Midlands: The middle of somewhere

Severn Trent Water has seen big changes of late, according to general counsel and company secretary Bronagh Kennedy and head of legal Shazadi Karamat. As Karamat comments: ‘We are just going through a bit of a transformation as a company. We have a new chief executive and we’ve just announced that what used to be separate parts of our business – our waste and water teams – are now going to be one big wholesale operation.’

Consolidation has been the order of the day in its legal services too. A number of years ago, the firm cut its panel from around 40 external firms to just two, with one regional firm handling more commoditised work on a fixed-fee basis, covering low-lying prosecutions, litigation, commercial matters and specialist work, such as pensions. Meanwhile, a City firm acts on significant corporate and banking matters. Everything else is kept in-house because, as Karamat stresses: ‘We want the in-house lawyers to be our business people with a specialism in law, so what they’re doing is helping with the strategy and helping ensure that we are delivering our kind of business objectives.’

Being based in the Midlands pits the company against some stiff competition for staff recruitment. As Kennedy puts it: ‘Some of the other companies we compete against, for example Rolls-Royce and Jaguar, have a very sexy, exciting product, whereas water and waste can be a bit more of a hard sell. However, people are attracted to the long-term nature of our business and the important role we play in society as a whole.’

Change is on the cards again, as the legal team is planning a sourcing review in some areas. Says Karamat: ‘We think our arrangement is probably best in class – and we’ve noticed other big companies moving to our model – but we want to make sure that, going forward, that’s still what we want to do.’

If so, she continues, the group might look to move from more non-fixed-fee work to a fixed-fee basis. The team is very aware of the legal procurement patterns of regional competitors and also of the importance of building community. Says Karamat: ‘We’re all trying to benchmark ourselves, both as a legal team in-house and seeing what others do, so what we’re trying to do is build up relationships with companies that are similar to us, to see what we can get from them and equally what we can share with them.’

Here law firms can add value, she notes. ‘Law firms now also appreciate that they’re almost relationship-makers in that way and they need to become more of a player in getting GCs together and talking.’

What the team likes to see from a law firm, says Kennedy, is ‘quality of advice, strength and depth, commercial pragmatism and value for money’. Another important factor is the combination of a national and even international outlook, with a local touch. ‘It has to be a national and international firm but also have regional offices, because we are a regional company. A lot of the work we want to do is out of the Midlands and so we encourage our firms, where appropriate, to make it as Midlands-based as possible,’ says Karamat.

David Tatlow, the director of legal and democratic services for Birmingham City Council, defines best practice as ‘four Es’: economy, efficiency, effectiveness and engagement. Or to put it another way, ‘not simply reacting to demand for legal work, but actively engaging to try to assist departments to meet their own objectives’.

The spectre of ongoing cuts looms and the function has reduced from 280 to 200 staff in recent years, although it remains among the largest in the country. Efficiency is key and so Tatlow manages legal services ‘in much the same way as I would if we were in the private sector’ – looking at headcount to assess whether supply is matching demand. However, with around 7,000 matters a year – most handled in-house – the workload is ‘the same size as a medium private sector firm’.

Regeneration is one major driver of work, thanks to significant inward investment in the West Midlands, which has enabled projects such as the Library of Birmingham, Birmingham New Street Station and, in the near future, the High Speed 2 (HS2) railway. Tatlow says the council wishes its economic area to grow and to thrive, and to this end has recently adopted the Birmingham Business Charter for Social Responsibility, which supports local employment and buying locally. This extends to external legal services. ‘While these days there’s a great deal of information technology around, and you can engage in telephone conferences and goodness knows what, that’s not quite the same as dealing with whoever’s based locally on important issues, which often require face-to-face meetings,’ says Tatlow.

However, he adds: ‘This is not Birmingham only. This is possibly Birmingham first. We will look anywhere in order to provide the best possible service we can for the council.’

According to Tatlow, work gets sent out to private practice due to volatility in demand and because the council cannot afford to hold surplus staff. Areas where work is outsourced include regeneration projects, litigation and debt recovery.

‘I’m not wedded to the in-house service,’ he says. ‘Historically it has provided an extremely cost-effective service and that will remain the case. But there will be aspects of work that can be done more economically in terms of value for money and perhaps more effectively by the private sector.’

A legal services procurement process has yielded a panel for property, private finance initiative and public-private partnership work. But simplicity is crucial. ‘We’re dealing with a number of firms who have a very high public record of performance and satisfaction, and what I don’t want to do is put them through a long and complex procurement process, only to find that a number of them have not been successful and have spent money where it could have been avoided,’ he says.

Value for money is critical and Tatlow wants to see ‘an appropriately-sized team of the right advisers at the right level, with the correct skillset’. But ultimately, external providers must engender ‘a belief on our part that they are going to achieve critical milestones on projects – their ability, in other words, to perform throughout the project and contribute to solutions that stand the test of time.’

Healthcare at Home group company secretary and solicitor John Bradshaw comes from a very different sector – before he joined just under a year ago, he was at Tarmac Group. But despite being relatively new to the post, he has immediately got to grips with the task of building a legal department – practically from scratch. ‘This business has grown rapidly in a period of just over 20 years and now it’s got to a point that, really, it does need that in-house expertise to give it support.’

Top of his list of priorities is implementing improved governance. ‘I’ve come in from a big company background; I understand the need to have in place proper governance and controls, and therefore that’s an area that I’m focused on here – to get the right processes and procedures in place and to try and tighten up on the way things are done generally.’

Under his direction, a team of two interim lawyers, a part-time lawyer and a contracts administrator handle a range of contractual and distribution matters with the NHS, pharmaceutical and other companies. The team also ‘makes sure that we are, obviously, complying with all the requirements of the regulators’.

As for using external advisers, Bradshaw says there is a balance to be struck between using the external resource to the best advantage of the company and building up expertise internally – ‘Because I think that gives better value.’ Finding those external resources is another item on his to-do list. ‘I wouldn’t say we have a set panel; we are using preferred firms admittedly, but we need to review for the benefit of the company the way forward and this may be looking at those firms as well as other firms.’ This means that a panel tender is likely to be on the cards within the next six to 12 months.

When that happens, a firm’s location certainly won’t be a factor. Healthcare at Home’s base is Burton-upon-Trent, but ‘if you’re getting the right level of advice and service you want, I don’t think it’s key where the firm is located’, says Bradshaw.

For Bradshaw, getting the right advice and service from firms means ‘not having to closely manage every aspect of the work they’re carrying out, otherwise it’s just duplicating. As in-house lawyers, we obviously understand the legal world, and therefore they should be able to deal with us in a way that gets rid of the dross and just get on with the key legal points, so we can get to the answer quicker and save costs.’

Mark Pardoe is legal counsel at Worcester-based Namesco, a provider of domain names, hosting services and professional online solutions for individuals and businesses. Brands managed from the Worcester office include names.co.uk, Register365.com and poundhost.com, all of which are part of Italian domain name and hosting services provider, Dada Group. The group serves around 520,000 customers across Italy, France, Spain, Portugal, the UK and Ireland, and so its outlook is hardly confined to the Midlands.

As such, Namesco’s Midlands base ‘doesn’t have a huge bearing on the operation or the customer base,’ says Pardoe, although he adds that its geographical seat in the centre of the county can be useful. He has sole responsibility for legal in the UK and Ireland, although the company-wide legal team fields resource in Italy, Spain and Portugal.

Despite being part of a relatively small European-wide legal team, he does as much work in-house as possible, ‘just to make it the most cost-effective solution I can. And that’s proved to be the case’. His workload is a diet of general corporate and commercial matters, such as contracts, M&A, corporate governance, compliance and disputes. The latter can include alleged trade mark and copyright infringement, and even defamation, because, although the company’s involvement is solely in the hosting of websites, ‘as a hosting company, and a responsible one, we have a duty to make sure that our customers are on the right side of things, and that can produce involvement in disputes’.

Specific matters on the horizon for Pardoe are likely to be M&A – as the company is constantly looking to expand – as well as regulation, particularly in data protection. Other areas include pension auto-enrolment and employment. External counsel are often used as a sounding board or sense check.

Says Pardoe: ‘They’re very good at giving a second opinion on a deal or a contract or a dispute because you can be quite isolated in-house, particularly if your colleagues that you work with deal in other legal jurisdictions and don’t necessarily deal in yours.’

‘We don’t send enough out to justify a formal panel,’ says Pardoe. ‘There are a couple of firms that I would go to for work. I have a preferred supply list.’ Those firms have been selected either because of historical connections or through ‘other contacts, word of mouth and reputation’. Although non-traditional legal advisers aren’t currently on his supply list, he keeps an open mind, having co-authored Alternative Business Structures: The Regulation of Law Firms, a book published by The Law Society.

Being an internet company, where a firm is based is not a critical factor, although he says locality can be useful in areas such as property. But the nature of the issue dictates where he goes, because, as he says: ‘The internet is worldwide, isn’t it?’

The countrywide housing shortage in the UK is a major driver for housing developer Barratt Developments, according to group GC Tom Keevil. The main legal concern for his team is ensuring compliance with the company’s internal control framework. The sector is replete with risk, says Keevil, who stresses the commercial importance of adherence to the company’s own systems.

Despite an East Midlands base in Coalville, Leicestershire, Barratt has a national presence, which is reflected in its regional and divisional make up. This is replicated in the legal team, where Keevil asks his lawyers to focus more on the nationwide picture, leaving local support to external counsel. ‘We operate out of 27 offices, and I tend to try to keep the group function focused on issues that require a group standard to be applied and look to our panel law firms to actually deliver the first line of service,’ he explains. ‘The reason I do that is to ensure flexibility and to guarantee that we have people acting locally in communities that understand the issues that are local to that development as opposed to trying to imagine it from a long distance.’

He adds: ‘We really look to individuals as opposed to the firms themselves, but we will look to individuals that are able to be with our divisions, should they be needed at very short notice, and to work with them. Whether that means they are ten miles or 20 miles or 30 miles from an area, it doesn’t really matter, but if they were 200 miles or 500 miles away that would make a difference.’

Barratt organises its external legal support via a panel system. This roster of advisers is informally reviewed on an annual basis rather than via a formal review process.

So what makes the ideal adviser for Keevil and his team? He appreciates ‘lawyers that can apply a pragmatic and practical application to complex issues, and can work as an extension of the in-house team, but communicate advice in a way that it is readily understood and is cost effective’.

There are exciting times at Aston University and particularly for solicitor and head of legal services Victoria Pender, who is setting up a team from scratch. Legal services didn’t exist at the university until she joined in December 2013. As such, she is currently reviewing the requirements for the burgeoning team.

Currently it supports strategic projects, deals with commercial contracts and establishes ‘policies, procedures, templates, training and understanding across the university’. On the legislative front, ‘looming large on the horizon’ are next year’s new procurement regulations. ‘The consultation documents were published last Friday – they’re on my desk,’ she says, so soon Pender will be ‘looking at how they impact university training, training with my procurement team and just making sure we’re ready’.

Pender is clear on what an in-house function can bring to the table: ‘The value we offer is we help our internal clients understand their needs very fully. We’re not under pressures of time – there isn’t a clock running; we can talk about their objectives in detail.’

However, at the point when matters become specialist, they will go out. Pender comments: ‘We’re very clear on the questions we ask outside counsel and it just helps to control cost, to get the best possible service in relation to the quality of the advice you receive and it’s easier for both sides to understand what’s needed on a particular matter.’ Outsourced where needed are employment, property and construction, tax, charity and, less frequently, litigation matters.

The university has a panel arrangement which pre-dates Pender’s appointment, although she says: ‘I suppose with all in-house people that come in, they want to put their own stamp on things but also make sure the university is getting the best value.’ Nevertheless, she stresses the importance of knowledge and an established track record for external firms. Where they are based is very much secondary, but sector experience is key.

‘We want to deal with true specialists for universities, who are also experts in their field of practice,’ concludes Pender. ‘You’ll say: “How does this feel in the context of what others are looking at or what others are doing?”’

catherine.rodgers@gcmagazine.com, catherine.mcgregor@gcmagazine.com