Introduction

Since the GFC in 2008, the legal profession has undergone significant change. Law firms have formed alliances or merged with international outfits in a bid to seek better market position and competitive advantage. There has also been a move to more flexible billing arrangements with clients. Additionally there has been a move by firms to pick up work in areas of practice in which revenues have remained relatively stable or have counter-cyclical capability, even where these practice areas have been previously seen as less lucrative.

Running parallel with these changes was the release of the Blunn Krieger Report. This emphasised the need for the Commonwealth Government to adapt a new approach to the management and provision of external legal services. Consequently the Legal Service Multi-Use List (“LSMUL”) was established in 2012. The purpose of this new general panel arrangement is to allow Federal Government Departments, Agencies and Authorities greater options for strategy and delivery of external legal advice.

With changes in the economy and an adapting legal market coupled with reform in the Federal Government, panel relationships has come a new market for law firms seeking both growth and a strong, stable client base. The Federal Government is the largest provider of legal services in the Australian market with external legal spend reaching $252 million in 2012. This has provided opportunities for firms with a ‘foot in the door’ through the LSMUL.

What has this meant for the Canberra market?

There has been a much greater interest from both Sydney and Melbourne based law firms wanting to grow into the Canberra market. However only two new entrants have had success growing into Canberra in recent years. These are HWL Ebsworth with the acquisition of a number of DLA Piper partners in 2011, and Maddocks with the acquisition of an Ashurst partner in 2012.

Has the implementation of the LSMUL changed things?

The answer to this question varies significantly depending on who you talk to. One thing is for sure - the bulk of Federal Government legal work is still being serviced by only a handful of firms. And despite the existence of the LSMUL, there are still only a small group of relationships maintained by firms with a presence in Canberra. Parcelling arrangements by Departments have meant a shoring up of work amongst these firms. Only a couple of firms external to Canberra have had recent success with tenders.

Have the new entrants on the general panel been successful in acquiring more legal work?

The jury is still out on this one. Certainly there are firms picking up work from Departments, Agencies and Authorities that prior to 2012 had not. But generally speaking larger matters are still serviced by the Canberra firms. The move into this new area of work will be, for many firms, a slow burn establishing relationships and gaining the trust of the Public Service.

So for firms looking to grow into this space in Canberra, what do they do?

This can only be answered with proper consultation and diligence done in areas of law for which they provide expertise.

Conclusion

Movement in the Canberra legal market and Federal Government client space has been limited in the last twelve months, and given a September election there is likely to be minimal movement until after that time. Expected changes will come once a new Government (presuming they do) comes in. Potential changes to public servant staffing numbers will mean a greater outsourcing of legal work and potential for greater opportunity for external legal providers in 2014. Areas of practice set to grow will be employment, policy and administrative law work, and privacy work, given legislative changes that will take place in February 2014.