Law Firms: Getting ready for Procurement (Part 3)

To help legal departments apply greater sourcing discipline, many companies involve procurement in buying legal services. Law firms are experiencing this shift as they work on pricing and answering RFPs. This series brings together recommendations on how to best work with procurement from articles published in the Legal Procurement Handbook published by the Buying Legal Council. It was first published as an article in the Legal Marketing Association‘s magazine “Strategies.” To read the previous parts, click here for part 1 and part 2.

Once you decide to participate in the RFP, you are likely to go through a multi-stage process, requiring you to provide responses to each stage. Each stage is aimed at assessing the competing suppliers, says David Clark, head of bid management at APS Group in Manchester, UK. In the article “Bidding to Win: Step by Step,” he explains that procurement draws up shortlists of firms who perform best on a scoring system. Procurement first looks for “bidders who have been trading successfully in recent years, have appropriate policies and processes in place, hold the required insurance and have robust business contingency procedures.”

Stage two typically measures expertise and experience in delivering similar services to peer organizations. The final stage is typically the pitch presentation. “At this stage, it is a matter of seeing if the parties can work together, whether the claimed level of expertise does exist, confirming that certain promises made in the submitted documents are realistic and negotiating commercial terms.” When pitching for panels, ‘chemistry’ is less important to the buyer, and the RFP is often awarded from paper, Clark says. “This makes the construction of a compelling bid even more important.”

Increasingly, clients also look for reciprocity, meaning business opportunities that the law firm can introduce them to. “Successful law firms offer such ‘added value’ through invitations to networking events, joint networking events, opportunities to joint bid and introductions to contacts in a given market. What’s new is that some buyers demand them,” Clark says.

In “Bidding to Win: Before, During and After the RFP Process,” Melania Wenstrup, global key account manager at Grant Thornton International Ltd. in London, recommends investing time, efforts and resources to finding out procurement’s objectives. “Learn what their business goals are and how the business is changing for them,” she says. “Explore what they believe to be the most pressing problems hindering them from achieving the success they seek. Arm them with the information they need to achieve these objectives.”

Large-scale opportunities are usually signaled long before an RFP is made public. Wenstrup says, “Surpass your competition prior to the RFP, and treat procurement as you would any other key stakeholder in the decision process. Demonstrate and convey your added value to procurement by helping them define the real business requirements and influence the parameters of the specification beforehand. See procurement as your partner, not your adversary.”

It is critical to understand how procurement evaluates suppliers and how this drives their purchasing strategies. Demonstrate your understanding of their organizations’ internal and external environment, e.g. through regulatory initiatives or industry themes, Wenstrup says. Arrange meetings to discuss developments in the business and projects that might be in the pipeline. Make sure your informal relationships are fresh, in case you are not allowed to contact those involved in the RFP when it arrives. Find out what procurement is trying to achieve through the RFP, which may not necessarily be the same as the business. Although cost will be important, they will have other key drivers. Ask questions so that you can demonstrate how your proposal will help them achieve their goals.

Be prepared to accept lower margins in exchange for future business or have the confidence to walk away and focus on opportunities with higher returns. If procurement’s driver is getting value for money, find the right balance between price and quality. To articulate your proposition, Wenstrup recommends that you focus on:

  • Better. Get across a definitive and tangible feeling of your service. What improvements can you offer? When can procurement expect to see these improvements? How will they be able to measure it? Does it drive sustainability?
  • Simpler. Simplify the process and service management: Procurement looks to eradicate any unnecessary added services, so avoid sounding too ‘salesy’ or pushing additional services.
  • More value. Price competitively. Do benchmarking and know your walk-away price.

Whether you won or lost an RFP, stay in touch with procurement and use this last RFP as an opportunity to cultivate a long- term relationship. “Anything you can glean from the scoring process and any peripheral elements of the decision can help you pitch more effectively next time,” Wenstrup says. Invite procurement to knowledge-sharing events, send relevant publications and newsletters, and share trends and issues that are critical to their success. Make it your priority to become the point of reference for your client’s procurement professionals.

In the end, only a win-win relationship will be able to endure the test of time. Good luck on your next pitch!

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Law Firms: Getting ready for Procurement (Part 2)

To help legal departments apply greater sourcing discipline, many companies involve procurement in buying legal services. Law firms are experiencing this shift as they work on pricing and answering RFPs. This series brings together recommendations on how to best work with procurement from articles published in the Legal Procurement Handbook published by the Buying Legal Council. It was first published as an article in the Legal Marketing Association‘s magazine “Strategies.” To read Part 1, click here.

In “Creating a Level Playing Field,” Richard Burcher, managing director and pricing consultant at Validatum, recommends firms systematically triage RFPs since direct and indirect cost of the firm’s participation in RFPs “can be astronomical in the aggregate.” Ask yourself:

  • What is the process for evaluating firms and their proposals?
  • Who is the ultimate decision maker, and will we have any opportunity to interact with them, or is someone else running interference?
  • How many bidders are being considered, and who are they?
  • How many firms does the client wish to end up with?
  • What are the selection and evaluation criteria?
  • When and how do we get an opportunity to understand how we can add more value to the relationship?
  • If you have no existing relationship with the client, why are you being asked to bid?

Burcher warns of RFPs “where the in-house team or procurement flatly refuses to provide answers to even the most reasonable questions. It often signals another agenda. My advice: Run a mile and let someone else ‘win’ the work.” Once you have a good understanding of what you are up against, “it is time to get to work on preparing your strategy so that the negotiations are just that, a negotiation, and not an unconditional surrender.”

John de Forte of Proposal Training Ltd. and de Forte Associates counsels firms to qualify RFPs rigorously in “Bidding to Win: Six Winning Moves.” He recommends to not chase too many targets and waste resources on RFPs you can’t win or are unsuitable for you. He believes “[f]ocusing on the most appropriate opportunities is critical to achieving and maintaining a decent win rate.” De Forte recommends advises you to carefully consider the following areas before answering the next RFP:

  • Logistical: Do we have the resources availability for the assignment? Do we have the resources availability for answering the RFP?
  • Tactical: Do we have an existing relationship with the client? Do we have access to decision-makers during the RFP process? Are we competitive in terms of pricing?
  • Commercial: Is the project likely to be profitable? What are the risks involved? What are the costs for answering the RFP? Are they appropriate for the size/volume of the matter?
  • Strategic: Is the matter part of our core business? Is it in our target sector? Is the client a target client for us?

Firms should also develop a dialogue with procurement: “Increasingly, procurement is involved in developing tools and metrics for assessing supplier performance and getting greater value from service providers. Firms [that] help the client further these aims are putting themselves in a good position to win and retain work in the future.” De Forte warns that once an RFP is in progress, the scope to achieve this is limited. Just as partners continue to nurture the relationship with the in-house legal team, business development is well-placed to maintain contacts with procurement. Responses to questions on added value in RFPs will be more persuasive if they reflect continuing dialogue with procurement about how external legal advisers can best support the business. De Forte counsels firms to invest time in thinking through the issues affecting the client and developing a response that addresses them specifically, rather than producing mini-brochures or credentials statements as RFP responses.

In regards to pricing, de Forte recommends a Price-to-Win (PTW) approach. He says, “Companies bidding for large contracts in the defense, IT and outsourcing sectors have adopted PTW. It is increasingly used in professional services, including accounting firms and management consultancies. There is no reason why it can’t be embraced by law firms.” PTW involves in-depth competitor analysis, including pricing estimates based on competitors’ past performance and likely approach to the solution. “A common technique is the appointment of a ‘black hat’ team to second-guess competitors’ pricing strategy,” de Forte says. Another critical element is setting work streams a price target and incentivizing them to undershoot it. Firms should also adjust the way they allocate RFP resources: Spend at least 10 percent of your overall budget on competitor analysis and a similar amount on strategic pricing.

To read Part 3 of the series, click here.

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Law Firms: Getting ready for Procurement (Part 1)

To help legal departments apply greater sourcing discipline, many companies involve procurement in buying legal services. Law firms are experiencing this shift as they work on pricing and answering RFPs. This series brings together recommendations on how to best work with procurement from articles published in the Legal Procurement Handbook published by the Buying Legal Council. It was first published as an article in the Legal Marketing Association‘s magazine “Strategies.”

In the article, “CEOs Love Procurement: How to Deal with the Consequences,” Tim Corcoran of Corcoran Consulting Group LLC warns that in “most sectors, there are a few providers whose reputation for excellence allow them to set prices with nary a concern that doing so will limit demand. Pragmatic and realistic business leaders know that very few truly occupy this space, and, therefore, there will be pricing pressure. Managing costs is an effective way to maintain margins, and often to improve margins, when clients eventually demand more for less.”

With procurement’s focus on price, many firms who have lost an RFP assume their competitors offered lower rates, even predatory unprofitable rates, Corcoran says. “They don’t realize that the bid is just as likely to have been awarded to a competing firm with higher published rates, but accompanied by a clear, well-designed project plan and budget. For procurement, the measurement of an effective selection of supplier doesn’t start and end at the rate card price. A low-cost supplier that imposes transactional costs such as inefficiency, a steep learning curve and endless scope creep generated by poor planning is a poor choice.”

Andy Krebs, global strategic sourcing manager at Intel Corporation, acknowledges that some sourcing professionals are all about cost. In his article “What Legal Procurement Really Wants,” Krebs says that “[u]nfortunately this ‘cost is king’ persona is painted across the profession with a wide brush.” He believes that sourcing experts who look at the overall outcome, the effects on the corporation and how their actions shape the landscape of the industry are closer to reality. These procurement professionals are driven by the desire to create an advantage for the legal team and their employer. They apply their knowledge and skills garnered in other professional services areas to legal services.

Krebs believes that procurement can add value to RFPs, supplier management, market analysis, supplier negotiations and streamlining the buying process. RFPs are “a necessary evil in any spend area,” he says. “They enable decision makers to view different ideas and strategies on how to resolve the issue at hand.” Procurement professionally manages the RFP event and ensures an even playing field for all participants. “The idea that an RFP outcome has already been pre-determined prior to the event is simply not true,” Krebs says. “Contrary to common belief, we want firms to succeed. This helps keep the market fresh with ideas and keeps it from getting stale.”

Click here to to read Part 2, and Part 3.

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