What Do Your Clients Want? Ask Your New Friends in Legal Procurement

An increasing number of companies today involve procurement when selecting outside counsel and ancillary legal services providers. This is particularly true for companies with significant legal spend and in regulated industries; banks, insurances and pharmaceutical companies were among the first to bring in procurement professionals. Now, many Fortune 500 companies and international equivalents bring in legal procurement to support the legal department cut costs, ensure quality and drive efficiency in legal services.

To better understand legal procurement practices and detect trends, the Buying Legal Council®conducted a survey in January 2016. This research represents the view of 92 legal procurement and legal operations professionals.

What the Findings Mean for Law Firms

Legal procurement is still a new profession, but increasingly influential for buying legal services. We expect that legal procurement’s influence will continue to grow in the next few years.

Procurement gaining influence means that firms need to show more efficiency and cost-consciousness. In particular, the large corporate client expects firms to behave like a prudent business partner who continues to innovate and evolve. For many firms, traditional approaches that treat every matter like a unique scenario will have to give way to a more professionally managed, industrial approach. Clients are increasingly expecting firms to apply the learning curve principle to the delivery of legal services. Here’s a list of what you need to do to evolve:

  • Speak with your clients to learn more about how procurement works in their organizations, what influence procurement has and how legal and procurement collaborate. Law firms should be aware of procurement’s goals, objectives, challenges and strategies.
  • Start building a relationship with your clients’ legal procurement professionals. Most are open to engage with their firms and happy to discuss ways to manage spend and getting the best value from the right firms.
  • Embrace the business side of the legal practice: rethink how you market yourself, as well as how you deliver and manage legal services. Procurement professionals demand predictability and project and budget management even more than most general counsel. Understand which metrics are used by procurement when evaluating law firms. Procurement believes that if you know your business, you should know how long it takes to deliver your services and how much something should cost.
  • Understand what your client’s procurement department wants and values. Firms can win “points” if they can demonstrate that they solved a similar issue for another client and can hit the ground running without needing to conduct extensive – often expensive – research. Procurement also likes to see industry experience and a robust project management approach as they promise the efficiency procurement seeks. Procurement looks for compliance with billing guidelines. Make sure you deliver what you promise.

Read the article on the Legal Marketing Association’s website and check out the beautiful info graphics!

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Become a master of pricing of legal services: Pricing Bootcamp

Law firm revenues increased by 4.1 percent in the first half of 2016 according to Citi Private Bank’s most recent quarterly report on the legal industry. The increase largely stems from higher lawyer billing rates (average billing rates increased by 3.2 percent) rather than greater demand for services. It is possible that rates will continue to go up as many major law firms just increased associates’ salaries. For example, first year associates’ annual salaries went from $160,000 to $180,000.

This is an interesting development, since clients continue to consolidate the number of firms they work with and pay much more attention to legal billing. (Read Elizabeth Olson’s article in the New York Times here.)

Given this development, it will be more important than ever for you to master the pricing of legal services: Understanding what goes into law firms’ calculations, what are cost drivers, how you best negotiate, and what information you need to provide law firms to so they can give you more than a very rough ballpark figure that no-one feels accountable for. Many law firms believe that as their cost go up, their prices will go up as well.

Become a master of pricing of legal services – sign up for our PRICING BOOT CAMP

Join your peers and counterparts – legal procurement and operations professionals, and law firm pricing and business development professionals – for an intense pricing boot camp for legal services. Learn about Pricing Strategy & Tactics, Negotiations, and Implementation in New York on November 3. Click here for more information.

This pricing boot camp focuses on active, hands-on learning for both client-side professionals and law firm pricing/business development professionals. Experts will help describe best practices in “alternative” or “value” fee arrangements and best practices in effectively responding.

You will work on complex pricing case studies that are based on real-world experience. This is an active pricing boot camp, not an introductory session on legal services pricing. You will be expected to actively participate and need to read the case studies ahead of time.

You will have the opportunities to learn, network, exchange thoughts and experiences. You will take home practical, real-world lessons and how to navigate the turbulent waters of today’s legal market. Master the pricing of legal services – whether you are a buyer or a seller.

Online Boot Camp

If you can’t come to New York in November, participate in our ONLINE PRICING BOOT CAMP and learn about Pricing Strategy & Tactics, Negotiations, and Implementation remotely.

  • Session 1: Wednesday, January 11, 2017
  • Session 2: Wednesday, February 1, 2017
  • Session 3: Wednesday, March 22, 2017
  • Session 4: Wednesday, April 26, 2017

You will receive a pricing case study to prepare for each 90-minute session (remote access). You will get information from the experts and the opportunity to share your insights.

Sign up Now: Early Bird Pricing ends September 12, 2016:

  • $250 for in-person participation (after September 12: $400)
  • $150 for remote, online participation – for all four sessions (after September 12: $250)
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Open your Mouth or Open your Wallet

My grandfather loved getting a good deal and didn’t hesitate to bargain. He applied “Open your mouth or open your wallet” to anything from buying skis to outdoor garden furniture. When his neighbors complained that they didn’t get the same low price or the upgraded version, he would say “well, you didn’t ask for it, did you?”

Are you like my grandfather’s neighbors? D. Casey Flaherty says some clients are. He found that clients aren’t asking law firms to change the way they deliver services. Firms might realize they need to change and become more efficient while remaining effective. However, unless you ask and tell the firms specifically what you want and how they can add value, firms won’t know what will satisfy you and your organization.

Casey warns that asking for discounts doesn’t do the trick as it is unlikely to modify the firm’s and their lawyer’s behavior. Instead, open your mouth and ask questions such as: To improve legal service delivery, what does your firm do to leverage your legal expertise through process and technology? Do you have credible evidence (descriptions and metrics) of your process improvements and innovation? To learn more, read Flaherty’s White Paper Unless You Ask, A Guide for Law Departments To GetMore From External Relationships”published by the ACC.

Asking is particularly relevant for RFPs. 

Matt Prinn of K&L Gates recently hosted a special session for us, titled “RFPs: Insights from a law firm’s perspective”. As a business development professional in a large law firm, his team answers hundreds of RFPs every year. Prinn found that some RFPs ask much better questions than others.

Examples of BAD questions are:

Are you willing to charge [company] on a ‘most favored nations’ basis (i.e., rates no higher than those charged by your firm to your largest and most influential non-pro bono client)?” Prinn says: “I’ve never seen a law firm agree to this. No smart firm would say yes, since we have clients of all shapes and sizes. Why would we give you the same deal we give a $20 million-a-year client if you are giving us $50,000 of work?”

“Please enter a rate for the following titles. The below rate will be the rate for all people of this title. For example a $500 partner rate means all partners would bill $500.” Prinn says: “This particular question was for an RFP touching on half a dozen different practice areas across a few continents. Some areas were very complex bet-the-company work, some more commodity-level work. Firms can have offices in low cost areas of the world and in high cost centers. Law firms understand the idea behind a blended rate, but to think that we would charge you the same price per hour for a bet-the-company case as we would for a standard matter is unrealistic. You will not the get “A” level lawyer if you force the firm to commit to fixed rate well in advance of them knowing anything about the matter or the surrounding facts. Firms will include a number as requested, but have no intention of being held to these numbers if the matter requires top lawyer in a high cost market. No firm is likely to ever staff a $900-an-hour lawyer on a significant matter for the client if they were expected to tie it to the blended rate which could be hundreds of dollars cheaper. Firms will either pass on the project or require a separate fee structure. You can’t trick a firm into doing a matter at a huge loss.”

So what should you ask in your next RFP?

  • When asking firms to price matters/matter portfolios, provide detailed information on budgets and historical legal spend in each legal area you want firms to bid on.
  • If you include a rate card, provide a detailed narrative on how it should be interpreted.
  • If you expect a minimum discount level, make it clear at the start of your RFP.
  • Be transparent on how many rounds of pricing negotiations you plan to have.

The above materials are accessible on the Buying Legal Council Members website.

The Buying Legal Council is the trade organization for professionals tasked with sourcing legal services and managing legal services supplier relationships. We support our members through advocacy, networking, education, research, and information. Our mission is to advance the field of how legal services are bought.

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