A review into the procurement of Commonwealth legal services seeks to align how government agencies outsource legal work with how private sector does, in a bid to minimise the federal government’s legal spend, which last year hit a high of A$555m.

“The report finds that the current system of agencies individually tendering for legal services is very costly both to the Commonwealth and to external service providers,” Attorney-General Robert McClelland said. “The review puts forward a number of recommendations which the Government will consider carefully as part of our commitment to closely monitor legal services expenditure and achieve greater value for taxpayers’ money.”

Of the A$555m spent on legal services by government agencies, almost A$308m was spent on purchasing services from external legal service providers. The balance of $247m was largely attributed to the cost of in-house practices.

While government legal spend in the past decade has increased 285% – from A$144m in 1999 to A$555m in 2009 – the report notes that most of the expense is a result of significant changes in government policy including the development and implementation of national competition policy, whereby former monopolies are either exposed to competition or regulated in a manner designed to emulate what would occur in a competitive market.

Increased transparency and accountability of government agencies has also increased demand for legal services with the development of “well-informed and well-funded community and commercial bodies able and willing to challenge government actions.”

Authors of the report Anthony Blunn and Sibylle Krieger interviewed private sector organisations and determined that a more structured way of deciding what work would be conducted in-house and what work should be farmed out to a panel would be effective for use in government agencies. When work is outsourced, the report said that government agencies should more rigorously seek to negotiate the best price for legal work.

“Key to best practice in private-sector organisations is a clear definition and understanding of the role of in-house lawyers, a sound knowledge of the market from which external services are purchased, and the ability and willingness to cost work rigorously and negotiate strongly on the basis of that costing with both external providers and internal clients as appropriate,” the report said. “Finally that ability to rigorously cost work and knowledge of the market has enabled a number of private sector organisations to experiment with different models of service delivery, including alliance-like models in which risks and rewards are shared more openly than is the norm in Commonwealth legal services procurement.”