Federal spending is a big source of revenue for many Am Law 200 firms, a new analysis finds.By Andrew Ramonas
Contracts from the federal government are a financial staple for plenty of industries, and it turns out that law is no exception. During the past five years, the government has awarded $3.3 billion to more than 4,700 vendors for legal work, according to data compiled by The National Law Journal, a sibling publication of The American Lawyer. Much of the money was spent by the U.S. Department of Justice to help administer the federal program that confiscates property from criminals; for law enforcement training in countries like Afghanistan and Iraq; and for technical support in litigation, including cases involving Hurricane Katrina and the Deepwater Horizon oil spill.
Of that sum, $391.4 million was awarded to more than 1,200 law firms and solo practitionersabout 12 percent of the total legal-related funds awarded by the federal government. Seven Am Law 200 firms were among the 10 biggest award recipients.
The NLJ compiled the data as part of a yearlong project to determine how much the federal government spends on outside legal services and who gets that work. [See the NLJ's full report.] To gather the data, it downloaded and analyzed more than 67,000 awards from USAspending.gov, a public database on federal spending maintained by the government. The search took in all of the contractors with work classified as "legal studies" and "legal services." It also included contractors who did work outside those classifications, but were identified as members of the legal sector. All of the contract amounts signify the most money that contractors could have been awarded from the government, not necessarily the sums they received in each case.
With $34.7 million in contracts awarded, Hunton & Williams was the largest law firm contractor in the NLJ survey. The firm racked up $7.3 million in awards for its work as general counsel in licensing issues related to Nevada's Yucca Mountain, a site that was slated to store nuclear wastea use that Senate majority leader Harry Reid opposed. (The plan was abandoned in 2010.) Hunton also was awarded $27.4 million for, at least in part, helping the U.S. Department of Housing and Urban Development with Government National Mortgage Association legal work.
The second-largest five-year payout, $26.8 million, was to Cadwalader, Wickersham & Taft, for assisting the U.S. Department of the Treasury with work including the Automotive Industry Financing Program under the Troubled Asset Relief Program.
Work from the Treasury also benefited Simpson Thacher & Bartlett, the lead legal adviser on the Treasury Department's $700 billion bailout plan following the 2008 financial crisis. During the past five fiscal years, Simpson Thacher was awarded $11.3 million from the Treasury Department for its assistance with recovery-related matters that included the Capital Assistance Program and the Public-Private Investment Program for Legacy Assets. Simpson Thacher ranked eighth among law firms receiving government money for legal work.
Paul, Weiss, Rifkind, Wharton & Garrison, number six on the list, was awarded $7.2 million from the U.S. Department of Energy for advising on loans to Nissan North America Inc. and Tesla Motors Inc. as part of the agency's Advanced Technology Vehicles Manufacturing program.
Paul Weiss also received a $6.5 million award from the Treasury Department for assisting with the Legacy Securities Public-Private Investment Program and Housing Finance Agency Innovation Fund for the Hardest Hit Housing Markets, among other matters. The federal government set up the programs in the wake of the 2008 financial crisis.
Despite these seven- and eight-figure payouts, most awards were more modest. Law firms and solos averaged about $322,000 in government contracts in the survey, and for most, the amounts were much smaller, the NLJ reported.
With $85 billion in automatic federal spending cuts having taken effect on March 1 under sequestration, contractors engaged in legal work for the federal government face an uncertain future. The reductions, which are split evenly between defense and nondefense spending, won't affect every contract. But Elizabeth Ferrell, a McKenna Long & Aldridge partner who leads her firm's terminations and contract restructures group, says the brunt of the cuts will hit service-related contracts, which make up much of the $3.3 billion the federal government spent on legal work from 2008 to 2012. "It is easy to turn them off and then turn them on," Ferrell says.
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