Eversheds and manufacturing giant Tyco have agreed to extend their groundbreaking “sole provider” agreement for a further two years.
Eversheds and manufacturing giant Tyco have agreed to extend their groundbreaking “sole provider” agreement for a further two years.
Under the agreement, which began in January 2007, Eversheds became the sole provider of legal services to Tyco across its business in Europe, the Middle East and Africa.
The deal stripped the company’s legal panel from 280 firms to one and reduced its legal spend by a quarter. Under the original contract, the law firm was awarded a bonus if it could reduce the amount of litigation brought against Tyco.
However, Stephen Hopkins, head of international at Eversheds, says that performance-related bonuses will play no part in the new deal. He says that the bonus system has become “less relevant as the behaviours that were incentivised before have become entrenched in the mindset of their lawyers”.
“The billable hour tends to encourage certain behaviour. You are rewarded on the number of hours that you do and there is no reward for efficiency or value of the work that you are inputting.
We have tried to align the rewards and payment mechanisms to the behaviours that we want to see,” he says.
LexisNexis editor at large Elsa Booth says that although other firms have looked at adopting similar agreements, there are concerns over the long-term viability of such agreements.
“These deals give international clients their holy grail; a degree of control, an element of transparency, as well as the capacity to manage legal spend.
However, the inevitable tie-up to fixed-fees implicit within such arrangements makes firms nervous about jumping in; there is a lot of scepticism about how profitable such arrangements are in reality,” she says
