When you think of Canberra, you think of the Federal Government. Although the many departments certainly form the largest user of legal services in the capital, ALB finds that the territory's construction frenzy provides a steady income for local firms.

With a population of about 330,000 people, Canberra ranks as the eight largest city in Australia. It's only just bigger than Wollongong and quite a bit smaller than the Gold Coast in Queensland. Canberrans compensate their relative small numbers with a keen sense for superlatives; they like to point out that it is Australia's largest inland city.

Despite the modest population the legal market is sizeable, says Alfonso del Rio, partner in charge of Clayton Utz's Canberra office. "Our population suggests it is not a very big market, but if you compare us to Adelaide, for example, which has over a million people, then I think you'd find that the Canberra market is just as big, if not bigger," says Del Rio. "Certainly the legal spend per head of population would be higher."

As Australia's capital, the city is heavily influenced by the presence of the Federal Government. Not surprisingly, the government departments are the largest users of legal services in the ACT. Because of the complexity of the issues involved, which can range from simple litigations to large scale acquisitions of fighter jets, and its interstate character, most of the government's external legal work goes to the national law firms.

Government solicitors
The largest law firm by far is the Australian Government Solicitor (AGS), counting almost 180 lawyers in the Canberra office alone. The firm was originally established as an office within the government, but was converted to a government business enterprise in 1999.

The decision to cut the office loose was made in order to enable the government to call upon the services of lawyers in private firms. It means AGS now has to tender for most work just like any other firm. "There is a very small portion of the work that is tied," says director Louise Vardanega of AGS Canberra. "About 4 - 5% of our business is tied, the rest of it we need to compete for by tender."

The origins of AGS as a government law firm certainly puts it in a unique position, but private law firms don't feel AGS has an unfair advantage over them. "They have an advantage because they have been doing it for a lot longer and they have got relationships and the depth of relationships by working in this market for many years," says Adrian D'amico, head of Deacons' Canberra office. "But increasingly the private sector firms are gaining a foot hold into the market and developing relationships which are becoming quite strong."

D'amico explains that the expansion of the government over the years means their legal needs couldn't be supplied by just one firm. "AGS would've needed to expand by 200% or more to meet the need," he says. Besides, the legal services required by the government are becoming increasingly more sophisticated and for some of these projects they are looking for the cr`me de la cr`me in corporate and commercial circles.

Profitability
The Canberra market offers law firms some of the most interesting and complex work, but not all of the national firms have found their ventures into the market to be successful. Freehills closed down its office at the end of 2002, which saw some of its partners move to Sparke Helmore. Corrs Chamber Westgarth left the ACT last year after a significant part of its team, led by Alexandra Wedutenko, transferred to Clayton Utz. 

Alfonso del Rio says the relationships within the different governmental departments are crucial for a firm to survive. "You need to be committed to exceptional client service," says Del Rio. "You need to be able to work as a team across a number of offices and you need to invest heavily in the relationship to understand the government business, because they are a different client and they approach business in a different way. I think that is something that a lot of firms are not prepared to do."

The investment of time in building relationships and the fee-discounts to which governmental work is subject makes some lawyers question the profitability levels of any Canberra office. However, Clayton Utz's office is thought to be one of the more profitable offices in the firm's network. Del Rio says they had 'good double digit growth' in fee-income last year. "I think all of Clayton Utz is profitable, but let's say I don't drag the average down."

"I think we hold our own," says D'amico of Deacons. "There are obviously different costs and different structures in each of the firms, but I think it's a profitable office and has been contributing well to profits." He says the culture of fee-discount in the Canberra shouldn't be overestimated. "The government is prepared to pay its lawyers [well] in particular areas if it needs its assistance."

D'amico expects his team to grow in the near future. "We were appointed to the defence panel 12 months ago and that's a very large outsourcer of legal services." He is himself an example of the firm's recent hiring efforts; D'amico joined from DLA Phillips Fox in February and was joined by Rosemary Crowley, who is a special counsel in Canberra.

Local players
The ACT market is unusual in comparison with other state markets in the sense that it has relatively few local firms that take on high-end work. The reason for this is once again found in the demands of the government. The large national firms are able to offer a wider range of specialists across multiple locations. Much of the governmental work has an interstate character and a single office just won't cut it.

This means that local commercial Canberra firms focus on work outside the realm of the Federal Government. "Long established local firms in Canberra have continued to service the local business community as a vacuum left by the large firms," says managing partner Keith Bradley of Canberra firm Bradley Allen Lawyers. The firm estimates that only 5-10% of their practice consists of governmental work.

They focus on commercial litigation, property, leasing and planning work. "We have a fairly strong and resilient residential and commercial property market at the moment," adds partner Mark Flint. "Commercial property forms the backbone of our firm."

Consolidation
Local firms are going through a period of consolidation and several of the ACT's long-established firms have merged. Most recently, plaintiff law firms Higgins Solicitors and Pamela Coward & Associates merged in October to form Pamela Higgins Coward. The new firm will have four partners, three consultants and a total of 13 solicitors.

The desire to merge was partly inspired by the benefits of a larger scale, but also an increasing number of partners in the Canberra market reach retirement age. Michael Higgins and Bill Coomes, both former partners with Higgins Solicitors, will take a consultancy role in the new firm.

One of the most significant mergers of recent years, however, was the amalgamation of Meyer Clapham's and Vandenberg Reid's operations in 2005. Their union created one of the largest local firms in the market; it now has 11 partner and 34 lawyers in total.

"We thought that putting us in a position as the largest single local operator would give us the opportunity to do the work to which we were attracted," says managing partner Archie Tsirimokos. He feels the strategy has paid off and says the work that has come in since the merger is of higher quality. "We have been appointed to panels of local ACT governments, some Commonwealth panels and certainly to some panels of large commercial property players that otherwise might have been attracted by the national firms."

Tsirimokos expects the firm will increase in size in the next few years. "I think there continues to be opportunity to grow in the market place. There is probably another 20-25% growth capability," he says.

The firm has picked up some IT work recently, but sees future opportunities still in construction and development of commercial property. "In Canberra, a lot depends on the property industry; if the property industry is doing it though then the whole town does it tough."

Fortunately, the property market has seen much activity recently and Tsirimokos believes there is no reason to assume this will slow down any time soon. "The government has an approach of releasing many more sites for commercial development. Lawyers should have plenty to do."

Flint of Bradley Allen agrees: "I think it's fair to say that we have a fairly strong and resilient residential and commercial property market at the moment."

Limited supply
The modest size of Canberra's population results in a relatively small pool of experienced lawyers and local firms are in particular affected by this in their efforts to attract new staff.

"Overall the challenge for us is not to identify and seize upon new growth areas, but to service our existing clientele," says Mark Flint, partner with Bradley Allen Lawyers. He says the presence of national firms in Canberra is not making things any easier. "The national firms don't really provide much competition for us in the terms of the work that we've traditionally done, but where they have posed competition is in resourcing legal staff."

Bradley Allen addresses the recruitment issue in a number of ways, the obvious one is remuneration. "We try to keep ourselves ahead of the market by paying slightly more," says Flint. "Another factor is to be fairly transparent in how we address people's remuneration requirements."

It is also important to engage people early, says Flint, preferably before they finish their legal training. He says the firm also has to be more realistic and flexible in its work practices. "The sweatshops as we knew them back in the 1980s and 1990s are just not capable of attracting and retaining people."

Archie Tsirimokos of Meyer Vandenberg agrees it's a difficult labour market: "We've got a philosophy that if a good person comes along, we'll employ them even if we don't have a job for them. Simply because we found that once you get those people on board, they will sort themselves out. The good people get up to speed very quickly."

In-house roles
Jonathan Beaumont, director of boutique recruitment firm Gillian Beaumont Legal, says the demand is the highest for industrial relations lawyers, junior commercial lawyers and lawyers with significant large scale litigation experience.

"We have an extraordinarily tight labour market here in Canberra," says Beaumont, whose previous experience includes a ten year stint as the CEO of Dibbs Abbott Stillman. "The unemployment rate across the state is a little over 2.5% and our experience is that is even less in the legal profession, across the private sector and the public sector."

He says it's not only difficult for private law firms to find staff, but also for government in-house teams, who struggle to attract enough lawyers. These teams have the additional disadvantage that a role in-house suffers from a low profile amongst practitioners in other states.  

"Many candidates have the perception that if you want to do government work, you go to a top-tier firm in Canberra, but the skills that can be gained in in-house roles also can provide candidates with sophisticated work and learning opportunities," says Beaumont. "Local lawyers are very much aware of the opportunities here, but people from interstate often need to be educated about the potential that is available.

I think one of the things that outsiders tend to get wrong is they assume that the Canberra legal market is simply a microcosm of the way things are in Sydney or Melbourne. It is a very different market and culture here due to the presence of the Commonwealth government."

But Beaumont sees a gradual change is the conception of in-house roles. "It used to be hard to convince private sector lawyers to 'cross-over' and join the public sector. When I started in the industry 10 years ago there was a very strong divide: you either were a private practice lawyer or a public lawyer. It's much more fluid now than at any time I can remember."

Department of Defence

The danger of referring to the Commonwealth Government as one of the largest users of legal services is that it is seen as one client. In reality the government consists of many different departments that all have their own individual need and often their own panels.

The department of Defence, which employs about 11.750 people in the ACT alone, spends around A$1bn directly in the Canberra market, while spending a more than A$15bn nationally.

Key projects that drive the need for legal support include the 'defence capability plan' which is setup to manage the acquisition of equipment over a period of ten years and will see the department enter into transactions worth billions of dollars. In 2005-2006 the department spent almost A$4bn on equipment ranging from ships to helicopters.

The development of a new complex near Bungendore will further boost the department's expenditure and will result in much construction and planning work on the back of this project.

The legal services panel of the department consisteds of: Allens Arthur Robinson, Australian Government Solicitor, Blake Dawson Waldron, Clayton Utz, Deacons, Dibbs Abbott Stillman, Ebsworth & Ebsworth, Home Wilkinson Lowry (which replaced Abbott Tout after the merger), Maddocks, McInnes Wilson, Minter Ellison, DLA Phillips Fox and Sparke Helmore. Although it doesn't include any local firms, panelists are required to subcontract 10% of work to small to medium law firms to allow smaller legal firms to gain access to Defence legal work.

Canberra firms in numbers
* Australian Government Solicitor: 179 lawyers in total
* Meyer Vandenberg: 11 partners and 34 lawyers in total
* Bradley Allen: 7 partners and 13 lawyers in total
* Clayton Utz: 6 partner and 90 lawyers in total
* Deacons: 5 partners and 25 staff in total
* Pamela Higgins Coward: 4 partner and 13 lawyers in total