Corporate Counsel Q&A: Construction 2012

Who's Who Legal interviews Matthew Flood, general counsel of Balfour Beatty, one of the world's largest FTSE 250 construction companies. He discusses the requirements and changing role of his job.

Matthew Floord

Name: Matthew Flood

Position: General counsel – services division

Company: Balfour Beatty, England

Sector: Infrastructure

Number of employees: 50,000

The economic challenges of the past few years have put many players in the construction industry under strain. Governments have cut infrastructure projects and reduced public spending for public-private partnerships. Despite this gloomy outlook, opportunities can still be found within the sector and emerging markets are predicted to account for the majority of the sector’s growth by the end of the decade. Many companies are observing this global trend and subsequently adapting their business strategies to take advantage of the opportunities to be found in these markets.

One such forward-thinking company is Balfour Beatty, which recently signed up to a memorandum of understanding with Tata Projects to take advantage of the demand for infrastructure improvement in India and sub-Saharan Africa and to maintain its growth. With over 100 years’ experience in the construction business and a presence in over 80 countries worldwide, Balfour Beatty is well placed to take advantage of the emerging markets activity in addition to maintaining its stronghold in more traditional economies.

The company is also known for taking a proactive stance on strategy and company policy – it introduced a whistle-blowing hotline three years before the new Bribery Act was introduced. In addition to its compliance programme and training, the company has in place a 2020 “sustainability vision” for minimising its effect on the environment and contributing to communities, and a “zero harm” programme to ensure the company takes an active role in keeping its employees and the public safe.

Who’s Who Legal spoke to Matthew Flood, general counsel of the company’s services division, about his role within the company. After qualifying in Australia with Corrs Chambers Westgarth and a secondment with BP Australia, he decided to emigrate to the UK to join BP, where he stayed for five years. After a year and a half with SABMiller plc, the global brewing conglomerate, as a specialist corporate and treasury lawyer, he joined Balfour Beatty and has been a part of its legal team for the past three-and-a-half years.

Tell us about your role.

On 9 January 2012 I took on the role of general counsel of the services division, a more business-focused position than my last. I am responsible for the delivery of legal services within four areas of the company: Balfour Beatty WorkPlace, Balfour Beatty Living Places, Balfour Beatty Utility Solutions and Balfour Beatty WorkSmart. Previously I was group senior counsel responsible for work arising in Balfour Beatty’s group head office, including M&A activity, group treasury, group IT, international joint ventures and other strategic projects.

How big is the legal department?

Globally there are around 50 lawyers in the legal department. In addition, one of the divisions – Balfour Beatty Capital – has around 15 legally qualified personnel in commercial roles due to the legal knowledge that is required. We also have a number of lawyers working in our major international joint ventures in Dubai and Hong Kong.

What do you consider to be your most important role as in-house counsel? And how is life as an in-house counsel different from that of a private practitioner?

The most important role is to be a trusted business adviser, to understand the business and the risks it faces and to know how to proactively manage them. It is important to be a problem solver, rather than a problem creator, and to ensure that answers to problems are tailored to the business.

The role is very different to that of a private practitioner and I find that often private practitioners do not understand the amount of work that is done in-house. They tend only to see the tip of the iceberg. A lot of work must be done before we instruct external counsel. As an in-house lawyer there is a strong need for an in depth understanding of the business and you are expected to make decisions rather than just give advice.

Tell us about recent special projects keeping your team busy.

We’ve just finished an £850 million syndicated loan for the group, which replaced our existing bilateral agreements with several banks. In addition we have signed up to two memorandums of understanding with Tata Projects to begin collaborating on emerging infrastructure opportunities. This will enable the group to pursue infrastructure opportunities in India and sub-Saharan Africa.

What law firms did you hire? What were the main challenges?

For the syndicated loan we used Linklaters. The challenge was that since agreeing our existing loans with our relationship banks, our US business has grown and now makes up approximately 30 per cent of the group’s turnover. So, for the first time we had to deal with US-style covenants. A further challenge was managing the logistics of having various group companies from across five or six jurisdictions to sign up to the agreements as guarantors (with all the associated legal opinions) within a very short timetable. The project ran pretty smoothly and there was good collaborative work between the in-house legal team and external counsel.

For the memorandums of understanding with Tata Projects, all the work was completed in-house. We always aim to do this where possible. We have involved external lawyers in India as we have sought to bid for binding projects subsequent to signing the MOUs.

What skills do you require in external counsel to address these challenges?

The most important skills are to get to grips with our business drivers quickly; and to recognise problems before they arise on a project so that they can be incorporated into the plan and never actually develop into problems. It is essential that external lawyers understand the scale of a problem so that appropriate resources can be allocated from the outset. We also require private practitioners to be technical specialists while being able to provide a focused solution.

Do you always tend to work with the same firms?

We have a UK panel and a US panel and, unless there is a need for a specialism or we are working with joint venture partners, we stick to the firms on these panels in these jurisdictions. The panel is comprehensive and includes firms for general work as well as those for specialist work such as M&A and competition law. We have a choice of two to three firms for each piece of work and then we make a decision taking into consideration the fee and our aim to try and share work around.

In the UK, I have been involved in the creation of a general panel and some specialist panels. We asked all the chosen firms to respond to a request for a proposal, giving them information about the group and the types of work we get involved in. The firms responded and then we interviewed them, in certain cases asking them to take us through how they would go about dealing with a particular issue or problem. Firms were then assessed on a number of factors, most notably price, technical ability, and their cultural fit with Balfour Beatty.

When dealing outside your home jurisdiction, how do you find counsel?

We often rely on past experience of working with firms; for example, we are working with AZB & Partners in India. I chose them because I had worked with them previously when I was at SABMiller. We also rely on experience within the panel and their relationships worldwide.

I find that the quality of law firms in different parts of the world varies a lot. When working in civil law jurisdictions, we try and choose firms that are used to working with clients in common law countries.

However, it often depends on the country and matter in question. For one recent case, I flew to Africa to interview three firms before deciding which firm to work with.

Do you see yourself hiring the firm primarily, or the individual?

This depends on how specialist the advice is that we require. An example of where we hire the individual is for competition law and pension law advice. For these areas, we use an individual that knows the positions the company takes on these areas intimately through experience gained with working with the company for a long time. To train another legal adviser to take on this role would be very costly. So for areas that we see as extremely specialist we choose an individual to deal with the matter, but for other areas we choose the firm. That said, it is individuals within the firm who won the firm’s place on our panel to begin with. If for some reason we were unhappy with a particular partner or lawyer’s work, we would speak to the relationship partner and another lawyer would be put forward. We work best with the firms that we have developed strong relationships with throughout all levels of seniority.

What measures do you use to control or monitor fees?

We have agreed rates with all our panel firms and we reviewed these two years ago. Sometimes, we will carry out mini-tenders between firms on the panel.

We use fixed fee arrangements and ask for regular updates on how the firms are managing budgets. We are also looking into how we might adapt this approach in the future, by using legal process outsourcing for example. This could either be by asking law firms to consider how they can provide their services on a project on a more cost effective basis, or it may involve Balfour Beatty going direct to such service providers ourselves.

Is the role of the in-house lawyer changing?

I believe that the role has changed, but that for the past five years it has been fairly constant. Prior to that, there was a view that in-house lawyers sat in an office and answered technical problems. Now, in-house counsel are required to be more in tune with the business, to know about the company’s strategy and to care about its performance. We are required to advise on more than the law – to understand risks and to give good commercial advice. The days of the nine-to- five in-house lawyer are gone and pressure is constant. There is a need to keep improving and delivering a good service.

A further change I have observed is that certain companies are now hiring dedicated specialists in-house and in-sourcing certain work that was previously left to external lawyers, an example being employment law. While that has been the case, in large organisations, for a while, smaller organisations are beginning to do this to manage costs. Particularly in heavily regulated areas, there is now enough work that it makes sense for in-house teams to have a specialist both to deal with the work internally, and to manage the external lawyers more effectively.

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