Summary: Your engineering & construction firm has grown over the last 20 years, to the point where you occasionally face costly, high-risk litigation on large projects. The CEO is concerned about spending $3Million on lawyers in 2020, and has asked you to lead an analysis of whether the firm should hire an internal legal team, or should continue hiring outside counsel as it's done in the past. The following represent (very simplified) steps in the strategic sourcing process. Read each section & put your inputs in the yellow sections. Note: In reality most firms have a combination of internal/external, but for this exercise you have to Identify Need Decide Make or Buy (if Buy) Select Arrangement Narrow Supplier Pool Select Supplier Negotiate & Implement Contracts Identify Need: As the firm's scale and revenues have grown, so too the volume of litigation has grown. The annual revenues and litigation expenses are shown below. The next few years are forecasted to continue similar growth patterns. Revenue vs Legal Costs Year 2010 2011 2012 Gross Litigation Revenue Expense ($000s) ($000s) $ 1,010 $ 25 $ 1,714 $ 100 $ 6,858 $ 200 $ 10,543 $ 258 $ 21,087 $ 890 $ 21,719 $ 664 $ 43,439 $ 1,789 $ 44,742 $ 1,587 $ 89,484 $ $ 92.168 $ 2,816 $ 129,036 $ 3,343 Legal % of GR 2% 6% 3% 2% 4% 3% 2013 2014 2015 2016 2017 2018 2019 2020 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $ S- 496 4% 2,734 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 3% 3% 3% Rev Legal Make or Buy: You have several friends who are executives at comparable firms in other regions of the country. About half of their firms have internal legal teams, while the other half regularly use outside counsel. It seems a typical inside counsel (lawyer) makes about $150k/year salary (assume $200k w benefits), and a firm your current size would likely need 12 lawyers. Looking at the annual spend analysis (above) and the approximate costs of building an internal legal team, do you recommend hiring an internal team, or continuing to use outside counsel? Why? Enter your response here. Provide your choice (internal or external), provide quantitative rationale, and other considerations that influence your decision. Select arrangement: If you chose external, what pricing approach (T&M vs FFP) is reasonable? Why? Would you go with a single outside legal company, or multiple? Why? If you chose to go external, write your considerations here. If you chose internal, simply write "I chose internal" in this space. 2010 2011 2012 2015 2014 2015 2016 2017 2018 2019 2020 $ 1,010 $ $ 1,714 $ S 6,858 $ $ 10,543 $ $ $ 21,087 $ S 21.719 $ S 43,439 $ S 44,742 $ $ 89,484 $ S 92,168 $ $ 129,036 $ 25 100 200 258 890 664 1,789 1,587 2,734 2.816 3,343 2% 6% 3% 2% 4% 3% $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 S- 4% 4% 3% 3% 3% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 -Rev Legal Make or Buy: You have several friends who are executives at comparable firms in other regions of the country. About half of their firms have internal legal teams, while the other half regularly use outside counsel. It seems a typical inside counsel (lawyer) makes about $150k/year salary (assume $200k w benefits), and a firm your current size would likely need 12 lawyers. Looking at the annual spend analysis (above) and the approximate costs of building an internal legal team, do you recommend hiring an internal team, or continuing to use outside counsel? Why? Enter your response here. Provide your choice (internal or external), provide quantitative rationale, and other considerations that influence your decision. Select arrangement: If you chose external, what pricing approach (T&M vs FFP) is reasonable? Why? Would you go with a single outside legal company, or multiple? Why? If you chose to go external, write your considerations here. If you chose internal, simply write "I chose internal" in this space. Narrow supplier pool If you chose to go external, what considerations will you factor as you short-list possible outside legal firms? If you chose to go external, write your considerations here. If you chose internal, simply write "I chose internal" in this space. Select supplier: If you chose to go external, what selection process would you use? Why? If you chose to go external, write your considerations here. If you chose internal, simply write "I chose internal" in this space. Negotiate Contract: If you chose external, what would you emphasize in the contract with the outside counsel? If you chose to go external, write your considerations here. If you chose internal, simply write "I chose internal" in this space. Summary: Your engineering & construction firm has grown over the last 20 years, to the point where you occasionally face costly, high-risk litigation on large projects. The CEO is concerned about spending $3Million on lawyers in 2020, and has asked you to lead an analysis of whether the firm should hire an internal legal team, or should continue hiring outside counsel as it's done in the past. The following represent (very simplified) steps in the strategic sourcing process. Read each section & put your inputs in the yellow sections. Note: In reality most firms have a combination of internal/external, but for this exercise you have to Identify Need Decide Make or Buy (if Buy) Select Arrangement Narrow Supplier Pool Select Supplier Negotiate & Implement Contracts Identify Need: As the firm's scale and revenues have grown, so too the volume of litigation has grown. The annual revenues and litigation expenses are shown below. The next few years are forecasted to continue similar growth patterns. Revenue vs Legal Costs Year 2010 2011 2012 Gross Litigation Revenue Expense ($000s) ($000s) $ 1,010 $ 25 $ 1,714 $ 100 $ 6,858 $ 200 $ 10,543 $ 258 $ 21,087 $ 890 $ 21,719 $ 664 $ 43,439 $ 1,789 $ 44,742 $ 1,587 $ 89,484 $ $ 92.168 $ 2,816 $ 129,036 $ 3,343 Legal % of GR 2% 6% 3% 2% 4% 3% 2013 2014 2015 2016 2017 2018 2019 2020 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $ S- 496 4% 2,734 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 3% 3% 3% Rev Legal Make or Buy: You have several friends who are executives at comparable firms in other regions of the country. About half of their firms have internal legal teams, while the other half regularly use outside counsel. It seems a typical inside counsel (lawyer) makes about $150k/year salary (assume $200k w benefits), and a firm your current size would likely need 12 lawyers. Looking at the annual spend analysis (above) and the approximate costs of building an internal legal team, do you recommend hiring an internal team, or continuing to use outside counsel? Why? Enter your response here. Provide your choice (internal or external), provide quantitative rationale, and other considerations that influence your decision. Select arrangement: If you chose external, what pricing approach (T&M vs FFP) is reasonable? Why? Would you go with a single outside legal company, or multiple? Why? If you chose to go external, write your considerations here. If you chose internal, simply write "I chose internal" in this space. 2010 2011 2012 2015 2014 2015 2016 2017 2018 2019 2020 $ 1,010 $ $ 1,714 $ S 6,858 $ $ 10,543 $ $ $ 21,087 $ S 21.719 $ S 43,439 $ S 44,742 $ $ 89,484 $ S 92,168 $ $ 129,036 $ 25 100 200 258 890 664 1,789 1,587 2,734 2.816 3,343 2% 6% 3% 2% 4% 3% $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 S- 4% 4% 3% 3% 3% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 -Rev Legal Make or Buy: You have several friends who are executives at comparable firms in other regions of the country. About half of their firms have internal legal teams, while the other half regularly use outside counsel. It seems a typical inside counsel (lawyer) makes about $150k/year salary (assume $200k w benefits), and a firm your current size would likely need 12 lawyers. Looking at the annual spend analysis (above) and the approximate costs of building an internal legal team, do you recommend hiring an internal team, or continuing to use outside counsel? Why? Enter your response here. Provide your choice (internal or external), provide quantitative rationale, and other considerations that influence your decision. Select arrangement: If you chose external, what pricing approach (T&M vs FFP) is reasonable? Why? Would you go with a single outside legal company, or multiple? Why? If you chose to go external, write your considerations here. If you chose internal, simply write "I chose internal" in this space. Narrow supplier pool If you chose to go external, what considerations will you factor as you short-list possible outside legal firms? If you chose to go external, write your considerations here. If you chose internal, simply write "I chose internal" in this space. Select supplier: If you chose to go external, what selection process would you use? Why? If you chose to go external, write your considerations here. If you chose internal, simply write "I chose internal" in this space. Negotiate Contract: If you chose external, what would you emphasize in the contract with the outside counsel? If you chose to go external, write your considerations here. If you chose internal, simply write "I chose internal" in this space