Ideas from the Front
Do It The DuPont Way
Its Much Vaunted Model for Saving Money on Outside Counsel Is Now the Standard
Posted Apr 1, 2004 12:04 PM CDT
By Terry Carter
In just over 11 years, the DuPont legal model has become enshrined as the way to get value for money in legal services. More than 160 corporations and government agencies have been in touch with E.I. DuPont de Nemours Co. to take a close look at the model, and there are a lot of variations at work around the country.
Devotees use fewer law firms and other legal-related service providers, develop a close relationship and a detailed playbook with them, then measure results to determine best practices. (See www.dupontlegalmodel.com.) DuPont was working with more than 350 law firms before it created the model. Now it uses just 41.
Thomas L. Sager, vice president and assistant general counsel at DuPont, estimates the model has saved the company about $121.5 million in legal costs since its inception. During that time, the original plan has changed, through fits and starts.
In the mid-1990s, for instance, DuPont pushed hard for dedicated lines linking its law-department computers in a network with the law firms and service providers on its preferred list. “We were building a locomotive and a jet flew over,” says Sager. “We saw the power of the Internet.” The dedicated lines were dumped for Web-based tools.
Now Sager is so excited about yet another advancement in the competitive, market-driven standardization of legal services that he calls it “a game changer.” That would be electronic billing.
TO THE NEXT LEVEL
DuPont, No. 67 on the Fortune 500 list, receives about 35,000 invoices annually for legal services, which is too much for even a resourceful corporate giant to parse for patterns and nuance. But now there is no need to transfer data from paper to computers. It is digitized all along the way from the preferred law firms, service providers and consultants to DuPont and back—and suitable for crunching.
“So there’s been a significant shift in control in how we review, what’s covered and what’s kicked back,” says Sager. “Now we’re in control like never before.” As part of this, law firms now must offer detailed justification for any hourly fee increases, which can only be considered annually.
Look for electronic billing to catch on elsewhere. While only 6 percent of corporate law departments surveyed currently use it, the number is probably poised for significant growth, says Robert J. Thomas, vice president for strategic development at Serengeti Law, which provides Web-based systems for tracking and managing legal work. About 28 percent of more than 270 respondents were considering the switch, according to the survey sponsored by Thomas’ company and the Association of Corporate Counsel. The same survey also shows that many companies want to continue cutting the number of outside counsel, now down to a median of 10.
“Firms that want to be in the surviving 10 should look to models like DuPont’s for the hallmarks of what their surviving firms offered that set them a cut above the rest,” says Frederick J. Krebs, president of the Association of Corporate Counsel.
Some critics fear that the model can be used to put an unreasonable squeeze on law firm compensation. That has not been the case with DuPont, says litigator Mark S. Stewart, a partner with Philadelphia’s Ballard Spahr Andrews & Ingersoll, which has been on the corporation’s preferred list since the beginning.
“The fundamental foundation is that the company is looking out for the interests of the law firm and the firm is looking out for the interests of the client,” says Stewart. “You see a lot of companies paring down the number of firms, but you don’t see a lot of them saying they want to fundamentally change the relationship. ... If we’re suffering under a fee agreement with DuPont, I can call and say so, and they make it right.
“That’s the difficult thing for a lot of other corporations to copy.”