May 26, 2021

contracts contract lifecycle management manage contracts partners contract management services teamwork

All too often, I hear of the same conundrum from in-house commercial attorneys: a seemingly endless queue of work classified as “urgent,” with much of it reviewing identical contractual provisions again and again and resolving them pretty much the same way every time. Meanwhile, other pressing work – more varied and usually more complex – awaits.

What’s a law department attorney to do to reduce time spent on routine matters and have more time to focus on the non-routine matters?

Preconceived Notions

Often, law departments simply make a direct request for expertise – “I need a real estate lawyer who can help me negotiate simple commercial leases. Do you have someone like that in your network?” In such cases, our flexible staffing business searches our talent database, identifies suitable candidates, and presents a set of resumes. The law department then brings on one at a predetermined price. It’s simple and straightforward. But is it the best long-term solution? It depends, because there are other solutions, each with its advantages and challenges.

Staff Augmentation/Flexible Staffing

The “find me a lawyer who can do X” scenario described above is a good example of staff augmentation. A key benefit of this approach is that it is relatively quick. It’s ideal for those times when you have an acute need for experienced legal resources and require little to no “ramp time.” Also, it is economical: you can get an experienced lawyer at a fraction of the cost of hiring an outside law firm to bill by the hour.

A frequent challenge with staff augmentation is ensuring new staff is kept busy enough to justify the monthly fees. It’s also a challenge to ensure that whomever you bring on will necessarily fit well with the existing team – and once you start them on a particular workstream, it may be hard to replace them, at least as long as there is pressing work at hand. Furthermore, you bear the responsibility to supervise them and ensure their work is done well.

Usually, the staff augmentation approach works well. You pay for a resource; they do what you want. The acute need is solved, and the leak in the dam is plugged…for now. But the broader problem of routine work eating up in-house resources remains.

Enter Managed Contracts Services

Managed Contracts Services refers to a model where you outsource an entire business process (or sub-process) to a third party. This third party is responsible for accepting the inputs (e.g., a request for contracts support) and delivering the output (typically a fully negotiated contract signed by both parties). Managed Contracts Services is a better option than a flexible staffing model if you want someone to take full management responsibility for a scope of work/corpus of contracts and use their experience, expertise, tools, and techniques to make the process better, faster, and more cost-effective. At least these are the goals you can articulate to them in your quest for a partner. However, there are multiple ways to consume Managed Services, and each has its pros and cons.

Full-Time Equivalents (FTE)

Sometimes you want the “best of both worlds.” On one hand, you would love to have your company give you a blank check to hire more in-house lawyers without having to demonstrate a return on that investment. Of course, few companies would entertain taking on an increased fixed cost and greater headcount for an uncertain return.

What about trying to put in place an FTE model “wrapped” in a managed services contract? In other words, full-time resources via third-party?

For example, let’s say you felt that given the volume of work at issue, you would hire two mid-level lawyers and three junior lawyers if you had a blank check. You could turn to a third party and say, “I’d like to have you take on management responsibility for these medium-complexity direct procurement contracts, but I want five named individuals assigned to me. I’d also like them to be the same people all the time and support no other company but mine.” You get dedicated resources that, just like an employee, develop relationships within your team and wake up every day with their entire focus on your work. Presumably, this ensures the same quality of work you would get from an employee. Also, because anything labelled “managed services” is usually perceived by executive management as a variable cost that is adjustable as things unfold, you may encounter less resistance to bringing on FTEs than employees.

Sounds like the best of both worlds, right? Turns out, there are some challenges involved in this approach.

First, managing FTEs is not trivial. Moreover, typically you still must pay for the entire cost of the resource (including paid time off). If they get ill, there is no backup, just as with an employee. Also, as the volume of work rises and falls, you have no way to easily adjust the size of the team. At times, the mix of resources may not match the mix of work: high-complexity work might require a third mid-level attorney instead of the third junior attorney. How do you solve that?

Finally – and importantly – under this model, there isn’t anyone on the managed services team responsible for continuous improvement of the process. There may be technology enablement and dashboards for reporting, but since all the resources are “heads down” doing transactional work, no one is focusing on improving the process. To get that, you would have to pay for an additional resource. You could have FTE focus on that part-time. Whether that will result in meaningful process improvement is uncertain. What is certain is that it will lower their work capacity.

What’s the alternative?

A Managed Services Model with a Blended Team, Staffed by Your Partner

Usually, when companies think about managed services, they mean something inconsistent with the FTE model I described above. Most companies consider managed services to be any scenario where they relinquish management responsibility for a process/scope of work.

Under this model – where your services partner owns responsibility for the process and process improvement from Day One – your partner should also be responsible for how it’s staffed.

Let’s say you agree on the volume of contracts per unit of time (e.g., X contracts per quarter), the mix of agreements (e.g., 10% NDAs, 30% MSAs, 40% counterparty paper, etc.), the Service Level Agreements (SLAs) for turnaround time, and the reporting frequency and format. Your partner is accountable for the entire process. If the volume goes up or down or the work mix changes, it’s your partner, not you, that must adjust. Whatever the economic impacts, the responsibility for addressing varied circumstances lies with them, not you.

Making this approach even more appealing is that typically you can negotiate a fixed fee for a particular scope of work. This provides cost predictability and helps to hold your partner accountable for outcomes. It also gives your partner the flexibility to staff the work to ensure quality outcomes, training, re-training, and continuity of relationships with your team. Also, in contrast to the FTE model, where once FTE comes on board, it’s typically your responsibility to ensure they are ramped up properly. Using managed services relieves you of this responsibility – though admittedly, time spent by your partner ramping up staff takes time away from “just doing work.”

Crawl, Walk, Run

At Elevate, we have found the ideal approach to putting in place a managed services support model for routine contracting is a “crawl, walk, run” approach model. For example, a 90-day period to complete knowledge transfer to the partner, have them work on a 10-30% of contract volume to familiarize staff with the work, absorb playbooks and templates, and put escalation process in place is a great crawl/walk start. The run starts with a jog then a steady pace for the medium/long-term after 90 days. I will provide further details on these stages in an upcoming post, so stay tuned!