Issuing a request for proposal for external legal services is becoming more commonplace — and it’s no longer the domain of government or health-care organizations.
But, as many in-house legal teams have discovered, issuing an RFP is a lot of work, particularly if they don’t have much experience with the process. On the flip side, responding to RFPs can also be a lot of work, taking 40 to 50 hours of staff and lawyer time, according to a 2013 Lex Mundi paper called “Best Practices in Preparing and Responding to Requests for Proposals.”
Both sides put in a lot of time and effort, but, oftentimes, neither side is satisfied with the outcome. Some law firms complain that RFPs are often too vague, with too many assumptions that can lead to misunderstandings down the road. Or, conversely, they’re too prescriptive, which can hamper creativity and innovation.
For in-house counsel, the process requires a considerable amount of tedious work, and they may not get exactly what they want in the end, when the winning law firm argues certain items fall outside the scope of the RFP.
Lex Mundi recommends keeping the RFP process within the legal department, since procurement departments may not have the same understanding of the relationship between inside and outside counsel — and in-house counsel will always oversee the work being done.
But Fred Headon, assistant general counsel for labour and employment law at Air Canada, says there could be a role for procurement departments. “Lawyers are not necessarily equipped to have this conversation,” he says. “These are not things we learned in law school.”
Nowadays, more legal services are being purchased through RFPs. “Many large businesses are using that approach for some of their legal purchasing,” says Headon. “It’s a tool the law firms have been accustomed to as well, but maybe it’s one we could refine.”
An RFP can be too vague, with “assumptions and qualifiers that work against the kind of efficiency or clarity that we’re looking for,” he says. “On the other hand, we see some arrangements where the client is becoming very prescriptive in how the work is being done.”
That’s where people who are accustomed to purchasing could help in-house lawyers find a better balance, to articulate what they need, Headon notes, adding that an RFP for legal services needs to account for the specificity of law.
The next step, says Headon, could be involving people who have the skills to negotiate these types of deals. “When we speak about this work, in the not-too-distant future, the RFP may be signed by someone not with the title of general counsel but by someone in procurement,” he says.
“They’re a group I’ve spoken to and I incorporate things they recommend,” he says of his company’s procurement department. “This is something you’ll see more of here and more of in the market generally, if only because of the amount and cost of the service.”
However, not all law firms are keen on this approach.
“One of the things we find annoying from our perspective or difficult to respond to is RFPs that seem to have been put out by the procurement department rather than the legal department, and they treat it the same way as if they’re putting out an RFP for light bulbs or janitorial services,” says Paul Harricks, a partner in Gowling Lafleur Henderson LLP’s Toronto office and leader of the energy, infrastructure and mining industry group.
Though legal services have been commoditized to some extent, there’s still a big difference between legal services and light bulbs. It’s important the client has scrutinized the RFP, he says, and that it makes sense in the context of legal services.
Harricks says he spends every day of his working life dealing with RFPs, and his industry group responds to upward of 200 a year.
“My sense is that sometimes companies issue RFPs without knowing what their evaluation criteria are going to be beforehand,” he says.
But that can lead to problems. Harricks recently sat down with a client after winning the bid. “As we were sitting to put pen to paper, it was apparent they were expecting us to do a lot more than we were expecting,” he says.
“This gets to the other side of the coin — how to respond to RFPs. It’s important in responding to set out what your assumptions are around the scope of the work — that becomes more of an art than a science sometimes.”
One of the biggest complaints from issuing companies is brochure-ware, says Blake Inkster, director of the proposal response team with Osler Hoskin and Harcourt LLP. “When you put a page limit on the RFP response, you’re going to eliminate that, and the responding law firm has to think about how they’re going to fill the space the issuing company has given them.”
Over the past five years, Osler has developed a national centre of excellence for responding to RFPs, which includes pricing specialists and innovation project managers. “We work on literally hundreds of proposal opportunities every year,” says Inkster, who has been managing proposal teams and complex proposal responses for more than 15 years.
What you don’t want, he says, is a scope of work that is so vague that the proposal is littered with assumptions. “That takes away from the sharing risk model. If there’s a clear, shared understanding of the goals and objectives of the RFP at the outset, then it allows law firms to scope, price, and accept risk for that work.”
Without enough detail, a pricing submission could be littered with assumptions, and “that makes pricing meaningless,” says Inkster.
In some cases, an RFP may have a detailed scope of work, but it involves such a complex matter that clarification may still be required. Or, the scope could change. “A change in the scope of work is normal — that’s part of the risk that a law firm needs to absorb,” he says.
“The great thing about the AFAs being used is you can more appropriately share risk between the issuing company and the law firm,” says Inkster. “On a complex legal issue, the scope of work may and probably will change and that’s just a reality. And that’s where AFAs or other types of pricing models share the risk instead of an hourly rate.”
At Borden Ladner Gervais LLP, the firm is seeing more sophisticated RFPs from clients. “We have to really be on our game and really understand what they’re asking,” says Matthew Certosimo, the firm’s national leader of the labour and employment group. “But on the other hand I’ve also noticed — this isn’t by any means necessarily widespread — that there’s a number of organizations that are going to mini RFPs or informal RFPs.”
These clients have a narrow focus or want to move quickly, so they issue a mini RFP, which is less formal but still involves interviewing external firms.
Richard Stock, a consultant with Catalyst Consulting, has been helping in-house counsel issue RFPs for the past 20 years. “I’ve done probably over 100 of them and met with hundreds of law firms during that time,” he says. “I think the market has been getting much, much better — certainly the law firms are much better than they used to be.”
Banks and insurance companies are used to preparing RFPs because they retain professional services of all different types. “Those that don’t do it on an ongoing basis may not have the infrastructure to do this by themselves,” says Stock.
These days, the negotiations include requirements that are much more strategic and developmental.
“RFPs are not just about the money,” says Stock. That being said, you can’t disassociate it either, and alternative fee arrangements are often part of the discussion.
“‘Give me your best people with your best discount’ is not an RFP. That’s kindergarten stuff,” says Stock.
More in-house counsel are looking at how the work is being done — to see if it’s the right mix of people with the right level of participation, from partners to paralegals. “We have to rethink the distribution of labour we want in line with the complexity of the work,” says Stock. “Failure to do that, and to leave that open-ended for the law firm to decide, is no longer sufficiently progressive.”
Many companies want to inject more predictability into pricing, he says, but it’s not always about getting a bargain-basement price. It’s about the right trade-off.
RFPs, after all, add to a law firm’s cost structure. “Frankly, I’ve worked on RFPs that have taken 100 hours or more to respond to,” says Harricks. “Despite the fact we have full-time professionals who do nothing but this … they can take a lot of time.
“We have to pay for people to respond to these things — it shouldn’t surprise anyone that law firms have fee structures that allow them to recoup the costs.”
These days, law firms are more sophisticated in how they prepare responses for RFPs, says Stock. The debate is not with law firms; it’s with the level of sophistication from the client.
“If you’re not already working for the client, there’s only so much you can ascertain from the RFP documents,” says Certosimo. “If general counsel can facilitate — to the extent that it’s possible — the providing of sufficient information around the needs of the client, then the response can be much more directed at those needs and we can in fact determine if we’re the right people.”
While the devil is in the details, so, too, are successful RFPs.
