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Reverse auctions continue to change the way small firms get work. If your firm is fishing for new projects, you may encounter this process. Should you be concerned? Not if you're up-to-speed and you know what you're getting into.
This rise of reverse auctions parallels the increasing use of alternative fee arrangements. In the context of nit-picking over legal fees, it makes sense that a business would engage in competitive bidding for legal services.
How Are Reverse Auctions Used in the Legal Profession?
A reverse auction involves a competitive bidding process where multiple law firms content for the same project. This can make prices lower for large-scale legal projects such as mergers and tax filings. If the prices are expected to be lower, then firms need to be increasingly savvy with their resources in order to compete.
Who uses reverse auctions? According to The Wall Street Journal, reverse auctions have been used by major companies including Toyota, eBay Inc., and Sun Microsystems.
Lawyer Bidding Sites
Years ago, reverse auctions for legal services would be facilitated primarily through basic online chats. In 2011, an ambitious student from New York Law School founded Shpoonkle.com, a site dedicated to lawyer bidding. This disruptive service caught the attention of the industry, but it didn't catch on. The site has subsequently shut down.
Then along came Lawtendr.com. This new site is up and running for legal markets in the United States, Canada, and the United Kingdom. Time will tell whether or not Lawtendr will gain widespread popularity, but either way this type of service seems inevitable: the reverse auction process is likely here to stay.
Reverse Auctions and the Success of Your Firm
If you engage in competitive bidding or reverse auctions to land projects, don't steak your whole claim on how cheaply you can perform legal work. As reverse auctions begin to be used for more complex projects (and not just labor intensive tax filings and the like), your expertise and proficiency will gain more value in the bidding process.
For every project your firm undertakes, focus on developing genuine, human relationships. If you can gain the trust of the businesses and GCs you work for, then you will gain loyalty, which is a quality that can't be easily obtained through an auction.