Better together: how legal ops & procurement can team up to take down messy contracts
French fries and milkshakes. Maple syrup and bacon. Oreos and peanut butter. Procurement and legal. At first glance, each of these combinations seems like it just won’t work. Give it a taste, though, and you know you’ve found something amazing — a pair that’s even better together than apart.
Legal and procurement teams have not traditionally worked together. Legal is convinced it “knows best.” Procurement just wants the best deal at the lowest price. At worst, the two departments butt heads. At best, they keep to themselves.
The result of this separation? Two business-critical teams that don’t completely understand one another and don’t operate as effectively alone as they could by joining forces. By working together and leveraging legal technology, the procurement and legal departments can simplify the contract negotiation process and realize long-term benefits for the entire organization.
Procurement + Legal = A Dream Team
Could Michael Jordan have become the greatest basketball player of all time without Scottie Pippen? What would Sherlock Holmes have accomplished without his faithful Dr. Watson? When teammates with complementary skills join forces, they can do incredible things. The story is no different when it comes to procurement and legal — even if the two departments have historically not really wanted anything to do with one another.
Legal procurement expert Dr. Silvia Hodges Silverstein explained the fraught history of the legal and procurement departments in an interview with Legal Executive.
“In many corporations, legal services used to be more or less exempt from the cost scrutiny that other business units and functions have been facing for years,” she said. “The 2008 financial crisis acted as a catalyst and sped up the process for the adoption of legal procurement.”
According to Dr. Silverstein, “Legal procurement is the professional approach to buying legal services and managing the business side of relationships with law firms and other legal service providers.”
Legal procurement has several benefits for organizations, including:
Legal procurement helps organizations apply a more data-driven approach to making legal purchases, including outside counsel and ancillary services and software, and enables them to better measure and analyze that spend with legal technology.
Procurement teams are pros at strategic sourcing. Legal procurement helps the legal department source and select from multiple vendors more efficiently, particularly when they leverage legal tech tools that maintain information in one central place.
Building Confidence in Legal Team Purchases
One long-standing source of tension between procurement and legal? Procurement cares that legal is getting the best “deal,” without necessarily understanding what constitutes good value for the legal department. When the teams work together, procurement comes to understand and approve the legal department’s assertion that the lowest-priced purchases do not always provide the best value.
Material Cost Savings
Legal and procurement are both known as cost centers, not revenue generators. But together, they can strike gold. According to a 2018 survey conducted by the Buying Legal Council published in Lawyers Weekly, legal departments that involve procurement in their purchasing help “companies save 14.6 percent of legal spend.”
Moreover, “when procurement is well-aligned and works in tandem with the in-house legal team, companies save an average of 21 percent.” According to the survey, these savings can add up to “hundreds of millions of dollars.”
Streamlined Contract Negotiation and Management
Contract negotiation happens every day, any time anyone in any department purchases goods or services from another company or vendor. Legal procurement optimizes contract negotiation by combining the traditional responsibilities of each department. Procurement takes the reins on sourcing vendors, analyzing options, making the final selection, and completing the purchase. Meanwhile, legal takes care of negotiating the terms of engagement in each contract. When they divide and conquer, both teams leverage their unique skills and strengths to arrive at an optimized final contract.
Plus, legal procurement introduces an impartial-but-informed third party that can negotiate more objectively. Many in-house counsel come to companies from law firms — some of which they may engage as outside counsel. It can be pretty awkward to play against (or negotiate with) prior teammates, and a dedicated legal procurement team removes that awkwardness without adding risk.
Legal Tech Is Legal Procurement’s Secret Weapon
Legal technology helps legal procurement teams gain and maintain important information in the contract negotiation process. The best legal technologies offer each of the following three features:
- Vendor management, which allows legal procurement teams to compare terms and prices objectively across vendors.
- Knowledge management, which enables legal procurement teams to easily and efficiently identify terms and conditions they’ve agreed to in past contracts with other vendors. Access to precedent allows legal to negotiate more consistently and effectively. Without legal tech, companies must rely on legal team members’ memories or manually sift through documents.
- Matter management, which allows negotiators to quickly and easily see what documents and contracts have been used for similar matters in the past. A solid matter management platform also ensures that legal department initiatives ladder up to the company’s overarching strategic priorities.
Contract negotiation is hard. Contract lifecycle management (CLM) might be even harder. It’s the legal procurement team’s responsibility to keep track of when contracts need to be terminated, renewed, or renegotiated. In a company with multiple vendors and multiple contracts, this is a huge challenge.
Good legal tech like SimpleLegal automatically keeps track of this type of information, which makes it easier for legal procurement teams to terminate a contract on time, renew it, or renegotiate for better terms. CLM systems also track commonly used clauses, special terms, turnaround times, and more. These metrics, which measure efficiency, risk, and areas of improvement, are critical in the contracting process.
The Right Legal Tech Catalyzes Legal Procurement’s Success
Legal and procurement don’t have to be frenemies anymore. Collaborative legal procurement teams streamline processes and reduce costs within their organizations. Legal tech is a key resource for these teams as they strive to negotiate and manage the full lifecycle of each contract within the organization.
If your company does not have a dedicated legal procurement department, don’t fear. Legal operations teams can still realize value from having transparent discussions with in-house procurement teams to determine their unique knowledge and strengths. By working together — and using the right technology — these teams can form a valuable partnership that results in more efficient work, higher levels of productivity, and material cost savings for the organization.