Wagons East

Looking to get a foothold in the federal market, a California law firm has acquired a robust Washington, D.C., firm that has one of the nation’s largest outsourcing practices.

The April 4 merger of San Francisco’s Pillsbury Winthrop and the law offices of Shaw Pittman, based in Washington, D.C., is another sign that the outsourcing market is growing and firms outside the Beltway want a place in it, according to experts.

Although Pillsbury Winthrop had a small outsourcing practice on the West Coast, its acquisition of Shaw Pittman gives the firm a better position for global outsourcing and federal government work.

"This is going to give them a huge footprint on the ground in the nation’s capital," said Ward Bower, a legal management consultant at Altman Weil. "It rounds out their significant national presence and establishes them as a national firm as well. I would think they would have an inside track to outsourcing [business] in the federal government."

The new name for the combined firm is Pillsbury Winthrop Shaw Pittman, and it employs 900 lawyers in 16 locations. The combined annual earnings for the new firm will exceed $600 million. The merger also gives the California-based firm a major outlet in Northern Virginia's high-tech corridor and increases its profile with offices in New York and London.

Shaw Pittman's outsourcing practice brings in $40 million to $50 million a year, said Bob Zahler, who helped develop the practice and now a partner in the combined firm.

Pillsbury Winthrop's "major objective was to build a national and global footprint," Zahler said. Of the major practices the firm has, outsourcing is the most valuable, he added.

Shaw Pittman attorneys advised National Security Agency officials several years ago when they developed Groundbreaker, a $2 billion project to update and manage NSA's hardware and software.

More recently, the firm guided officials at the Financial Management Service, a Treasury Department bureau, during negotiations to update an outsourcing contract for the Electronic Federal Tax Payment System.

"Outsourcing has become such a key component in the business world today," said Zahler, a senior member of the firm’s outsourcing group. "Shaw Pittman had the dominant legal practice in it, with more than 80 lawyers and consultants."

It's a good bet for the California firm, too, said Harris Miller, president of the Information Technology Association of America.

Any business in the government marketplace will be strong for the foreseeable future, including "law firms, recruiting firms, accounting firms and everything that provides a strong infrastructure around government," he said.

Larry Allen, executive vice president of the Coalition for Government Procurement, said the move is another sign that outsourcing is in.

"The second thing at play here is that it follows a trend in law firms," Allen said. "If you see a particularly hot area you want to get your firm in, you raid that practice area or you acquire another firm."

Shaw Pittman has been successful in government outsourcing projects worldwide. Firm officials helped outsource all of Australia’s nondefense federal work. They also advised the United Kingdom's Inland Revenue, Great Britain’s tax collection agency, when it recompeted an outsourcing contract for technology and business services.