Legal Tender A Major Shock for Many Law Firms

LawFuel.co.nz - www.lawfuel.co.nz - Legal News - Some law firms will be reeling with the loss of Government business in the All-of-Government legal tender round announced by Economic Development minister Stephen Joyce.

Almost 80 per cent of law firms who have been successful in the All of Government tender round are sole practitioners or small-to-medium firms, but many firms have lost work and will be "transitioned out" from their previous Government work, according to documents released by the Government today. The tender round, which has been the subject of much criticism and will result in severe financial issues for some firms who missed out on retaining Government legal work, was announced today.

The Government expects to slash its legal spend through the tendering process undertaken over recent months.Eight seven of the 125 tenders received were unsuccessful.

The 'don't-come-Monday' letters many law firms received has incensed many of them. However earlier stringent criticism of the tendering process has altered somewhat since with MED advising firms that any firm on the panel for one, specific area of work may still be permitted to work in any area of law for Government. Just how the process will work in practice and how much the Government will save in reality remains to be seen.

Despite the much-trumpeted innovations with the tendering and interview process, many lawyers have been dismayed if not angered by the approach.

Further, it seems that the actual cost-savings that are sought to be delivered rest largely on savings achieved with charge-out rates, rather than other innovations to achieve greater efficiencies in legal services.

The tender process, which involved an online electronic negot5iations process was reviewed by PriceWaterhouseCoopers to ensure it was properly conducted.

The Ministry of Economic Development, who conducted the tender, said that 85 per cent of the firms tendering for Government work and who missed out had less than one quarter of their business with Government.Although the tender process will severely hurt many firms, with 14 who are over the 25 per cent 'threshold' who will be "significantly impacted" according to the MED.The Government intends working with those firms to "transition them" out of Government work.

The split of firms who were successful in achieving the competitive tender and who achieved a position on the 39-firm panel included six sole practitioners, 25 small or medium-sized firms and seven larger firms.

This is the first time the Government has used a single commercial tendering process to obtain legal services and it has significantly stirred the legal market, particularly among law firms in the capital.The overall savings the Government believes it has shaved off its spend is 18 per cent, although time will tell how correct that figure proves to be.

The proposed transition will occur in the new year.

ENDS

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