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A few weeks ago, a survey of international General Counsels showed that almost half of in-house legal teams used a competitive bidding process when hiring outside counsel. That's a big jump from previous years, up 14 percent, but still surprisingly low.
If you're one of the half of GCs who haven't yet embraced competitive bidding, you should. Here's why:
The Basics of Competitive Bidding
Competitive bidding, sometimes called a reverse auction, is a fairly straight forward concept. Legal departments, looking for outside legal services, solicit proposals from firms, selecting the best offer from a handful of potential firms. Sounds simple, right? It is, and your procurement department does it all day long. But the practice is relatively new in the legal field.
Competitive bidding is most commonly used for high-volume, repetitive legal work. Firms can offer alternative billing procedures, lower hourly rates, or other discounts to make them more competitive. That leads to lower prices for your company. Instead of simply throwing associate after associate at a problem, those lower prices force firms to be more judicious with their resources. When GlaxoSmithKline instituted a competitive bidding process, it saw its legal costs reduced by tens of millions.
Not the Only Factor
Some firms, predictably, have objected to the practice. "What ever happened the relationships, reputation, the value of professional expertise?" they ask. "Are we so crass as to only value money, to reduce the legal profession to just a dollar sign?" Surprising, no. For most in-house teams, competitive bidding is only part of the process.
Indeed, reducing spending on outside representation and aligning costs with results still takes second place to hiring based on expertise and reputation. Skill and know-how trump bargain basement pricing to most GC's, who continually say they look to expertise first and price second. Competitive bidding can inform your hiring decisions, but it need not determine them.
So how do you get started, if you haven't already? Ask your procurement department. Many competitive bidding processes are operated in conjunction with or after models created after the company's procurement procedures.