For In-House Counsel
Online procurement of legal services
Often relationships between law firms and their clients are based on historic ties, that not seldom were cemented in law schools or fraternities decades before the legal services are rendered.
Procurement of legal services so far has escaped the ever increasing area of activities of purchasing departments. This may be caused by the purchasers shying away from this bastion of specific knowledge of the legal market or the legal department blocking the purchase department to get involved in the procurement of legal work.
Slowly the habits are changing; pitches are becoming more common and now law firms are confronted with tenders on a daily basis.
The pressure from senior management to reduce costs now also affects the legal department.
One method to reduce costs is to benchmark the offerors of legal services. This can give an insight in the quality of firms and the fees one may expect for legal work.
How it works
Law firms are requested to fill in a questionnaire in which they set forth their experience and the expertise of their lawyers. Other yard sticks, which can differ based on the specific needs can be:
proximity to the client, language skills, diversity of staff, pro bono work, level of lump sum amounts, hourly rates, cost structure (copying or legal research costs), connections with authorities, (international) net work, IT capabilities (e.g. electronic billing), reputation among peers, testimonials of other clients, standing in the academic world, legal training of client staff, listings in reference guides, creativity in the fee structure, presentation skills, extra´s offered as lagniappe, and last but not least chemistry between client and lawyer.
These yard sticks typically get weighting factors for a specific assignment, resulting in a matrix with strengths and weaknesses of the firm.
The client determines from the matrix so obtained, which three law firms will get selected from the long list (often > 20 firms).
The short listed firms will be presented to the client in a “beauty contest” in which they can further demonstrate their abilities and the chemistry they can bring to the relationship.
This process results in a relatively easy choice, whereby it rarely is the lowest bidder that gets selected.
In the US there are about a dozen companies offering on line selection services of law firms. In Europe the choice is limited to London based First Law and Legal BenchMarket International B.V. (“LBI”) in The Hague . Consulting firms like McKinsey and A.T. Kearney are active in this area but mostly in wider purchasing programs, neither of the latter two have specific focus on legal services.
First Law is mainly active in the UK and conducts an depth analysis of the legal aspects of the matter, assigns a professional agent, the case manager who not only selects but also monitors the legal work from start to finish. Fees are generally paid by the law firm.
Legal BenchMarket is mainly active on the continent (> 30 countries). LBI does not divulge the identity of the client until the short list selection is complete i.e. law firms submit bids on the work described in a Request For Proposal and can not take into account the strength of the client, hence there can not be any “reputation billing”. The fee is always paid by the client and is a percentage of the realized savings against a pre-agreed benchmark.
