Local authorities are coming together to purchase legal services. Derek Bedlow looks at the reasons and the benefits

The lot of the local authority lawyer has become a challenging one. Councils, and their heads of legal up and down the land, are being asked to cope with ever greater demands on their departments’ time – without the requisite increase in resources. The increasing involvement of the private sector in the delivery of facilities and services is also making new demands on the skill sets and resources of public sector lawyers.


Local authority legal departments are, to use the business vernacular, having to work smarter as well as harder. One technique to square this particular circle is for local authorities to club together to extract greater value from the external legal advisers on which they increasingly rely for both their expertise and capacity.


At the end of 2004, the Greater Manchester borough councils of Stockport, Bury, Oldham and Rochdale became the first local authorities to use their combined purchasing power to negotiate a single deal with regional firm Cobbetts, which became their preferred legal adviser for the bulk of their external legal work (see [2004] Gazette, 25 November, 7).

This model was followed by Wellingborough and Kettering district councils in the East Midlands, and in Essex, where the county council combined with district councils to procure legal advice on waste management issues.


Then, last month, the east London boroughs of Newham, Tower Hamlets and Waltham Forest set the seal on the largest joint legal services procurement to date (see [2006] Gazette, 2 February, 6). Following a tendering process which began with 40 applications from law firms, the three local authorities – which between them spend up to £3 million in external legal fees per year – appointed two legal panels. The childcare panel comprised Nottingham-based Browne Jacobson and specialist childcare firm Childlaw, while a second panel, made up of regional firm Mills & Reeve, City firm Trowers & Hamlins and Westminster practice Sharpe Pritchard, was set up for other work including property, planning, private finance initiatives, employment, housing, prosecutions and civil litigation.


The local authorities will monitor the performance of the panel firms at quarterly meetings, as well as an annual review. The initial panel contracts will run for three years, during which time hourly rates will remain fixed, and further discounts will be applied when the aggregated legal fees from the three authorities reach a certain level. The actual figures are confidential, but the local authorities concerned are happy that they have achieved ‘a very good deal’. There will also be operational cost and time savings, as legal departments will be able to send major pieces of work without having to run a tender process each time.


The local authorities hope to make further savings through greater co-operation with each other. Panel firms will inform the other local authorities when they have given advice on a matter to one of them, so that all three can benefit. ‘We hope that the joint procurement will enable us to work more closely together and share our experience, so that when we come across a problem, we’re not individually paying to find the same answer,’ says Newham’s head of legal, Helen Sidwell.


One common denominator of both the Greater Manchester and London procurement projects is that both had one consortium member clearly leading the programmes – Stockport and Newham respectively. Newham appointed a specialist contract lawyer to draw up the agreement.


‘It needs one authority to take a clear lead and get the other councils to buy in,’ says Ms Sidwell. ‘We could have involved more councils, but the process was new to us all and we weren’t sure how much time it would take up.’


Although individual councils have their own different financial regulations and authorisation procedures, the only major issue in the way of putting the agreement together was finding the time. ‘It’s not that complicated as long as you agree which areas of work are going to be included,’ says Ann Drake, practice manager at Tower Hamlets’ legal department. ‘There was a meeting between us where we compiled a “shopping list” of work we would put out to tender.’


These kind of arrangements are relatively easy for local authorities to put together, as councils generally operate in parallel rather than in competition with one another. That means the potential for problems with confidentiality and conflicts are considerably less than they would be for commercial clients. Nevertheless, conflicts of interest can arise between neighbouring authorities, particularly in social services cases, and both procurement partnerships have provisions in place to deal with such situations when they arise.


None of the contracts prevents local authorities from instructing firms outside the respective panels, and in the case of the east London partnership, the contract allows for the use of information barriers within panel firms where appropriate.


The Greater Manchester project has been up and running for a little over 12 months now, so far without problems. ‘It’s gone very well, in fact probably better than expected,’ says Stockport’s head of legal, Paul Stonehouse. ‘In my view, it is the way forward for local authority legal departments. It is no longer feasible for every local authority to continue to do all of its legal work in-house.’


One key difference between the Greater Manchester and east London partnerships is the number of firms involved – the latter chose three firms to be on its main panel, with a further two on the social service panel, while the Manchester councils preferred to have one firm as its main adviser and then have a shortlist of four more for occasions when either European procurement rules or other circumstances require that a beauty parade is held.


Although the London councils entered into the process looking to appoint just one firm for all their work, their research raised concerns that a single firm may not have the resources to cope with instructions from all three clients. The panel was also subsequently split in two because of the lack of firms that could handle both social services and other more general work.


The criteria applied by both sets of local authorities were similar – price, experience of the firm and individuals within it, capacity and the ability to provide ‘added value’ services such as two-way secondments, access to libraries and knowledge banks, and the provision of training. There is far more to these joint procurement projects than simply getting a discount for buying in bulk, Browne Jacobson partner Sarah Erwin explains. ‘We looked at their aims and objectives, and looked at how we could make them more effective without trampling on their resources.


We made sure that we could align ourselves as an effective partner to the local authorities.’


The close relationships that both consortia have put in place with their panel firms mirror the ‘partnering’ relationships that have become widespread between commercial companies such as BT and Barclays Bank and their legal advisers. This, says Mr Stonehouse, is one reason why the Greater Manchester councils appointed a single law firm. ‘We didn’t think it would be feasible or fair for the external law firm to put the partnering arrangements in place if we were going to have a preferred supplier arrangement with more than one firm,’ he says. ‘The exchange of ideas and information, and the formal and informal support we get from Cobbetts, has proved to be very valuable.’


There are signs that the increasing collaboration between councils will lead to more formal co-operations between local authorities. ‘Over a period of time, we want to work more closely together because we are all giving similar advice to our clients, and there is scope for further rationalisation and building more expertise,’ says Satish Mistry, head of legal and democratic services at the London Borough of Waltham Forest.


‘For example, we are all struggling to find planning lawyers, but if we got together, we could build some good capacity and pay better rates. There are professional issues to be addressed, but that’s the logical way it is going. Over time, you could see one legal department rather than three.’


Stockport and the other councils in the Manchester consortium are already set to take this concept forward, with plans to establish an independent joint vehicle between the four councils to increase their capacity and expertise. The scheme is at present at the feasibility study stage, with the councils and Cobbetts in talks with the Office of the Deputy Prime Minister, the ministry with responsibility for local government.


Meanwhile, Essex County Council is even further down the track of combining its legal function with that of another local authority. It has set up a joint unit with Harlow District Council’s legal team, which will see some of Harlow’s lawyers move into the county council’s Chelmsford offices, a process that Essex’s head of law and administration Philip Thomson hopes will be completed later this year.


‘It is beneficial to the local authority if their legal departments become bigger so that they are able to invest more in their capacity,’ he says. ‘Local authorities have a complex set of legal needs and legal departments increasingly need a wide base of expertise and specialisms. Combining our legal functions makes us more fit for the “marketplace” that we serve.’


The catalyst for much of this activity has at one end been the Gershon Review, commissioned by the Treasury and published in 2004, which called for councils to improve their operational and back-office efficiency in order to release more resources to front-line services. At the other, the greater flexibility granted to councils by the Local Government Act 2000 and the ‘joined-up’ approach that it and other policy initiatives are promoting, have given councils the powers and comfort to find more innovative ways to achieve results.


Much greater collaboration and formal links between local authority legal departments now seem inevitable. Another idea being mooted is that individual councils could develop their legal functions as specialist centres of excellence, and then cross-sell their services to other councils. The only question is: how far will it go?


At present, many local authorities are still feeling their way towards meeting the requirements of the Gershon Review, and considering how they can cater for the growing demands placed upon them by their clients. ‘There is a consensus that we need to work together more closely, but there are different views about how we go about it,’ says Mr Thomson.


One response to this comes from the Law Society’s Solicitors in Local Government group (SLG), which is in the process of appointing a number of its officers to co-ordinate the sharing of good procurement and collaboration practice between legal departments.


However, now that most of the legislative barriers to flexible working and organisational change have been lifted, the main limitations seem to be political and cultural ones within the local government sector itself. Some fear that combining legal functions will lead to local authorities, especially smaller ones, losing control of their legal advisers, while others are concerned that procurement schemes such as the ones in London and Greater Manchester will lead to a greater use of external law firms and the diminution of the role of in-house lawyers.


SLG chairwoman Helen Liddar says: ‘An area of concern for some authorities may be to retain some skills in-house in the area of law for strategic purposes, but joint practices between authorities do not mean a loss to local government specialist knowledge for the corporate hub and senior management team, But what is important is that local authorities receive high-quality legal advice from specialist local government solicitors who really understand the needs of the authority.’


The future of local authority legal provision is very much in a state of flux. But what can be said with some certainty is that innovative schemes such as those in London and Manchester will be very much part of that future.


Derek Bedlow is a freelance journalist