Carillion to drive panel firm work through new low-cost legal arm

Construction group tells panel to cut costs through Newcastle base

Carillion is to make all of its recently appointed panel firms use its new low-cost arm in Newcastle for commoditised work as the FTSE 250 construction group considers offering the service to other companies or law firms. 

The Newcastle base, known as Carillion Advisory Services (CAS), currently houses 60 paralegals providing support to Carillion on the commoditised elements of deals and other work, as well as providing legal aid advice to clients. 

The service was previously attached to energy services company Eaga, which was acquired by Carillion last year. It was brought under the remit of Carillion’s legal team earlier this year to take on in-house low-level legal work, including reviewing commercial contracts and non-disclosure agreements. It previously focused on legal aid, providing 40,000 hours a year of advice on debt, welfare, housing and employment matters. 

In addition to being used by Carillion, from January 2013 all 12 firms appointed to the company’s panel in September will be required to use the base for commoditised aspects of any work they take on for the company in order to cut costs. 

One panel firm, Clarkslegal, is already offering CAS services to some of its other clients as a lower cost resource. 

Company secretary and director of legal services Richard Tapp (pictured) is now looking at offering CAS services to other companies or law firms outside its core panel firms. Should the business expand significantly or move into regulated areas of law, it could in future be converted into an alternative business structure (ABS).

Describing the venture as the company’s Legal Services Act play, Tapp said: “We see it as a platform for us to develop for Carillion’s benefit, but also to see where it takes us as it begins to develop. It is a scalable model.” 

He added: “You only need to be an ABS for regulated activities, and the things we want to do are not regulated and therefore don’t require us to be an ABS at the moment.”

CAS, which housed 50 staff at the time of the acquisition, has already grown by 20% and there are plans to expand by a third again by the beginning of 2013, which would take it to around 80 people. 

The September panel review saw Tapp reappoint 12 previous advisers: Slaughter and May, Linklaters, Ashurst, Addleshaw Goddard, Clyde & Co (where legacy Barlow Lyde & Gilbert previously sat on the panel), DLA Piper, Pinsent Masons, Kennedys, Clarkslegal, MacRoberts, FBC Manby Bowdler and Reynolds Porter Chamberlain. 

All of the firms have been appointed for a two-year term, with panel firms currently working with Carillion on how to unbundle tasks. 

Carillion previously had an arrangement with CPA Global under which panel firms were encouraged to refer work to the outsourcing company on an informal basis. The construction group is now using CAS instead of CPA for this work. 

Carillion’s 2009 panel review saw Addleshaws, legacy Barlows and Kennedys joining the roster for the first time. At that point, the company had 14 firms on the roster.