in-house attorneys to effectively negotiate
AFAs that made sense.
Vincent Montalto, senior counsel for litigation,
made the compelling argument that cases
could be bucketed and offered to the market,
fostering competition. To facilitate comparisons, he developed an innovative efficiency
algorithm that considers cost to reach case
resolution, hours billed to reach case resolution, and calendar days to reach case resolution; and adjusts for such variables as type of
allegation, alleged damages, jurisdictions and
Now, as part of its outside counsel guidelines,
BASF requires firms to submit AFAs for each
new matter. Remarkably, given the short
time frame, over 80 percent of its annual
legal spend is now under AFAs. They are
not discounted hourly fees but a range of
creative structures including fixed fees, cuff
and collars, phase-based fees, holdovers,
success fees and others. “If a firm tells me
they can’t give me an AFA, I will probably
go to another firm,” Lepore says. As a result,
but not an objective, a degree of convergence has occurred. BASF has concentrated
work with firms willing to shift to the new
paradigm, drastically reducing its overall
number of law firms. Lepore estimates that
twenty-five firms now do more than half of
the work. The company has also streamlined its outside counsel guidelines to reduce
superfluous content and to emphasize that
BASF expects billing for actual legal work
and not administrative tasks.
BASF has also converted a great deal of
its regional mass tort work to AFAs. This
required the buy-in of firms and insurers
alike. The company conducted several
in-person meetings and calls with insurers
and firms to discuss the shared value of
the AFA concept. Including the insurance
companies was crucial, says Lepore.
“Insurance companies have been late to
the game when it comes to AFAs, but they
also understand value and predictability.
By bringing them to the table, we gained
their support and demonstrated that their
bottom line was improved with AFAs.”
The legal department has also experimented
with reverse auctions, putting out an RFP
to three firms to bid on the national coordinating counsel role in a mass tort litigation.
This structure yields market efficiency while
preserving the company’s ultimate decision-making authority.
The company further reduced its outside
counsel spend by handling the launch of a
new brand and the divestiture of two global
businesses internally within the past year,
while continuing to handle almost all of
BASF’s transactional work in-house. In total,
BASF has reduced its legal budget by 48
percent year over year.
“We make sure that we are only hiring
outside counsel because we need their
expertise, not because we are too busy.
Overall, these initiatives represent a positive
change in how we do business as a legal
department at BASF.” says Lepore.
• Great use of data analytics and a proprietary efficiency
• 80 percent of new matters are covered by AFAs; interesting
to use them with legal vendors as well