Brian Swartz may well have realized the secret to being a successful in-house counsel long before anyone else who stepped into a company to form a legal department. That’s because he’s been in-house and integrated into the DNA of the businesses he’s represented since he graduated from law school in 1983.
“I went in-house right away,” says Swartz, executive vice president, legal and commercial services, at construction giant Aecon Group Inc.
While he started in-house in the technology sector in the early ‘80s it’s clear his enthusiasm for the construction industry is what drives his passion today.
At Aecon he has a broad portfolio of executive responsibilities in addition to his role as chief legal Officer. It includes corporate secretary, risk and surety, mergers and acquisitions, and labour relations as well as office and facilities services. He is also chair of the Aecon Project Risk Committee, a member of the executive committee, and a member of the board of directions for each of the wholly-owned subsidiaries of Aecon.
He’s been at Aecon 16 years, joining in 1997 when he was the only lawyer in the department. “I get excited about every construction project — we’re working on the TTC expansion to York University right now — it’s something I would have liked to have had in place when I was attending York,” he says.
Aecon is also at the heart of the work going on with Metrolinx to create the Union Pearson Express at Pearson International airport in Toronto constructing the rail link which will provide travellers train service to and from the airport with a goal of completion in time for the 2015 Pan/Parapan Am Games.
The work includes building a station at Terminal 1 and constructing a three-kilometre rail line that will connect the new station at Terminal 1 to Union Station. “Everything we do is exciting,” says Swartz. “I get energized by the industry and the projects and the people — it’s just so much fun and very rewarding,” he says.
Before he arrived at Aecon the legal department was primarily focused on looking after the legal aspects of managing the public company. “There really wasn’t any legal presence in the business units. That surprised me because my background was as a business lawyer and being engaged in business activities,” says Swartz.
He realized his challenge was to build the internal department’s expertise and broaden its reach, and because the business of construction is largely about identifying and mitigating risk that became his focus.
“If you don’t have someone reviewing your contracts who understands the law and the contract itself then there is a big gap in that whole risk management process. It was really about spending a lot of time educating the client group, learning the business, visiting projects and really helping the operational people understand more about the contracts they’re responsible for managing and executing,” he says.
As the company grew Swartz grew the legal department. From the beginning he took a customer service perspective to make sure business objectives were attained. Rather than giving the client a “no” answer he tried to approach it from understanding what their needs were and getting to what they needed to achieve their goal without taking undue risk.
“With everyone I have hired over the last 16 years I have tried to select people with common sense and good business judgment with strong legal skills and contracts/public company background. It doesn’t matter where they came from but to have that business background sense to connect with the client group is critical. That has enabled us to successfully grow to a much larger department,” he says.
There are lawyers on the team who are embedded in the operations areas of the company across Aecon. They report up centrally through Swartz and to Yonni Fushman, vice president, legal and business affairs.
Recently the legal team at Aecon was named best in-house department in Canada by an international group of its peers. It received the award at the International Legal Alliance Summit & Awards in New York.
“When I started eight years ago there were three of us here and the company was about $1 billion in revenue,” says Fushman. “We’ve since tripled to about $3 billion in revenue and tripled our department size to nine lawyers and expanded the admin staff as well.”
Swartz also serves as chairman of the project risk committee which is made up of the company’s executive team. On the commercial side a VP of contracts and risk is an engineer who runs the department for the industrial-focused business. His background as an engineer has been on the industrial side but has been there as long as Swartz has. “I’ve mentored him over the years — he’s not a lawyer but he’s on the Canadian Construction Documents Committee and has been there for a number of years as the Aecon representative — he’s a contracts guy,” says Swartz. “We’ve combined a number of legal and commercial roles within my group and we’re able to give sound legal and commercial advice across the operation.”
You could say Swartz cut his teeth in construction law on one of Ontario’s biggest and most controversial infrastructure projects — Highway 407 Express TollRoute. He was lead counsel for the province on the project from 1992 to 1997. At the time Ontario was looking for ways to get construction workers back to work during the recession and it was a project the Bob Rae NDP government of the day thought they could get built but didn’t have the money. They launched the first private-public-partnership in Canada for the $1.6 billion project.
Swartz led the legal team and developed the procurement process and contracting structure. He was ultimately hired by the team that built the 407 and joined Aecon in 1997.
“I really enjoy being involved in project development from the bidding stage to execution. The first day we opened the 407 was a proud day for me and driving on it was a tremendous thrill for me. I took my wife and kids and they were completely unimpressed,” he says with a laugh.
Swartz graduated from Osgoode Law School in 1983 and went in-house right away to work for a family owned computer business. The company was distributing software internationally for the Commodore 64 computer — a word processor called PaperClip.
As he has built up the internal team at Aecon Swartz says the company has become less reliant on using outside legal services. “We still use external firms from time to time for M&A and banking and transactional matters where we have to, and we also use external for litigation, but we manage most claims in-house before they get to litigation and try and resolve it early. So we have significantly reduced our external spend even though the number of matters have increased significantly,” he says.
In the last five years the company has grown geographically to be located half in the west and half in the east. “During that time the number of files we have opened and matters we have had under review has grown significantly but proportionately it has been handled more in-house than external,” says Swartz.
He also believes in benchmarking the department on costs. “From a revenue perspective I think we’re right on target for the number of lawyers per billion dollars but we’ve got a more complex business than some because we’re a contracting company — everything is about contracts and so there is much more demand for legal services internally,” he says.
For in-house counsel, he says there is a greater recognition that the ultimate success of the business units drives how legal work gets done.
“When you’re hourly and billing by the hour your incentive is not to resolve disputes, it’s to litigate and even transactional lawyers have a tendency to over-lawyer things. When you’re inside and every dollar counts you’re thinking about the bottom line — what’s the value I’m adding here, how do I incentivize them to settle matters early and bring transactions to closure quicker?” he says.
“I think some of the firms get it and are looking at ways to change their billing structure. A number will push back and say, ‘We’re not a commodity and you can’t treat us like a commodity.’ The reality is that’s the business world and people are looking at the lowest common denominator and price and performance are important.”