The storage of paper records can be a substantial annual cost for legal and professional service firms. Typically contracts are for 3 or 5 years and DIY reviews can become mired in opaque tariffs, unfair roll over provisions and, our least favourite, hostage charges. Jason Adderley of Expense Reduction Analysts Legal Team (ERA Legal) explains:
There’s been much publicity about ransom ware in the last week with Lincolnshire County Council’s IT systems brought to a standstill by a malware infection. Legal IT professionals are acutely aware of the threat of data being encrypted and only released in return for a substantial amount of money.
But are law firms as aware of a more commonly found ransom note hidden in Document Storage contracts?
PERMANENT WITHDRAWAL FEES:
As a Document Storage contract approaches expiry law firms usually take the opportunity to review their expenditure and records management processes. Although there may be a migration of newly created files to digital storage (more about that in future articles!) it’s highly likely that there will be a legacy of paper files that need to be retained in off-site storage.
In the event a law firm chooses to serve notice on their existing supplier pending a competitive tender process, they will usually be presented with a schedule of permanent withdrawal fees. In some cases this may simply be charge to retrieve files and boxes, in others the schedule may list a whole host of supplier processes and costs.
The purpose of these proposed charges is to convince the customer that withdrawing files and moving to a new supplier would be costly, disruptive and not in the customer’s interests – Stockholm Syndrome if you like.
The highest we’ve seen so far this year is over £7 per box, and in previous years we’ve managed to reduce Permanent Withdrawal fees by over £100,000 by standing firm with suppliers.
PLEASE RELEASE ME:
Most firms will accept that there will be a cost to prepare files for shipment to a new supplier. But as most firms will only consider these costs every 3 to 5 years, how are they able to judge what is fair and reasonable and what is not?
We see a wide range permanent withdrawal fees from all suppliers in the market and recognise what is reasonable and what is not. It’s very common for us to encounter onerous fees proposed at the end of contracts. We consider such fees to be a form of ‘Hostage Pricing’, anti-competitive and probably unenforceable in law.
In fair and reasonable supply arrangements, customer retention should be based on good quality service and competitive pricing – not by holding a gun to the head of customers should they wish to change suppliers.
A SHARP EXIT:
You’d expect ERA Legal, rightly, to be able to improve your document storage tariff.
As part of this process we also endeavour to agree fair and reasonable permanent withdrawal fees and ensure that suppliers involved at competitive tender explain how such fees will be reimbursed to clients.
Crucially, as part of our tendering process we will insist on clear, fair and reasonable permanent withdrawal fees in the new contracts – so firms never have the same problem again.
HOW DO WE DO IT:
ERA Legal benefits from the expertise of some of the UK’s leading experts in the records management industry. Peter Lee is ex-Finance Director of the UK’s largest document storage company and has spent the last 6 years arranging cost effective, secure and compliant document storage contracts for legal and professional services firms.
Unlike any law firm ERA Legal is active in the Document Storage market every day. Suppliers know that we know what a commercial tariff and service level agreement looks like and respond to our tenders accordingly.
Here’s some examples of projects being implemented so far in 2016 alone, so if you find yourself in a hostage situation please let us know. We’d love to release you.
Annual Savings Identified
Midlands Law Firm – 55% – No change of supplier. Future Permanent Withdrawal fees substantially reduce.
London Law Firm – 43% – Supplier change. Future Permanent Withdrawal fees eliminated.
Midlands Law Firm – 44% – Supplier change. Future Permanent Withdrawal fees eliminated.
London Law Firm – 42% – Favoured supplier retained. Future Permanent Withdrawal fees substantially reduced.
WHO WE ARE & WHAT WE DO:
Jason Adderley’s Expense Reduction Analysts Legal Team (ERA Legal) works nationwide with law firms, patent attorneys, chambers and other professional services firms to identify and implement opportunities to save money, improve processes, appraise options and enhance service outcomes. The core team comprises seasoned professional services experts drawn from UBS, Hays & Thomson Reuters.