Selecting Compliance Counsel

Originally published by tfoxlaw.

I have often wondered who is FCPA Inc. and perhaps even how I might join this seemingly august fraternity if they do allegedly make so much money, as some commentators regularly deride FCPA Inc. for the seemingly outlandish fees they charge for doing Foreign Corrupt Practices Act (FCPA) investigations, remediation, negotiations with the government and the provision of other FCPA or compliance services. Yet there is another way to consider how companies could obtain their compliance services. I recently read a couple of blog post by James J. Stapleton, the Chief Business Development and Marketing Officer at Dickinson Wright PLLC, where he laid out his thoughts on how an in-house counsel can think through obtaining legal services. I have adapted Stapleton’s articles for the compliance practitioner.

In a blog post, entitled “Selecting law firms to propose on your work”, Stapleton reviewed how you might think about law firms you might want to bid on your legal work. He initially looks at the law firm perspective when he says, “I have known some very successful law firm partners who feel that the most important question during the proposal process is not “what does the client want?” but “who else is being considered for the work?” Why? Because everything law firms do is affected by their competition; their fees, their service mix, their client care and all other elements that make up the competitive profile of a specific law firm. Even if an attorney has just a rudimentary understanding of the competition, he should have a strong idea as to their respective strengths and weaknesses.”

Stapleton believes that as an in-house counsel and purchaser of compliance services, it benefits you to do two things to improve your chances of landing the best relationship. First, if you only have two or three firms proposing, you should not share the names of all bidding firms, particularly if they have similar profiles. If you have four or more firms (assuming from different categories of legal service providers), then he suggests going ahead and sharing the names of all competing firms. He then lays out some ranking criteria for you to consider when you are getting ready to request bids for your compliance work.

• Leader in the field. The firm should be considered the natural leader for your compliance work. He does note however, that this “may be among the priciest of alternatives.”
• First Challenger. The second firm you consider, option #1a to #1. It should be almost as good as the leader for your work, and even superior in some important ways, but perhaps not quite as impressive a brand name in FCPA Inc.
• Smaller firm with a more optimal cost/service mix. If the first two firms are in the AmLaw 100, this is your AmLaw 200 choice. It should still be an exceptional firm with a solid if not great reputation. However Stapleton notes, “it has some holes, but will have a more appealing fee structure in comparison to services needed.”
• Maverick Massive. Given the fact that AmLaw 100 firms have taken a beating on fees over the past few years, some of them may bend over backwards to attract clients. The local office of a large national or international firm may not match up as well as the other competing firms based upon local resources, but they are hard to beat if they decide that they really want a client. Use this economic reality to negotiate a more palatable fee structure.
• Non-traditional firms. Some firms, such as Baker & McKenzie, offer a compliance consulting practice that you can engage. There are other firms who have created similar consulting arms. While they are usually run by lawyers, as entities they may not be able to provide the attorney/client privilege, yet you may have compliance related work where this is an acceptable trade-off.
• Boutique. Just as my law firm, TomFoxLaw, is a boutique law firm, there are others in the compliance space. Many of these types of firms can work with you on creative billing arrangements or fee structures yet can bring to bear some of the top compliance talent in the country. (Think the Volkov Law Group.)
• Incumbent. Most interestingly, Stapleton says that even if “you may be privately thinking of them as “the-firm-that-I-am-about-to-fire,” but I would include them in the mix for two reasons; first, because the incumbent is often willing to bend over backwards to retain work, particularly if they are just starting to realize that there are service problems in the relationship. And second, you’ll want the other firms to know that the incumbent is being considered. That will help keep them honest.”

He ends by noting that you should let each of the firms or consulting entities know other firms or consulting entities you are inviting to bid. As the law firms should know their competition well, it serves for you as an indicator to the law firms as to what you consider to be important criteria for your decision. Stapleton believes that “each of these steps are designed to help you find a mix of law firms that is optimal for your needs. The legal profession is competitive, and as a consumer of legal services you can leverage that competition to achieve the best possible output. Your company’s leadership will generally support this approach, given the attention you are paying to being cautious with corporate resources.”

In a second blog post, entitled “The RFP for Outside Counsel”, Stapleton laid out his thoughts around some items an in-house counsel should require from a prospective outside compliance counsel in the form of a Response to Request for Proposal (RFP). He suggests that every RFP for outside compliance counsel you send out should contain some basic elements, as follows:

1. Description of compliance services (what your company needs).
2. Desired pricing format (fixed, time & expense, contingent, hybrid, etc. and whether you want a variety of options or a single fee).
3. Team biographies and expertise specific to your key needs.
4. Representative experience base.
5. Conflict check procedures and timeline.
6. Describe their access to your compliance team in order to address questions requesting clarification of your needs specific to their RFP response.
7. Timeline of the compliance selection process. The timeline should include Q&A, accessibility to compliance counsel, response times for each stage of the proposal, etc.

Once he got past the basics, Stapleton added some further requirements for a RFP:

1. Description of their desired client service, client satisfaction and formal feedback processes.
2. Questions surrounding how a new law firm will learn your company, industry, competitors and markets and who pays for the time involved in that process.
3. Preventative measures that the firm commonly employs with clients; e.g.: What training does the firm offer clients?
   • How do they handle planning sessions?
   • What training does the firm offer clients?
   • What is their approach to reviews of your internal processes?
   • Who do they handle risk assessments?
4. How do they communicate with you about fees, in terms of fee raises, billings above the proposed fee, collections and so forth?
5. Description of their quality assurance processes.
6. Description of their team management process; e.g.,
   • What will be the level of attorneys assigned to your work?
   • What is their criteria for selecting the attorneys?
   • What degree of control do you have over attorney selection?
7. Describe their specific experience in your industry, including an understanding of your business drivers.
8. Some clients map out the decision process for law firms. They may give the firm a formal list titled “Here’s what it will take to win our work.”
9. Separate from bios, a client may require Subject Matter Experts with specific qualifications.

Finally, for companies more mature in the RFP for compliance services process, Stapleton added some “more far-ranging sections on their RFPs, including”:

1. A more tightly defined description of compliance services (what you need, more refined)
2. A formal service expectations agreement. If the client drafts their service expectations, they will have greater controls over their actual service levels.
3. Along those same lines, some clients request bilateral client feedback. In other words, they request not just client feedback forms for themselves, but they request external counsel to rate themselves, then compare the two responses. Makes for very fruitful discussions.
4. “Describe how (name of firm) would approach…” (describe three situations; one past that didn’t work out, one present, one likely to occur in future). In other words, treat the RFP as a learning experience. Get some insights as to how the new firm is likely to approach your legal issues.
5. What is your proposed team composition, how was it determined and who determines it in the future?
6. Give examples of business acumen; e.g., business advice you have rendered with respect to legal issues. The best service providers are additive to the business, they will have a broader understanding of the business problems surrounding your legal issues.

I particularly agreed with Stapleton’s final touch in which he says you should always “ask the question: “What will we lose if we don’t select your firm?””

I found Stapleton’s ideas very intriguing for the Chief Compliance Officer (CCO) or compliance practitioner. He certainly lays out some strategies you might be able to employ to help ameliorate the cost of your compliance services, even if they are obtained from the amorphous FCPA Inc. Finally, if FCPA Inc. is accepting new members, please let me know as I would love to join y’all.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2015

Filed under: FCPA, Legal Fees, Outside Counsel

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