Consilio in Action: An Exemplary Transformation in Legal Spend Analysis for a Global Pharmaceutical Company
Solving the significant challenge faced by a pharmaceutical giant negotiating outside counsel rates.
When a major global pharmaceutical company and longtime client faced a significant challenge with its annual outside counsel rate analysis, it turned to the consulting team at Consilio for support. The client had decided to transition this mammoth task from its procurement group to its legal operations group. In doing so, the team discovered a lack of historical data and a need for a fresh, effective process. This new process was needed to support the company’s goal of paying fair rates and avoiding higher-than-average rates from its firms. This is where Consilio came in.
Doug Ventola, a senior director at Consilio who leads the law department spend management practice, and Adam Storck, a manager at Consilio who works as a consultant in Ventola’s group, took the reins of this project. Storck played a pivotal role in executing the project while Ventola provided the strategic vision, having significant expertise in legal spend and benchmarking analytics, which he acquired through more than a decade of work with Consilio’s Sky Analytics tool.
The challenge faced was not simply retooling an existing process but creating a completely new one. To establish building blocks for the future system and processes, and ensure that past mistakes were not repeated, the team analyzed the old process and thoroughly documented everything that worked – and everything that didn’t.
The team utilized Sky Analytics, a powerful tool that enabled them to go deeply into spend data and determine appropriate and fair rates. Sky Analytics is a sophisticated platform that consolidates spend data, enabling users to identify trends, perform benchmarking and make informed decisions. The software was crucial in determining fair and appropriate rates for the client. Moreover, Consilio added value through a diversity, equity and inclusion (DEI) survey and report, gathering information to be leveraged as part of negotiation and decision strategies.
The client had previously followed a rudimentary method of approving rate increases based on a flat percentage. However, this method failed to consider several crucial factors such as position changes for attorneys within firms, economic and inflationary factors and previous contract agreements. For example, when an associate attorney was promoted to partner, that attorney’s rates naturally would level up as well.
With the usage of Sky Analytics, the process was transformed. The platform offered a more comprehensive, contextual understanding of various influencing factors like partner-to-associate ratios, the rates charged by the firm in the previous year and the percentage of increase requested. Additionally, the system provided visibility into the fact that larger firms often reviewed their rates every two years instead of annually, which led to larger incremental rate increases as compared to firms on an annual schedule.
Through a meticulous examination of rate increases, types of firms and firm sizes, the team equipped the client with valuable real data to negotiate with confidence. This more holistic evaluation ultimately fostered more effective negotiations with the law firms.
Beyond merely analyzing rates, the client tapped into the Sky Analytics database of $22 billion in benchmarking information. This expansive database, built over several years, proved invaluable for the client as a robust, data-driven basis for negotiations. Through this strategic approach, the client was able to negotiate an additional $4.6 million in potential savings.
“Our involvement didn’t just result in substantial savings, but it also brought about an organizational transformation as we built a system from the ground up. We kept detailed records of negotiation points and areas of pushback, offering a wealth of knowledge for future negotiations,” declares Ventola.
The project was completed in two phases over a 10-month period. The first phase, finalized in two months, involved setting the base rates. The next phase catered to additional firms not included in the initial wave.
To ensure sustainability, the team created a playbook for the client, providing a repeatable process and a record of calculations and data points. The playbook will serve as a valuable guide for future negotiations.
At Consilio, we believe in the power of relationships and trust. Our experience with similar companies, coupled with our existing relationship with this client, facilitated effective collaboration. We reassured the client with our commitment to deliver within the set time frame, and hitting every milestone bolstered that trust.
As Ventola explains, “During the project, we held weekly meetings to ensure smooth progress, promptly addressing any concerns or issues. Our focus was always to exceed client expectations, and I can comfortably say that the value-add we provided absolutely exceeded them.”
Storck similarly stresses the importance of trust. Building that trust helped mitigate the client’s anxiety and reinforced its faith in Consilio’s ability to handle the project adeptly. Storck adds, “We hope this project serves as a model for future collaborations, and we look forward to assisting our clients with more of their needs.”