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On Beyond Savings: Why a Competitive Counsel Selection Process Matters

Not everyone feels the need to run a competitive process to hire outside counsel . There are a laundry list of reasons folks will throw out, but there’s one I find especially difficult to swallow: “I already know what everything costs.”  When I find myself in front of a “I know what it costs” counselor, I share some of the great learning we’ve gathered running our business over the past year.

With All Due Respect, You Don’t Know What Everything Costs

No doubt if you are experienced with the subject of an engagement, you have an idea of what it might cost. But you really don’t know. Consider a litigation matter put out for bid with a request for fixed fees or fee caps by phase. This isn’t an uncommon outcome for initial bids in a competitive process:

  • Bid 1 – $1,125,000
  • Bid 2 – $1,050,000
  • Bid 3 – $950,000

Chevy Chase may have once uttered he was told there would be no math, but even he could determine that $950,000 represents a cost savings of $175,000 versus the highest bid. That’s a discount of about 16% to the highest bid.  And while I’d like to believe each of these firms would offer you the same pricing absent a competitive process, I tend to believe you’d be starting your negotiations about billing rates and fee caps from a higher starting point.

The point: a competitive counsel selection process gives you a market-based range for your engagement. And smart as you may be, you are not a market.

You May Gain Hidden, Practical Insights

When you invite multiple proposals for an engagement, you gain the benefit of learning about the practical past experience of each firm. While this doesn’t happen everyday, sometimes those past experiences yield tremendous and surprising benefits.

Perhaps one of the firms you invite to make a proposal has direct, highly relevant experience working with a counter party or a government agency on a very similar engagement for another client that no other firm you’ve invited can offer. And this does really happen, more than you’d think. One client recently received a proposal that was 3x less expensive than the highest estimated fees for their engagement, all because the firm had highly relevant prior experience. The hiring decision was a no brainer.

The point: a competitive counsel selection process, can yield valuable practical insights about your engagement you might not otherwise gain if you just pick up the phone and hire someone.

You May Find Surprising Offers

While you may have a solid, general idea of what something should cost, there are times when law firms will surprise you. Pick up the phone and call a law firm, they may give you a discount. Put several law firms through a competitive process, and you may find one firm is willing to go to great lengths to win your work. Perhaps, they want to deepen their relationship with you. Perhaps they offer a deep discount because they are short on work.

The point: when you run competitive processes you will, from time to time, be pleasantly surprised.

You Will Gain A Better Understanding of Your Engagement

Get one budget for your engagement, you get one viewpoint. Gain several, and you’ll likely have a more balanced viewpoint. Sometimes one budget is well outside the norm of its competitors across the board. Other times you’ll find outliers within one or two particular phases of the budget. Reviewing the budgets and understanding the causes of outliers enables you to help redirect those firms who may have made what you determine were poor or unlikely assumptions to retool their proposals– be it the outlier or everyone else.

The point: gaining multiple perspectives helps you better determine what is reasonable and rational. And this gives you a better starting point to discuss the expected scope of your engagement as well as changes in scope that likely will take place as the matter unfolds over time.

About the author – Dave Sampsell is a 20-year lawyer with extensive experience managing large, complex legal engagements around the world and overall corporate legal budgets. He presently serves as General Counsel of a NASDAQ listed company and is a Founder and Principal of BanyanRFP. BanyanRFP saves companies time and money through an easy-to-use, private and secure online application for the creation and processing of legal services RFPs. For more information, visit www.BanyanRFP.com

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