Playing with ACES
Posted Oct 7, 2009 9:25 AM CDT
By Jenny B. Davis
For the past four years, Jeffrey Carr says, FMC Technologies Inc. has been using versions of ACES for 100 percent of its legal work in the U.S. and for most of its international work. Carr says the company pays its lawyers with a Visa purchasing card, which ensures payment can arrive in as few as three days from invoice.See related profile: "Jeffrey Carr: Business Unusual"
Unconventional? Perhaps. But wait until you hear about the process (PDF) Carr has used to find new firms. (And look at the documents linked from this article.) It began with an invitation posted on Legal OnRamp, the social networking site for in-house counsel and lawyers.
Carr then gave responding firms a two-page questionnaire (PDF) with 13 yes-or-no questions—“If you want to drive lawyers crazy, give them yes-or-no questions,” Carr says with a laugh. Firms in the competition also agreed, if selected, to sign a “covenant with counsel” (PDF) setting out general behavior and expectations for FMC and hired firms.
In phase two, Carr posed more thoughtful questions: Tell us what you’re best at. Tell us about your average litigation budget, and how that budget would change under the ACES system. And Carr asked firms to respond to this final question—what makes you different?—with a 140-character Twitter post.
That exercise forced lawyers “to show us whether or not they could embrace new ways to do things and to see if they could be succinct,” he says.
Of the 52 firms that filled out the questionnaire, FMC invited 30 to answer the more detailed questions and the tweet query. About half of that group moved to phase three—in-person interviews Carr says are important to see whether there’s chemistry between his group and theirs.
Carr gave each firm “two hours to wow us and to woo us” and gave them carte blanche to sing, dance, role-play or just pull out the PowerPoint. A “value challenge” (PDF) document spells out what Carr expects these sessions to include. Carr says one firm did mix it up by reciting an ode it dedicated to FMC—“blatant pandering, but still nice,” he says.
By August, Carr’s team had its final list, beginning discussions on structure with Beirne, Maynard & Parsons; the Law Offices of Tom Fulkerson; Littler Mendelson; Seyfarth Shaw; Sutherland Asbill & Brennan; Valorem Law Group and Summit Law Group; and Womble Carlyle Sandridge & Rice.
Once a law firm is hired, ACES (spelled out in this brochure) works roughly like this:
FMC and the firm first agree on two basic issues: a definition of success in the dispute at issue and a set of time-based budget targets. During each phase of the case, the firm bills 80 percent of accrued fees and expenses, and the remaining 20 percent is set aside into a fiscal nether region Carr refers to as the “at-risk bucket.”
With ACES, the firm can get those bucketed funds (plus a base multiplier of up to 125 percent more in bonuses) according to a sliding scale based on when the predetermined success is achieved along the predetermined timeline. The base multiplier is higher earlier in the case and declines as time goes on.
If there’s work the firm feels it needs to do to achieve success that was not included in the agreed-upon timeline and budget, the firm is free to do so, Carr says, but the 80-20 ratio flip-flops, and the firm earns only 20 percent of its fees and expenses for the extra work, with 80 percent going into the at-risk bucket. Carr believes this makes the firm focus on activities that matter as opposed to activities that generate hours. A sample spreadsheet (PDF) shows the kind of detail involved.
Bucket access under the LT, or long-term, version—nonlitigation work of the type that could be done under a fixed-fee, retainer or hourly arrangement—is determined based on six report-card-style factors. FMC lawyers complete the report using an evaluation form accessed through the company’s matter management system, Serengeti Tracker. Under ACES LT, the bonus ranges from 0 to 200 percent of the bucket, meaning the firm can realize between 80 and 120 percent of its invoice.