LPO refers to the process of procuring legal services from an external provider. There is nothing new about outsourcing legal services – companies have been outsourcing legal services to external law firms for ages. So why all the recent discussion about LPO?
What is new is that, today, we see the outsourcing of legal services across the globe. Technology has enabled access to offshore, low-cost pools of labour and has allowed efficient disaggregation of routine legal work which can be performed by these low-cost pools of labour. A familiar form of offshore LPO is the e-discovery service provider, who might have teams of lawyers working in India or the Philippines to perform relevance review of a major document collection for production in Canadian litigation.
LPOs began to emerge in the past decade as global corporations starting offshoring work to captive centres with large pools of skilled, low-cost labour. We now see company-owned captive centres, captive centres of law firms, and third-party providers. Some LPOs are niche players and some provide many different kinds of services, including document review services, contract drafting, transaction due diligence and legal research and analysis. The major players also offer onshore and near-shore alternatives at different price points in additional to offshore services. For example, you might have a first-pass review of documents occurring in India, with a higher level quality control review being performed by more costly Canadian lawyers in the LPO provider’s Canadian office.
The major benefit of LPO is the ability to substitute high cost labour for a combination of lower cost labour, superior technology and process maturity. The idea is to get the work to the most cost-effective provider of the service. LPO provides scalable services so that the work force dedicated to your project can increase or decrease as needed. LPO can also increase the speed of delivery of legal services, especially if staff is working across different time zones for 24-hour service. Finally, some in-house lawyers find that, by engaging an LPO provider, they can offload the standardized work and focus on more strategic work.
Bear in mind before engaging an LPO that, unlike an external local law firm, most of the lawyers that work for the LPO provider are junior foreign-trained lawyers. This staffing can be very efficient and keep costs down, but it also means that the client has to invest time and energy in training and nurturing the pool of junior lawyers who will perform the work.
Security and confidentiality
If you outsource legal services, your data will likely be travelling across the globe and become accessible to a variety of LPO employees and potential hackers. It is extremely important to perform due diligence on the LPO provider to ensure that its security infrastructure is up to standard and confidentiality agreements are signed.
When legal services are outsourced to a non-lawyer or a non-local lawyer, there are ethical implications related to the unauthorized practice of law. In order to not run afoul of rules of professional conduct governing the legal profession, it is crucial to have licensed lawyers supervising those performing the work. Further, it is wise to obtain prior consent from the client (or business leads, if you are in-house counsel) to use supervised non-lawyers.
Conflicts of interest
Make sure the proposed LPO provider performs a conflict search to ensure that its duties and obligations to you will not conflict with its duties and obligations to other clients.
LPO Best Practices
Here are some additional best practices for ensuring a successful LPO relationship:
- Be sure to consider the overall value proposition, not just the price.
- Assign a high level point person to manage the LPO relationship.
- Ensure that the contract holds the LPO provider to a particular standard of quality or service level.
- Test the LPO provider with a small, short-term project.
- Consider pricing alternatives, such as fixed fee for full-time equivalents or unit pricing for volume work.
- For each project, build a playbook and/or checklists so that there is always a reference for how the work should be done.
- Assign work through portals, as opposed to relationships, to ensure the work goes to the most cost-effective employee of the provider.
- For long-term contracts, mandate annual productivity improvements and incentivize innovation by sharing the benefits of cost-saving innovations.