local transactions team just as we were gaining momentum internally to make sure each transaction involved the right players on the front end. An added benefit for legal being involved on the front end is legal can advise procurement of the proper template to use and/or comment on the other party’s proposed document before things get too far down the road, and it makes legal’s job more efficient and interesting because legal can learn of and can advise on the proposed transaction and better learn the business early on and through closing. This has been an interesting and timely topic since most folks within an organization do not want to deal with legal. They see legal as a roadblock. But that can be changed with a proactive, business-minded legal team whose goal is to help facilitate the deal and keep the rest of the team feeling comfortable to come back for any advice or input at any time.