In 2008, GlaxoSmithKline’s then-head of litigation Bob Harchut was appointed “SPOC of the GELRT.” The associate general counsel was, in fact, exploring a new frontier for legal departments: competitive bidding. When legal departments use competitive bidding, or “reverse auctions,” they solicit proposals for outside legal services through a digital auction, often in conjunction with or modeled after the procedures of the company’s procurement department, says Julie McMahon in Let the Competitive Bidding for Outside Counsel Begin.
During the process, both the legal department and the participating firms have a clear picture of the “market”—i.e., what other firms are offering for their services. This takes the place of traditional requests for proposals (RFPs). GSK has seen overwhelming success with the new procedure in place, with the company reducing its legal spend by tens of millions of dollars, and 68 percent of its legal budget going toward value-based fee arrangements.
Competitive bidding is catching on in a growing number of legal departments. “It’s a trend that’s here to stay,” said Silvia Hodges, a Fordham Law School professor and legal marketing consultant. “I strongly advise law firms to understand how it works, and legal departments to be open to how procurement can help them.”