Running a panel tender for law firm services can be challenging and time-consuming. So what can procurement do to ensure they tick the right boxes?
A panel tender process can be long and arduous for all parties involved. A recent survey said 42 per cent of law firm respondents spend over 15 hours on each tender, with 19 per cent spending over 20 hours.
Firms complete multiple tenders each month. When you think that most respondents are partner or director level, this adds significant additional cost to a law firm’s operations. This will, in turn, factor into increased costs for the client.
Any tender must be targeted and specific, and aim to get to the right result as quickly and efficiently as possible.
We have set out our top tips to ensure a successful panel process below:
Agree a clear strategy
Whether it is procurement, in-house legal, or claims managers, who ever uses the legal services and, ultimately, whoever is involved in selecting the panel composition, need to agree the strategy for any panel review.
You should consider questions such as:
- Are you looking to reduce firm numbers?
- If yes, how will you manage conflicts?
- Is the aim to reduce costs?
- If yes, how do you plan to manage increases to ensure firms remain incentivised to provide the best possible advice (and lawyers)
- If no, how do you plan to manage increases and ensure you are not overpaying?
- Do you want to look at innovation and technology?
- Are you focusing on AFA’s or hourly rates?
- How long will you look to hold rates firm for?
- How will you manage individual lawyer annual increases? (For example, as a lawyer goes from being 1 year post qualified to 2 years post qualified)
- Managing exceptions to the panel – how will you do it? (For example, if you need to use a specific partner from another firm due to expertise)?
- How will you manage historic matters and pricing – especially if a firm is removed from panel?
- How will you factor in and measure historic performance?
You need to make sure you document this, ensuring everyone is clear on and signed-up to the approach.
Full understanding of legal spend
This may sound straight forward but for most organisations it is not. Many organisations resort to asking their own panel firms to provide spend figures to allow for more accurate analysis of historic spend patterns.
Many organisations find that when they come to undertake a detailed analysis of spend, there are limitations on their data. For example, data might not detail fee earner level, or how many hours a firm works on any individual case.
Real data and real analysis allows for side-by-side comparison of law firms, with the ultimate goal being to obtain data that allows for some means of understanding both cost and performance.
Too often procurement teams drive panel review processes without real input from those who use the legal services. On the other side, in too many organisations GCs and in-house counsel run tender processes without valuable input from legal procurement specialists.
You are left in a position where many tender processes do not deliver on the strategy set at the outset as old alliances between in-house counsel and law firms remain, or procurement drive too hard for reduction of cost. Some organisations have a more cohesive and collaborative relationship between legal and procurement but these are in the minority.
A real attempt must be made to bring together a “core team” to run the legal tender process, who are bought into the overall strategy and work together to run the process.
Sticking to the strategy
Often great strategies are set but ultimately decisions are taken on hourly rate reductions or past experience with a firm.
While neither of these reasons of themselves are incorrect, if your strategy was to reduce your panel, you need to look beyond relationships, and take tough decisions.
Too often, final panels can be decided upon, only for an unsuccessful firm’s senior partner to get on the telephone to a key decision maker asking that they be reappointed – and they are then reappointed. It is very common and hugely undermines the value of the whole process.
If all you are interested in is rates, do not draw up lengthy RFP documents. It is still quite shocking to read some RFPs. They require weeks of a law firm’s time and require a whole host of analysts to review the responses. And this doesn’t even consider senior management time to accurately digest responses and take decisions based upon them.
Be honest when setting your strategy. Experience dictates that while you genuinely believe the questions you ask will form the basis of the panel decision, there are only a few core drivers. These include: rate; geographic spread; expertise; and departmental spread (particularly if looking to consolidate your number of firms).
This sounds simple, and many companies believe they are adhering to this. Yet, time and again the examples we see are unnecessarily detailed and burdensome to both sides.
The linchpin for much of this is performance management. In our experience, most companies either overlook this entirely or invest very little resource into it. While they will invest a significant amount of internal time and money on a tender process, they then fail to monitor performance, or measure any element of it, during the tenure of the panel.
The next tender rolls around and they undertake the process armed with only rates and anecdotal information on a firm’s performance. Organisations need to focus on understanding what value a firm brings them. Are they getting the best service for the best price, whatever that may be? This involves investment of resources into understanding what value is for you and how to go about measuring it.
Stacey Coote is a Legal Procurement Expert and a Partner at Coote O’Grady, a specialist Legal Procurement Consultancy.