SOUTH AFRICA: TIPS FOR BRIEFING LEGAL COUNSEL TO HELP WITH IT PROCUREMENT WHEN BUDGETS ARE TIGHT
It is an unavoidable fact that, in the current economic climate, many companies have tightened both IT and legal budgets. The resultant restrictions on the ability to appoint external legal counsel to assist with contractual arrangements when procuring important tech places companies in a very difficult position (especially internal legal counsel and IT teams).
Based on our experience advising customers on all facets of IT procurement, here are some tips to help:
- Do your own due diligence. Before choosing a supplier, your company should perform appropriate commercial, operational, technical and financial due diligences/ investigations on the proposed suppliers. This will help you to identify key risks relating to the supplier’s financial position, compliance with laws and your company’s policies and procedures, and to ascertain whether the offering meets your company’s needs and expectations.
- Review the insurance policies. You need to understand what your insurance policies (and the supplier’s insurance policies) cover and what they do not cover. This will help you to map out the ideal risk allocation between your company and the supplier, based on who is best placed to take on certain risks. Once you have done this, you will be able to focus your contracting efforts on addressing the key gaps. (However, you should bear in mind that the supplier’s pricing will likely be linked to its risks, so you will need to carefully balance pricing and risk allocation.)
- Front-load commercial negotiations. Key commercial points should be agreed between the parties before you instruct an attorney to assist. Ideally, these points should be clearly recorded in a non-binding term sheet. This will help to reduce the amount of time spent by the attorney drafting and negotiating the agreement. If you are not sure what the key commercial points are, you can ask your attorney to provide initial guidance in this regard.
- Focus on material projects. Only involve external attorneys for projects that pose a material risk to your business.
- Identify key issues. Identify the key risks and issues for your company. When you instruct your attorney, you can then provide them with a limited, clear scope of work so that your attorney can focus efforts on these risks and issues.
- Find an attorney who understands your business and the industry. If this is done, your attorney will have an existing understanding of the relevant tech and the key risks. Therefore, they will be able to provide nuanced advice on how best to address the key risks while taking standard industry practice into account.
- Communicate openly: Be honest with your attorney about your budget, concerns and the type of assistance you are looking for. Find an attorney that is a trusted advisor who will have your company’s best interests at heart and to be open and honest with you.
- Manage fees proactively. Ask your attorney to provide a fee estimate and to keep you updated on their fees. Read the fee estimate carefully to make sure you that your attorney has understood and recorded what is in scope and out of scope. Be honest with your attorney about the budget for the project and ask if they have any ideas as to how best to approach the fees. Most big law firms, including Bowmans, offer innovative pricing and legal tech solutions to help manage costs.
- Keep project management tasks in-house. Keep the responsibly for project management and administrative tasks in house, so that you do not have to pay your attorney for doing this work (or ask your attorney if they are able to provide a junior or free resource to help with this). Legal costs can escalate quickly when your attorney is required to send follow-ups for information, collate feedback from multiple individuals and coordinate diaries to schedule calls/meetings.