Report 97102 Summary - December 1997

State Legal Contracts:

The State Could Reduce Its Reliance on Outside Counsel and Better Manage Contracts

Results in Brief

The State is involved in many matters requiring legal representation. The Department of Justice (DOJ), under the direction of the Office of the Attorney General, represents most state departments in legal matters. A few departments have been authorized by statute to employ civil service counsel for all their legal needs. Other departments employ civil service counsel for limited purposes, such as providing advice on administrative and program matters. The DOJ represents these departments in litigation.

During fiscal year 1995-96, DOJ client departments spent $29.6 million on outside counsel. Of this amount, approximately $12.3 million, or 42 percent, resulted from the DOJ's determination that it had insufficient staff to provide counsel. According to the DOJ, changes in laws and practices in litigation, among other factors, have greatly increased its workload, causing the DOJ to assign staff to different types of litigation than they would otherwise take on. Further, the DOJ asserts that its workload has historically exceeded its resources. These conditions have contributed to the DOJ's decision not to represent departments in litigation.

Moreover, although the DOJ may authorize departments to use other counsel for litigation, the law does not explicitly allow DOJ consent as justification for departments to contract with outside counsel for these services. As a result, departments that contract with outside counsel may not comply with the state law mandating use of civil service employees for work that civil service employees normally perform. However, a DOJ official believes that the DOJ's decision not to represent departments, together with the lack of other options, justifies the use of private counsel because of insufficient staffing at the DOJ. Nevertheless, recent actions by the State Personnel Board and courts cloud this issue.

We also noted that departments did not take advantage of opportunities to better manage contracts with outside counsel. Specifically, they have not exercised the management tools, such as litigation plans and budgets, already available to administer and control legal services contracts. As a result, they may have overpaid for some services or paid for disallowed costs.

The private sector has recently focused on improving the management and oversight of its legal contracts and developed the Uniform Task-Based Management System. The system is a standardized, industrywide approach to task-based planning, budgeting, and billing. It is being adopted by proactive corporations and law firms.

Recommendations

The State's current policy makes the DOJ the primary litigator for most departments. If the Legislature believes this policy continues to be appropriate, it should have the DOJ complete a study to determine if it has sufficient resources. Based on the results of such a study, the Legislature should authorize sufficient staffing and funding so that the DOJ does not decline work because of insufficient resources.

The Legislature should consider modifying state laws to permit departments to contract for litigation services when the DOJ declines to represent them because of insufficient staff and make the departments' use of management tools mandatory for legal services contracts.

The Department of General Services should give more direction and guidance to help departments better manage their legal services contracts.

Departments should better manage their legal services contracts by using management tools.

Agency Comments

With the exception of the Department of General Services (DGS) and the California Department of Corrections (CDC), the departments generally agreed with our findings and recommendations.

The DGS agrees with the concept of developing guidelines for managing legal services contracts. However, the DGS believes that a considerable amount of study will be required, thus making it a long-range project. Also, the DGS is concerned that under a task-based billing system, some outside counsel would be unwilling to work for the State or would charge more to provide this information.

The CDC generally agrees with the findings and recommendations, but believes that any management system to control the legal and business aspects of litigation needs to be flexible.


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