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Structuring an RFP For Legal Services – The Basics

In-house counsel and others who procure legal services for corporations are under incredible pressures to contain costs.  RFP’s can be a terrific way to drive better pricing from law firms either matter to matter or for longer term engagements.  Here are four basic principles that will enhance the quality of information you receive from law firms and position you to make wiser engagement selections.

1 – Provide Good Information – GIGO

GIGO stands one of two things:  “Garbage In, Garbage Out” or “Gold In, Gold Out”.  While garbage in, garbage out works fine for your kitchen disposal, it is not what you want for your RFP.  The quality of proposals you receive to your RFP is a function of the quality of information you provide in your RFP instructions.

To help assure you receive responses that are more predictive of the level of service you want for, and the costs of, your engagement, there are a number of factors you should concentrate on when constructing your RFP.  The three most important are:

  • Work Scope Definition – How well you define the work scope of the engagement.  More than anything else, a well-defined work scope will lead to more accurate budget estimates.  Among other items you should consider instructing as to:
    • Discernible phases or work flows of your engagement that breakdown your work scope description into pieces and provide a framework for respondents to create a budget.
    • Significant issues you know will impact the work flow of the engagement.
    • Any tasks you know will be performed by or in conjunction with other outside advisors or members of your internal staff as well as how the law firm is expected to interact with such parties on these matters.
    • Any particular work deliverables you will expect to receive in the engagement (e.g. Board presentations, memos, etc.)
    • If available and applicable, the results of work flows from similar past engagements (i.e. history can be a strong guide)
    • Any common assumptions you want respondents to make as to the engagement and its work scope.
  • Staffing Expectations – Clearly state whether you have any particular staffing expectations for particular work flows or the entire engagement.  What areas of expertise are required?  What level of experience is necessary to complete the work effectively?
  • Questions – Be clear and thoughtful as to any common questions or information requests you want all respondents to fulfill.  Law firms frequently complain about the volume of information on a wide range of topics they are expected to provide when responding to RFP’s – even basic RFP’s for relatively mundane one-off projects.  Of course, law firms are also notorious for providing reams of marketing material no one requested in their RFP.  Regardless, think about the scope of information you request and whether it will truly impact your ultimate engagement decision.  The more familiar you are with the firms you are inviting to respond to an RFP, the less information you should need about their business practices to make a decision.

2 – Define Value

What factors will play a role in your selection of a law firm to fulfill the proposed engagement?  Define these and assure they are communicated clearly in your RFP.  Some of the most common considerations include:

  • Total estimated fees
  • The fee methods and rates that are proposed
  • The manner in which the law firm will staff the engagement
  • The experience of the law firm working on similar engagements
  • How the law firm utilizes technology to work more efficiently, this can be particularly important on longer term engagements

3 –Obtain a Detailed Budget

Based upon the work scope framework of your instructions, have each respondent build a detailed line item budget.  Be specific about the format to assure all respondents use the same one.  Making meaningful comparisons between proposals can be difficult absent the use of a common format.  To assist in your comparison of proposals, the budget format might require:

  • A staffing roster that shows the experience level, areas of expertise and standard billing rates of each staff member.
  • For each phase or work flow of the engagement, details on which staff members will provide service, the amount of time they are expected to work, and the fee method associated with, and estimated fees to be charged for, that work.
  • Information on any success or contingency fee elements of the proposal and any proposed fee caps or collars.
  • Details of expected expenses.

The budget enables you to compare competing proposals in greater depth.  You are able to determine if each firm appears to have staffed the engagement appropriately.  You can compare proposals work flow by work flow.  And if you’ve asked to receive the standard hourly rate of each staff member, you are able to determine the estimated discount or premium a proposal provides compared to standard hourly rates.  This is useful regardless of the fee method proposed.  For instance, fixed fee based proposals often include a “risk premium” to account for the fact the law firm bears risk of cost overruns.  Understanding that potential premium is useful.

The budget also serves as, well, a budget for the firm you ultimately select to conduct the engagement.  It creates a sense of accountability for the law firm to try and complete the engagement within the budget.  And it also enables you to track costs more closely and offers a departure point for any discussions you (or the law firm) believe are appropriate regarding the bills you actually receive.

4 – Simplify with BanyanRFP

Using an online application like BanyanRFP will help you adhere to these principles and greatly reduce your time investment to create and process an RFP.  It also drives transparent competition by providing law firms with discovery of key financial metrics of other proposals without revealing the identity of competing law firms – another significant advantage over conducting a manual RFP. Get started with BanyanRFP today!

About the author – Dave Sampsell is a 20-year lawyer with extensive experience managing large, complex legal engagements throughout 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 RFP’s.  For more information, visit www.BanyanRFP.com

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