When it comes to legal services procurement, there are still some in the in-house world who balk at the idea that legal services can be procured in the same way as widgets. I get that, but more and more, traditional procurement approaches and tools are being used in large organizations to determine how external legal providers are chosen. It’s hard to ignore the effectiveness when you consider the questions asked.
In both our 11th Annual General Counsel Roundtable discussion this year and a recent interview I did with Gordon McCue of Shell Canada, I had some insight into how two companies with historically strong processes for acquiring external products and services have used traditional tools — including reverse online auctions — to come up with a roster of law firms for large, repeatable litigation and other big matters. Both Dell and Shell use the process.
Dell Canada’s Barbara Silverberg has been doing it for about five years and says it can work well. She is quick to note Dell doesn’t necessarily go with the lowest bidder because managing litigation is not just about cost, but it’s certainly a major one. Other factors kick in but it is about making the firms compete.
At Shell, the company uses a sourcing tool designed by IBM and used routinely for purchasing goods. Legal adapted the tool to suit its purposes. The firms were asked a series of questions — such as: Would they commit to working with legal in certain ways such as using project plans, fee arrangements, provide secondees, etc., as well as requests for information on data privacy, cybersecurity, and the like. Armed with that information, Shell narrowed its short list to move to the next stage.
McCue says there was “a lot of anxiety” for the firms it dealt with, but that’s to be expected with such an exhaustive process. I asked a few of the panel firms they work with about how they viewed the process, but they declined. Based on what McCue told me, it seemed like the process leaves few stones unturned and quite a few rejected service providers.
To be sure, few in-house departments have the resources to use IBM tools and reverse auctions to achieve the kind of savings and due diligence that Shell and Dell employ. It does suggest that when the effort is put in by the in-house team, rather than waiting for the law firms to create the right formula of staffing and fee arrangements based on a vague request, the result is better defined to the needs of the business and can be applied over several years before it needs to be reviewed.
For some time, law firms have been told they aren’t delivering what in-house want. Instead of waiting for the dynamic to change, progressive in-house departments are taking matters into their own hands and asking for information to allow them to come up with data they need to make informed decisions.
During the roundtable, we also talked about the effectiveness of requests for proposals. It seems to me small departments prefer a happy medium that falls in between the exhaustive approach Shell takes, and one that leaves in-house feeling like they still don’t know if they got the best deal. But the real takeaway for me from the Shell approach is when going to the market, know what you want and be prepared to spend the time to evaluate. Otherwise, the end result probably won’t be the right result.