I was asked over Twitter to explain some of this post again, especially the bit towards the end about how much individual firms get paid and how this might impact on quality.
We cast the original story in a fictional 43rd Procurement Area where the LSC have let 16 contracts
Lets have a look at 2 imaginary firms.
Firm 1
The first are good craft-lawyers, very experienced and had an excellent “own client” following before PCT. As we all know that is now irrelevant as clients no longer choose who they want to instruct. Rather cases are allocated, as equally as possible, between the 16 remaining contracted suppliers – perhaps on a taxi rank basis.
However as we all also know being good craft lawyers does not necessarily imply good business management skills. Here, our firm struggle and, desperate to remain in business, made an ill-judged low bid, arguably reckless as to the financial implications. The LAA used its powers to consider if this was a “suicide bid” but decided that, marginally, is was not. They got a contract.
Right now, say 18 months on, things are getting tight and the financial reality of their bid is beginning to bite. They were the lowest bidders in the PA, by a margin, and are consequently now the lowest paid of the 16. All the suppliers in the same PA no longer get paid the same “administratively set” fees, they get what they individually bid.
After speaking to their accountants, the only rational business response is to make “efficiency savings”. Some of these come in the form of redundancies, cheaper cars and other cuts that can be made against running costs, against expenditure.
The imperative on the income side of the equation is to “maximize profitability from standard fees”. This essentially involves cutting corners and doing less work on each and every case. The reduction in the number of casework staff also drives this. So, against all their professional instincts, they are faced with an economic reality in which they have very little option but to start snipping corners. This is happening organically, in any event, as the Partners are having to put in more and more of their own time. They are also getting badly stretched.
They do however begin to find that they just cannot follow the second element of their accountants advice, it grates with all their instincts. Consequently they simply work harder and longer. Perversely craft-quality, to a degree, improves, as clients get to see the highly experienced partners more than they previously did. Ultimately professional ethics and vocation have triumphed over rational economic behaviour and work/life balance.
Can they survive the 18 months (with perhaps an additional 2 year extension) to the next bid round? Only time will tell. If they cannot a good, long established, craft law firm will be lost.
Firm 2
These people are new entrants to Criminal Defence (perhaps think of 2 letters and a number) and this was one of a number of speculative bids made in a number of differing PAs.
They are only interested in a contract at the right price. They do not have a business, built over a professional lifetime, to protect. They therefore made a rational bid at a price which would deliver an appropriate return on their investment. There is no real gamble here, they have nothing to lose; no existing staff to worry about or a long lease to pay or the goodwill in a business, which forms retirement plans, to lose. When their ventures (of Olympic proportions) go moobs-up they generally survive and carry on regardless.
In this PA they were successful. In fact they were the last of the 16 to gain a contract before the drawbridge came up and got one with the highest fees in the PA, again by a margin. Whilst they have no previous CDS experience they understand the economics outlined by Firm 1’s accountants above; minimum overheads and expend the minimum effort required on each standard fee case, to maximise profitability.
To achieve this they have recruited a team of the cheapest lawyers available in the local market – most, desperate for a job. In addition they drive a team of equally desperate trainee solicitors by offering the carrot of a never-to-be-realsised training contract. In the police station they work probationary reps like pit ponies.
They are fully aware that there is no “market force” encouraging them to build an own client base, so quality and client satisfaction can be damned – they will get their promised 1/16th of the available work regardless. The complaints officer is busier than her counterpart in Firm 1 but the efficient operation of their procedure delights the regulators. (Firm 1 obviously do not do this well, with the obvious, opposite regulatory impact).
In craft quality terms they do a far worse job, but nobody is even interested in measuring this. Most importantly every single case they ruthlessly conclude, with lower notional costs, nets them a fee significantly higher than Firm 1.
They will prosper in the next 18 months, perhaps picking up an additional share of Firm 1’s work should they, and others, go out of business. A 2-year extension would be welcomed.
If you think this is overstated for effect read this from the MoJ “impact assessment” kindly tweeted by our friends at Crimeline (yes you may well need to read it twice)
Client choice may in certain circumstances (where quality is easy to measure and clients have good information about the relative effectiveness of different providers) give an incentive to provide a legal aid service of a level of quality above the acceptable level specified by the LAA, as firms effectively compete on quality rather than price. The removal of choice may reduce the extent to which firms offer services above acceptable levels. We will ensure that quality does not fall below acceptable levels by carefully monitor quality and institute robust quality assurance processes to ensure it does not fall to an unacceptable level. We will also work with regulators to ensure they are aware of such a risk and through the enforcement of the relevant Codes of Conduct, identify and address any shortfall in standards.
At least they acknowledge a risk to quality- I posed a question to Lord McNally today on this very subject, and his response was: “ancient professions are always going to be resistant to change. It is up to individual firms to come up with satisfactory business models for the proposals. We do not believe the proposals undermine quality”.
So we are arguing for the sake of it, apparently!