There's a significant gap between in-house procurement pros and their law firm counterparts in how each side understands what clients want & what they're willing to pay for
Over the past several years there has been a significant change in the kind of Request for Proposals (RFPs) that law firms are receiving for legal services, not just in terms of volume and complexity, but in that the issuer is from legal procurement or legal sourcing (as some professionals are called) rather than from the corporate legal department or the office of the general counsel directly.
Therefore, I decided to take a deep dive into what is meant by legal procurement to better understand what the buyer wants. I discovered a significant gap between in-house procurement and law firms in this understanding, and I recognized a need to help bridge this gap, particularly because procurement is a key influencer as to which law firms get chosen for work.
Indeed, legal sourcing is quickly gaining traction, particularly among companies with significant legal spend, and the sooner law firms understand the role of legal sourcing, the sooner they will have a better relationship with their clients and a better chance of winning RFPs.
In my work, I have met many leading-edge professionals who are responsible for legal procurement either globally or nationally at their companies. Some have an MBA, a background in procurement, a Six Sigma black belt, a law degree, or were previously pricing managers at top law firms. Some in-house legal departments combine the role of procurement with legal ops, while others keep the roles separate. I use the term procurement or sourcing in this article; however, law firms need to ask their clients for clarification as to the structure of each client’s individual legal department.
These legal procurement specialists have provided me with pointed observations and candid commentary on what they want, need, and expect when hiring outside counsel. Further, I have interviewed top procurement and legal ops professionals and leading law firms’ legal ops personnel all over the world, gaining a wealth of knowledge about how the two sides can work better together. Indeed, the two sides recognize the complexity of selecting legal partners, says Geraint Evans, Head of Clients and New Business at CMS Global. “Legal procurement is a highly complex and sensitive process, with skilled professionals now having to balance the dynamic between quality, relationship, and value,” he adds.
Role of Legal Procurement Professionals
Procurement teams work with line managers and legal departments on the content of RFPs, analyzing proposals and pricing, and then presenting their recommendations to the general counsel for the final selection. That is not to say that GCs are not directly involved in the process — in fact, the methodology used to analyze proposals is often quite complex and varies by department. Some legal departments use software to help them make comparisons between the responses of the proposing law firms, analyzing each firm’s responses and making price comparisons between the firms. This information is often stored so that procurement professionals can predict how much a matter should cost when asking for quotes for specific work.
I have seen the good, the bad and the ugly in RFPs, and I work with in-house legal departments on its structure and on the questions it should ask. Therefore, I have developed a database of questions that should be asked by industry and practice area to solicit better, more thorough responses from law firms. It is important to ask the right questions to achieve the desired responses in order to make an informed decision as to which law firms are best for certain matters or whether they should be put on the corporate legal panel at all.
However, this process begs the million-dollar question: What is a major focus for companies regarding the selection of law firms?
Instead of just measuring hours, sourcing professionals are focusing on improving efficiency, negotiating and measuring value pricing, and determining service levels, overall cost, and time to resolution. We all acknowledge that one of the main roles of legal sourcing is to lower the cost of a company’s legal spend — not necessarily by outsourcing everything to the lowest bidder, but rather by achieving good value for the lowest possible price.
As buyers, legal sourcing professionals are also typically involved in the development of general purchasing strategies, and sourcing processes and criteria. They also are involved in negotiating fees and contracts, and drafting engagement letters and Terms &Conditions sections of contracts. Moreover, procurement professionals and legal departments use a great range of metrics and benchmarks in addition to price when evaluating proposals. They regularly conduct industry benchmarking and rate increase analyses, and invoice audits.
If a law firm is not getting more work from its clients, it should be proactive and ask why. Firm leaders may find out that their firm is not making the grade.
Evaluating Value-Added Services
Procurement is upping the ante for value-added services as well. Continued legal education (CLE) seminars for in-house counsel, hotline/helpline access for in-house counsel and line management, and “secondments” (law firm personnel assigned to in-house teams) are some of the favorite added services according to sourcing professionals. The challenge is that many “added values” are no longer differentiating factors, but have come to be expected. Can you put a price on the value of CLE education that the client is getting for free? Can you offer secondments free or at cost?
No matter what, client relationships are still essential to getting and keeping the work. Legal procurement professionals may act as “gatekeepers” who control the flow of communication and information from the law firm to the potential client; however, they are less likely to be the final decision-maker.
Every legal sourcing specialist I have spoken with has emphasized that open communication is paramount, especially if something starts to go wrong. Be proactive. Don’t wait for the client to call you. If a litigation matter is going to go beyond the budget estimate, for example, communicate immediately with the in-house counsel or the procurement specialist and explain why the matter is veering off the proposed budget and how the new scope has increased the time-keeper effort required. This kind of activity all goes to the firm’s performance-scorecard measurement.
General Counsel have said that they want their legal advisors to pick up the phone to discuss issues before they become major problems. They also want their legal advisors to make suggestions about how to fix the problem.
Procurement professionals too want law firms to respect their role and play by the rules, which means following their processes by providing information that they want, when they want it, and how they want it. Do not try to end-run around them — be professional when working with procurement.
More importantly, you should get to know them and find ways to help them do their own job more effectively.