In previous chapters of this book I described the evolution of the “rule of law” model of litigation and its implications on the practices of litigation before the HCJ following the activist revolution of the 1980s. One of the principal features of this model was the rise in the relative number of out-of-court settlements (discussed in Chapter 3). In the current chapter I wish to shed light on some additional functions of the HCJD with respect to the formation of out-of-court settlements. In particular, I wish to demonstrate the connection between the practice of settlements and the processes of policy change through litigation. I start by presenting the theoretical background. I discuss the relationship between transformative litigation and out-of-court settlements. I also point to the importance of collaboration on behalf of the administration in the contemplation of judicially initiated institutional reforms. To demonstrate the argument I discuss in some detail a well-known case study of prison reform in the United States that drew much attention from the theoretical literature in this field. The theoretical discussion serves as a background for a detailed discussion of the functions of the HCJD with respect to the formation of out-of-court settlements and other managerial functions of the department. I present two case studies to demonstrate these functions: the case of the Bedouin tribes in southern Israel and the case of human rights litigation regarding the Occupied Territories. I conclude with some general remarks regarding the role of government lawyers in judicial review.