Per BTI Consulting, 56% of legal departments ran at least one RFP of some type last year when hiring outside legal services. That is an encouraging sign for those of us who believe in the power of competition to enable better decisions about who to hire. It also means, however, close to half of legal departments did not lever the force of market competition at all. So this is for all of you who are wondering the ways you might lever an RFP to help drive efficiencies and gain greater insights about who is right to do some portion of your legal work.
Back to Basics: RFPs for Legal Services
There is no one size fits all path to using RFPs. How and when you choose to lever an RFP is a function of many factors that can impact whether and the type of RFP you may run. We’ll hit on these as we review four RFP types for legal services.
Basic RFP Types for Legal Services
- New Work – One obvious time companies run RFPs is when they face a new project/issue they are not certain how best to staff with outside counsel. Examples that may lead to an RFP can include many circumstances such as international expansion to new locations, an unexpected government investigation, litigation in a jurisdiction where the company has not dealt with issues in the past, etc.
- Consolidation of Work – Much has been made of companies looking to cut back on the number of law firms that provide them service. The idea often is that consolidating work will lead to deeper relationships with fewer firms that really know your business, obtain more of your work and, in turn, offer better pricing. Often we see companies do this in select areas where the use of numerous firms brings obvious potential benefits. One example is the use of benefits, employment and labor lawyers across various states where the company also has relationships with firms that do this work nationally. Another may be patent or trademark prosecution work.
- Individual Matters – Some companies already rely on a handful of firms for certain types of work such as M&A, commercial litigation, etc. Rather than just picking a firm from the bullpen, companies will ask two to four of the firms to submit a line item budget for the engagement. Many of our clients will also ask for the firms to offer fee caps or fee collars for each phase of the matter. By engaging in this practice with some consistency companies are often surprised to find how firms may vary their financial offers from engagement-to-engagement and also can uncover unexpected and on-point experiences firms may have that make them more ideal than the competition to handle a particular matter.
- Panel Creation – Some companies believe they need to expand the firms they are willing to use for various types of work because the providers they are presently using are not meeting all of their needs. In these instances they’ll invite several firms to submit financial proposals for the areas of work in question with the idea they will rely on a handful of firms to assist with this work going forward for the next several years. Typically this is done by getting rates for various categories of staff members. Whenever possible it is a good idea to weight the rates provided based upon how the company believes work hours are most likely to be divided as this offers a closer reflection of actual rates likely to be charged. In some instances it may be appropriate to request fixed fees for distinct, repeatable task based work (e.g. processing a trademark application or immigrant visas). Yes, this work may vary from matter to matter, but generally firms that provide work on these matters will be willing and able to offer fixed fees based upon historical fee averages.
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