Brilliant Innovation in Municipal in-House Legal Teams

As we legal writers drag ourselves through the dog days of summer, we sometimes hit lulls in finding topics of interest. Lucky for me the United Kingdom continues to provide fodder for those exhorting North Americans to change the way legal services are delivered. And I count myself fortunate to have been able to connect with a number of players who are truly shaking up the legal services industry across the Atlantic.

While the spotlight on innovation is focussed primarily on the private sector, one municipal in-house legal team is starting to cause a sensation.

Geoff Wild has written a fascinating article on what he and his team have done, and continue to do, in Kent.

In Geoff’s words, “We simply asked: could local authority lawyers become players in the wider market and generate external income by charging or trading with, for example, council employees and members of the public, as well as private and public sector organisations? Over recent years, Kent County Council Legal Services has built up a thriving external practice based on providing high-quality, low-cost legal services to local authorities and public sector bodies across the country, which now accounts for more than 25% of its overall income and generates £1.5m a year.”

In essence, Kent “recruited and developed a flexible and highly motivated team of over 100 lawyers (many from private practice with a strong commercial nous) – a legal practice with a turnover of more than £7m and with at least 300 clients. Kent’s legal team is now well placed to match, and often exceed, whatever the private sector can offer.”

After some relatively recent amendments to local legislation, “solicitors employed in local government can act for any other organisation or person to whom the council is statutorily empowered to provide services. [and now have the] ability to generate significant income from … external sources… not only paying for the legal function, but also subsidising the delivery of frontline council services… [while also opening up] the potential for greater collaboration between local authority legal departments, raising standards and generating greater efficiency savings through achieving economies of scale and providing a healthy income generation stream – all of which will be of benefit to the councils, taxpayers and the community.”

According to Wild, in-house municipal lawyers faced with declining budgets, “need to adapt if they are to survive. The ultimate goal could be to enable local government lawyers to form their own regional ‘hubs’, providing legal services direct not only to the wider public sector, but also to the private sector.”

Wow!

It seems I’m in the wrong country.

Comments

  1. Interesting initiative. Is there an argument that Kent Legal can provide lower rates because they have taxpayer-subsidized overhead, or at least overhead at a lower rate than would be available commercially? I know that some businesses that bid on service contracts in Canada complain if any part of government joins a competing bid, on the basis that the cost of the public entity’s services are picked up by taxpayers.

    OTOH it may be simply that public body’s expected profit levels are lower …

  2. David R Johnston

    It is indeed refreshing to see public sector in-house teams innovating. It is not all that unusual though. In safety certification in the UK, for example, quasi-legal and compliance teams set the pace for contractor and construction certification teams some years ago now.

    A few assumptions about the move to deliver local authority law beyond one region or authority could do with challenging, however.

    1. It is assumed bigger = better and wider networks deliver cost effectiveness that inevitably result in the ability of the lead partner to ‘subsidise’ the delivery of (its) front line services. There is in effect an assumption that this work is and will always remain profitable, certainly for the lead provider and by extension to all. Usually when consolidation is being forced upon a function it is because cost pressures are accelerating and profit may be maintainable but it is also inherently less ‘inevitable’. What about junior partners to these arrangements, however, where the scale economies may not be so quick or reliable?
    2. Having just seen what happens when retail banks have a public funded ‘get out of jail card’ – why are we thinking any other variant of this is a ‘good’ thing. If it fails, who picks up the tab? The lawyers? The Law Society? Indemnity funds? Who is lobbying for the full protection of the Kent tax payer against downsides here? Another case of who polices the police perhaps?
    3. ABSs aside, it seems odd that some equivalent at least of Pannone’s Connect system for referring on business between peers has not been available to public sector. It seems a no-brainer, and frankly is quietly outperforming both the high profile new UK franchises and the assorted disruptive legal consolidators. It’s not new, but it’s also not clear that much more than this approach is genuinely what is required to solve the problems that local authority law may be facing.
    4. Hub teams for local authority work across several regions may well be a ‘good thing’ as at the very least it adds a freshness to the in-house legal diet. The lesson in neighbouring areas, however, such as HR & Payroll systems is that once decoupled, they very quickly devolve entirely and, yes, become if not parts of, then prospects for the likes of Capita. To whom would the proceeds of sale go? Why would there not be some? Does it inevitably have to be the resignation and poach route that strips the equity value out of the public sector and into the private sector by the back door. I’m not making a judgement on whether that is good or bad – it is the preferred method of M&A in the law firm private sector in the UK after all. It’s just that this expertise is established with public funding, nurtured with public funding, focused on public needs, and insured with public funding; it is qualitatively not the same as the ‘kill what you eat’ private sector.

    I wish the 300 lawyers in the Kent team well. I hope the £4.7bn Capita legal services teams do not play hard ball with them, just to prove that ‘things that go up, can also go down’. Why should they after all, a long game will be in their interest. But who’s asking the hard questions about indemnity, portability and non-competes? If no-one is – then yes – UK lawyers and commerce should start making the anti-competitive case with some force.

    Will they? probably not, but my guess is one of these ‘hubs’ will find itself declaring UDI in the not too distant future. Its happened in compliance several times already. ABSs may facilitate this – but they’re not needed to do it, frankly. None of the cash went to the tax payer. The lure of the independence and equity cash may just prove too strong when stacked against the delights of evening council chamber drudgery.

  3. I agree with David, it seems like a swell idea to eliminate some of the competition and increase the margins for the better placed. And unfolding like Max Weber predicted: continued rationalization, his allegory of the iron cage, with little or no benefit except for the raptor-like 1%.