It used to be so easy: For a new matter, clients would hire the firm that did excellent work for them in the past. Today, more and more clients use requests for proposal (RFPs) to qualify and compare firms, their offering and pricing. RFPs have become a commonly used tool to control legal spend and ensure the best value for clients.
Running the RFP process has become one of the first steps when Procurement is involved in Legal. It relieves in-house counsel from a range of unpleasant tasks, just like negotiating rates and conducting billing audits.
RFPs are used to ensure an even playing field for all participants in the competition for the company’s business. The idea that an RFP outcome has already been pre-determined prior to the event is simply not true, says Andy Krebs, Intel’s global strategic sourcing manager in his article “What legal procurement really wants” in the Legal Procurement Handbook. “Procurement professionals strive to have the competition open to the best-suited partners, ensuring the best ideas and strategies are brought to the table,” says Krebs.
But RPFs need to be properly designed and customized to the legal category. Procurement professionals work with their colleagues in the legal department to develop the right strategy to identify the right candidates, develop the scope of work for the RFP as well as a scoring matrix based on the requirements. The matrix ensures that the assessment of different firms is as objective as possible. RFP programs launched without developing a strategy can derail the entire process and backfire on Procurement.
To improve the likelihood that the RFP will get you the responses you need to make good choices, here are some best practices:
- Preparation: The more specific you are in your RFP, clearly stating your goals, expectations, and assumptions, the easier it will be for you to compare the proposals, analyze the information, and make your decision. To ensure creative answers and realistic scoping, clearly describe your current views on the scope of the matter, and the way in which the work is accomplished today.
- Information: Construct your RFP to get responses that check for risk and conflicts, highlight experience, and enable pricing comparisons. The RFP should also provide you with insight into how the firms aim to manage client relationships and provide value to your organization. How do they approach transfer of knowledge? Is there access to the firm’s library of information? Free CLE programs or other value-adds?
- No generic requests: Answering an RFP in a thoughtful manner might take the firm’s lawyers, business development and pricing professionals several days, if not weeks. Occurring cost of $50,000+ to answer a complex RFP is not uncommon. Given their limited resources, law firms aim to determine how serious the requester is. The more thought and care you put into your RFP, the more likely they will interpret the opportunity as a real one.
- Questions: Make sure you ask questions that that are based on the strategy you developed with the legal department and that provide you with decision-grade information. Otherwise, you risk a “paper pushing” exercise that wastes your and the firms’ time and annoys your colleagues in the legal department.
- Handling: Be clear about how you want the firms to handle your RFP documents. Do you expect the responses in an Excel file? In Word? When putting together the questions think about how you intend to analyze them. Drop-down menus, multiple-choice and word limits can make your life easier. The more specific your questions, the more likely the answers will provide you with the desired information.
- Organization: Make it clear what information you are looking for and don’t keep the firms guessing. Depending on your industry, you may have to ask some “due diligence”-type questions, but limit repeating similar questions, avoid questions that are unrelated to legal services (no hard-hat clauses!), and allow firms to focus their time and energy on their value-add solutions to your business needs.
- No “bidding on your spreadsheet”: Legal services, even the more commoditized end of the legal services spectrum, are not mere commodities differentiated only by rates, says consultant Danny Ertel in “A Primer for Sourcing LPO Services” (also from the Legal Procurement Handbook). Don’t just look for the cheaper price, but ask the firms about their use of technology, project management, and process improvement. How are they intending to work more efficiently? And whay about the quality of the people they hire and train? Together, these elements will drive differences in quality, productivity, and error rates.
- Baseline: You want law firms to be able to “show off” what differentiates them, but you also need to be able to make direct comparisons. Ertel cautions that hourly rates don’t tell you about the value for money you are likely to get nor about the total cost of ownership (TCO). In fact, the number of hours firms estimate for the work likely will vary more widely than their rates. Instead, use a past example, such as an already closed, “typical” matter, and ask firms to use the situation as the basis for their estimates of what a comparable matter would cost. Law firms can showcase their work and approach, enabling you to understand how they develop estimates and what assumptions they make.
- Evidence: There is a learning curve in delivering legal services and firms who cannot demonstrate that they have sufficient experience delivering similar services to similar clients should not get your business. Ask firms to describe what their experience has been in concrete terms. Their experience solving similar problems will differentiate the creativeness of their solutions and their ability to implement them, says Ertel.
- Pricing innovation: In “Creating a Level Playing Field” from the Legal Procurement Handbook pricing consultant Richard Burcher cautions against asking firms for generic requests for ‘anything else you think we might be interested in’. Asking such open-ended questions have become commonplace in RFPs, but they don’t make much sense. Instead, get a good grip on your own data and industry benchmarking information and provide firms with proper assumptions and scope on which they can base innovative as well as more traditional pricing models.
When using RFPs, don’t aim for quick wins or play the zero-sum game: Think long-term and look for good business relationship with reliable suppliers. Don’t misuse RFPs as tire-kicking exercise. “Firms are becoming increasingly sophisticated in their market research and triaging processes. Like the boy who cried ‘Wolf’, you will be found out,” warns Burcher. The result will be a diminishing pool of desirable law firms who will respond to your invitations.