Ahead of its UK legal panel review scheduled for 2017, energy giant BP has informed its current external advisers they will now be required to pitch for instructions worth over $1m in legal fees, in a bid to curb costs.
In a move overseen by longstanding group general counsel Rupert Bondy (pictured), go-to law firms will no longer be instructed for high-value instructions but must pitch against each other for the work. This comes on top of panel fee arrangements, encouraging law firms to drop their fees further to actually win work once on the legal panel.
The new rule follows increasing scrutiny of the oil major’s cost base after profits sunk 51% in 2015 to $5.9bn following a huge slide in oil prices. In BP’s latest quarterly results, the firm took a $917m charge for the 2010 Gulf of Mexico oil spill, taking the total to $56.4bn.
A go-to lawyer for BP told Legal Business: ‘They are desperate to push costs down given the current environment. Every few months Rupert Bondy does a video message and everybody has to watch like something out of a bad science fiction film and it’s always “here’s some new rules”. There is more competitive tendering for work and more rules internally.’
The lawyer added: ‘If a deal or a case is worth over $1m in 12 months then there has to be competitive tendering. They are not going off panel, in fact they are staying more on it, but this is their way of making panel law firms fight more for the work. It’s rather tiresome tricks.’
The order comes as firms prepare to compete for coveted positions on BP’s upcoming panel review in 2017. Currently, the list comprises Linklaters, Freshfields Bruckhaus Deringer, Herbert Smith Freehills, Norton Rose Fulbright, CMS Cameron McKenna, Ashurst, Simmons & Simmons, Pinsent Masons, Olswang and Addleshaw Goddard. The panel agreement covers all aspects of BP’s activity in the UK. Specialist firms are also typically considered for niche mandates.
A BP spokesperson told Legal Business: ‘BP Legal continues to focus on being strategic, rigorous and standardised in how it buys external legal services for the group and uses a variety of approaches.’
Bondy is recognised as one of a handful of GCs to use alternative tender methods when selecting his external advisers, holding a reverse auction in 2014 as part of its UK panel tender process.
The move comes as part of a renewed push on legal fees by big corporates, just as firms thought that fee pressure had rescinded and rates were on the rise. While RBS recently lost its battle to push down fees, offering a five-year panel place instead of three for firms that froze their rates with very little uptake, Barclays has also put pressure on its law firms as it undergoes a review. The bank, which Legal Business recently revealed put a ban on its 600 lawyers accepting corporate hospitality during the panel review, is expected to conclude its process by 1 July.
For more on Rupert Bondy subscribers can read his GC Powerlist entry here.