Since the release of the Commonwealth’s legal services multi-use list, firms have been vying for the attention of government agencies. But how successful have they been in winning work? Leanne Mezrani reports.

The Federal Government spent more than half a billion dollars on legal advice in the 2011-12 financial year.

If you were one of the 10 firms that collectively took 85 per cent of the total fees paid to external legal services providers (a total of around $280 million), you were laughing. 

Most other firms conceded that getting in with Federal Government agencies would be a tough slog. There were inefficient individual panel arrangements, public sector rules around gifts and benefits, and seemingly impenetrable firm-agency relationships to contend with.

Then came the Commonwealth Government’s legal services multi-use list (LSMUL) in June 2012, which promised to give 68 law firms, ranging from top tiers to boutiques, a chance to muscle in on a market that had been dominated by a handful of firms.

The aim of the LSMUL, according to the Attorney-General’s Department, is to enhance the management and delivery of legal services across Commonwealth departments by providing a pre-approved register of firms from which to procure legal services.

Nominated firms celebrated their inclusion on the exclusive list with positive PR and a pat on the back. Many had invested heavily in making their firm an attractive candidate for nomination and, since the announcement, have been eagerly awaiting the rewards.

Now, almost 12 months on, it seems there has been little change to how the Federal Government’s legal expenditure is divided up among law firms.

The exception is the emergence of mid-tier firm Maddocks, which, alongside top-tiers Norton Rose and King & Wood Mallesons, took two per cent of the Federal Government’s external legal spend last financial year. This placed the firm among the Commonwealth’s top-10 legal service providers.

The secret to Maddocks’ success is demonstrating a deep knowledge of the government sector, according to Simonetta Astolfi, partner-in-charge of the firm’s Canberra office. A firm can’t court a government agency in the same way it would try to land a corporate client, she says. It has to “demonstrate an understanding of the business of government”.

“It is broader than just the pure operational side, it involves policy and the political context and activities that go with that,” Astolfi adds.

Mark Henry, head of Maddocks’ government practice, also believes specialisation in the government sector is highly valued.

“You need to have fundamental knowledge of particular principles and how the government works,” he says. “If you don’t have government experience, it’s going to be hard competition.”

Maddocks has been building its profile as a government sector specialist for a number of years. In February last year, the firm opened its Canberra office with the key hire of Astolfi, who was working at Ashurst at the time. Since then, the firm has made a number of other key hires, including Greg Badcock, who left an in-house government role to join Maddocks’ Canberra office as a special counsel in July 2012.

Specialist talent, digs in Canberra and a place on the LSMUL is a winning formula, says Astolfi, who credits the combination of these factors with attracting 15 new government clients to the firm since it was named on the LSMUL last year, which equates to a 30 per cent increase in fees from Commonwealth clients.

Other firms have not been as successful. 

Slow start

Aitken Partners was named on two of the list’s four panels. However, unlike Maddocks, Aitken Partners doesn’t have a dedicated government practice or an office in Canberra.

Partner Andrew Blogg, who heads up the firm, says he is talking to government agencies and “beginning to get traction”, but has not secured any new clients. 

Blogg claims, however, that he wasn’t expecting to land government clients until pre-existing panels, some of which are still in use, are completely phased out.

“We’re not disappointed; we went in knowing it was a medium-term project,” he says.

Lex Holcombe, a Canberra-based partner at HWL Ebsworth, which was named on all four panels of the LSMUL, also blames the transition period to the new panel arrangements for the firm’s slow progress in attracting new government clients.

He also points to previous subcontracting arrangements with DLA Piper as having prevented HWL from building its profile in Canberra last year.

“Even though we had a good year [in 2012], there’s not a lot of visibility because we weren’t the prime contractor,” he says.

“We’re getting various parcels of work from government agencies in our own right and anticipate we’ll have some visibility [in 2013].”

While Holcombe is optimistic that HWL Ebsworth will land significant government contracts in coming months as the LSMUL creates a more level playing field for firms to compete, he says marketing services to government clients can be difficult for all firms.

“You can’t shout them to big lunches and so on because of their gift registers and you have to be careful of probity and respect their position ... it really is a skilled marketing exercise rather than a ‘chummy friends’ exercise,” he says.

Holcombe claims the conflict of interest rules that apply to public servants force firms to be more innovative in the way they connect with government agencies. 

“You really have to be relevant to their business, whether that’s through CLEs or speaking at seminars, or providing updates and secondments,” he says.

Cost pressures

But, Holcombe adds, it may ultimately come down to cost. Competitive rates will become increasingly attractive to government agencies that are “under intense spending pressure”, he says.

Holcombe even anticipates that these pressures will prompt larger firms to reduce their fees to maintain their position as market leaders.

While it remains to be seen whether top-tier firms will slash their rates, the big players in Canberra are demonstrating that they have no intention of making it easy for outsiders to get a piece of the market.

King & Wood Mallesons recently appointed a new special counsel and two senior associates to its Canberra office. The firm said in a statement that the appointments reflect an “ongoing investment in the Canberra market” and highlighted last year’s partner appointments of Paul Crawford and Dan Kynaston to the firm’s government practice.

“We’re focused on building our bench strength here in Canberra,” said Canberra head Stephen Jaggers.

Clayton Utz, which took the largest share of the Commonwealth’s legal spend among external law firms last year, also recently bolstered its presence in Canberra with the appointment of Andrew Leece as a partner.

Clutz has held on to its top position for the past four years, with only Australian Government Solicitor earning a higher percentage of professional fees from the Commonwealth. The firm is followed by DLA Piper, Ashurst, Minter Ellison, Sparke Helmore and Corrs Chambers Westgarth, which have also held on to their ranking in the list of top providers of legal services to the Government.

Question of quality

But Astolfi maintains that even though Maddocks came in at equal eighth position, it is well-positioned to move further up the list and even overtake some of the top-tier firms. She argues that top tiers may have the resources and quality lawyers to provide top-notch advice, but their size and the volume of clients on their books can compromise the quality of service they provide.

“More established firms can take clients for granted,” she says. “For us every client is an exciting opportunity and exciting way to form a new relationship.”

Blogg, on the other hand, says he is realistic about the fact that his nine-partner firm is unlikely to attract multi-million dollar government contracts. He admits that the lion’s share of work will continue to go to top tiers that have long-established relationships with government agencies. He is hopeful, however, that budgetary pressures will encourage government clients to seek out competitive alternatives.

“That’s what they say they will do, anyway,” he adds.

In any case, changes to the distribution of Federal Government legal spend are unlikely to occur before the September election, with the caretaker period known to put major budgetary decisions on hold.

So firms on the LSMUL will have to wait a few more months to find out whether their efforts to get on the Federal Government’s radar were worth it.