Controlling external spend has been a focus of corporate law departments for years — one that has been brought into even sharper focus as a result of the global pandemic.
In the U.S. and the U.K., roughly half of all large corporate law departments have expressed a desire to reduce their legal budget. At the same time, however, many also expect to see an uptick in the number of matters they handle on an annual basis. As a consequence, request for proposals (RFPs) have cemented their place in the legal industry as a key tool for corporate counsel seeking to optimize their outside counsel relationships.
In the latest podcast on the Thomson Reuters Institute Market Insights channel, we gather a panel of legal pricing and procurement experts to explore not only how pricing plays a role in the current landscape for RFPs, but also how corporate clients are using those requests to reassert the priorities of the company more broadly.
With issues of gender and racial equality being top of mind globally, it is becoming much more common to see RFPs include terms relating not only to the diversity within a law firm or how a matter will be staffed, but exploring more deeply how a firm incorporates a focus on diversity and inclusion in its broader operations, such as the associations that a firm belongs to and the leadership roles members of the firm have taken within those organizations.
In the podcast, Richard Brzakala, a 20-year legal operations veteran, says he expects that the economic dichotomy that currently exists between clients who want to save money and law firms who need to continue to improve profitability will intensify given the realities of the current market. Both groups must exist in a give-and-take environment, but ultimately, the outcome must be economically viable for both sides of the relationship.
Nancey Watson, whose work on proposal strategy has helped her clients win more than $3 billion in professional services bids, agrees, noting that changes in the RFP process are already coming “faster and harder” than many would have predicted. Corporate law departments have begun to issue RFPs not only to help re-evaluate their current panel of firms, but also to help with the search for boutique firms with particular expertise. And unsurprisingly, pricing and fees are a top consideration among these requests.
While pricing remains an important driver of law firm favorability in the eyes of their clients, proprietary research from Thomson Reuters Acritas SharpLegal shows that the quality of individuals working on matters and their responsiveness to client needs has surged in importance in recent months, according to Lucy Leach, Technical Research Director at Acritas. This is a rather dramatic shift, and it is not that price has become a less important consideration. Rather, “if anything, clients seem to be wanting to go more to their trusted partner that they know,” says Leach.
For as much focus as was placed on RFPs prior to the recent economic upheaval, the global pandemic has amplified their importance. The points discussed by the panelists in this podcast serve as a good primer for what law firms and corporate law departments should expect as the reality of the legal economy continues to evolve.