5 Take-Aways From the 2018 North American Legal Procurement Conference

#1 Law Firms Need to Get Their Head out of the Sand when it Comes to Legal Procurement.

Having spent the last 15 years in “Biglaw”, I’ve seen the impact of legal procurement first hand. When RFPs first started popping up, many rolled their eyes, or thought it was just a passing fad that was better suited for buying paperclips. WRONG. WRONG. WRONG. What was originally limited to public pension plans or government contracts has now evolved into the standard method being used to compare and select law firms. What was once a relationship only driven process, has evolved into a business-driven approach led jointly by corporate counsel and the procurement group. Relationships are still key, but those relationships need to be supported by underlying data that supports using that law firm.
People who can reduce costs, or bring in new revenue, will always have a seat at the table and be listened to by management. The Buying Legal Council 2018 Survey noted that “when procurement is well involved and well aligned in and works in partnership with the in-house law department, companies save 21% on average.” Granted, the procurement process for the legal industry is still a work in progress – but it’s NOT going away and will only grow more prevalent. Chief Legal Officers, General Counsel and other legal decision makers are seeing the value in working with the procurement team as they are positively impacting the bottom line.
Every law firm should have sent a representative to this conference. WAKE UP.
#2 Technology is Driving Legal Spend Management.
I was amazed by the types of software programs and technology being used by procurement and in-house counsel to monitor and predict legal spend. Law firms are not known for being quick adapters to innovation – and it really shows when you see some of the tools coming out by some of the legal service providers. They are moving at a much faster pace to figure out how to incorporate technology to create efficiencies.
For example, I was blown away by Digitorylegal, a company that uses artificial intelligence to better predict, price and manage legal matters. I’ve had dozens of conversations with partners where they throw up their hands when asked to come up with a fixed budget for a litigation matter and they tell me they really can’t do one until they have more information. Litigation is not a “snowflake” and task level benchmarks can be used to predict future costs. The “we need more information” answer no longer works.
Many law firm’s marketing materials note that they have done hundreds of similar matters to the work being pitched, but they never harnessed the power of that data to assist with pricing future matters. Corporate Counsel are now being armed with data-driven tools that allow them to be in a much better position than the law firm when it comes to negotiating prices. These tools provide them with a much more accurate market cost for the matter then the back of the napkin estimate many lawyers still rely on.
#3 Relationships Aren’t Dead.
With so much of the conference focused on how data is driving more decision making, it was great to hear that relationships still play a vital role in the process. Adam Severson from Baker Donaldson wowed the crowd with his presentation on how relationships are still vital to any law firm/client partnership. We are seeing more collaboration where law firms are working together with other panel law firms to paddle towards a common goal of producing better results for the mutual client. Excel spreadsheets, online reverse auctions, and other traditional non-personal procurement tools are here to stay – but they are not replacing relationships. Its important law firms engage in meaningful conversations beyond the data with clients to collaborate on how they can create a win-win relationship.
#4 How Will Law Firms React to an Increase in Price Sharing Fee Models.
Richard Burcher from Validatum presented on the growing demand by corporate counsel for more billing fee structures that were tied to the alignment of commercial interests. This shared risk/shared reward model is often tied to a discount or bonus based on agreed upon metrics. The trick is in finding a metric that is objective and not subjective. There are plenty of quantitative metrics available if corporate counsel and law firms negotiate in good faith and are willing to share the risks involved, but that is easier said then done.
The problem is most law firm compensation structures can be obstacles when it comes to assuming the risk involved in these types of matters. Typically, a partner has to “own” the matter internally at the law firm, so they take on the personal liability of the matter’s outcome to some extent. Should it “win” or meet the metric identified for a bonus, then all is great and both sides win. The issue is if the matter is considered a “loss” or does not meet the metric identified and the firm must provide a deep discount or write off a significant amount of time. Then you have a partner who must answer to the management committee come compensation time about low realization of the matter. Smaller, more nimble law firms may be able to take advantage of winning work from larger firms who may be too risk adverse to seize on these opportunities. Law firms should be asking themselves what changes they should consider to be able to assume the risk for these matters as a firm as a whole rather than as an individual partner.
#5. Take. The. Work. Away.
Keynote speaker Hugh Simons definitely got the crowd stirred up with the title of his presentation, “Seizing the Moment: Why Now is the Time to Push Big Law Hard for Lower Rates.” While I didn’t agree with everything he said, I will say that every law firm should ask him to speak at their next partner retreat so that your lawyers understand the playing field they are up against. The theme of his presentation was that law firms are making too much money to change – and won’t change unless they are forced to change – and the people at the conference are in the best position to make that happen.
Companies are finding cost savings in adding more in-house counsel staff, using more alternative legal service providers, converting to more AFAs, using Big Four accounting firms, and trying other more non-traditional law firms and vendors. But in the end, the only way to really make change is to “take the work away.” Hopefully traditional Biglaw firms will adapt quick enough to avoid that outcome.
Matt Prinn is the founder of RFP Advisors Group, a company that provides consulting services for RFPS in the legal industry to both corporate counsel and law firms. He can be reached at mattprinn@RFPag.com.
2018-10-26T18:55:41+00:00October 26th, 2018|Legal Procurement|0 Comments

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