Posted Jun 23, 2006 11:47 am CDT
A conspiracy theorist might see the increasingly demanding process for law firms responding to RFPs as payback from corporations. After all, the clients complain more and more about paying billable hours for unnecessary work—think on-the-job training for high-paid law firm associates.
Responding to requests for proposals really can feel like payback. That’s because beauty contests are often ugly. In what can be a literal reversal of fortune, the law firms themselves might end up doing a lot of work for nothing. Even firms that survive the RFP process may see their fee bid downward.
Yet these contests are becoming common for the big players as corporations move toward winnowing outside law firms from bushels down to handfuls. For the law firms, this is a zero-sum game.
“Everything staying the same is not an option,” says Stephen Barrett, chief marketing officer for Philadelphia’s 450-lawyer Drinker Biddle & Reath. “If you’re among the winners you can double, triple, quadruple your business. If you’re not, you go to zero.” Barrett has worked a lot of beauty contests, both as a marketer inside law firms and as a consultant to them. Drinker Biddle hired him last fall.
He knows the frustration of figuring out late in the game that the process was rigged. He also knows that winning an RFP is no guarantee.
“What’s most frustrating of all,” he says, “is when they ask for discounts, best rates, favored nation quotes and then say that even though you’re accepted you still might get no work.”
Drinker Biddle responded to dozens of RFPs in the past year, he says, winning enough of them to justify the work. The key is in knowing when the effort is worth it.
An example is the recent RFP from a startup telecom firm near Washington, D.C., that was losing money hand over fist. The company declined to reveal its budget for legal work or the firms it used previously. “They were just out kicking tires and we passed on it,” Barrett says.
While beauty contests aren’t all about money, it still is very much a part of what they’re about. The business world mantra is, after all, better-faster-cheaper.
“Sometimes the RFP is used as a way to get the client’s outside law firms to move toward alternative fee arrangements,” says Peter D. Zeughauser, a Newport Beach, Calif., consultant who has helped law firms primp for beauty contests. That can grate on what, over the past half-century, has become the traditional law firm model: the almighty billable hour.
The rawest application is probably the online RFP, a type of reverse auction. Bidders keep going lower. General Electric has been noted for its online auctions. Every time there is a bid, the auction remains open another 20 or 15 minutes.
“You have to prepare the law firm for blood running down the hallways,” Barrett says. “You need your best numbers person, and it’s like going into a casino with your walk away number. When they hit it, get out.”
While RFPs are basically auctions, that term seems limiting. A lot more work than just ponying up a dollar figure goes into the process. On big ones, hundreds or thousands of hours of work by lawyers and staff go into showing the client, or potential client, that their firm is the one for the job.
The Biggest Wrinkle
The detail gets granular as far as how matters would be staffed and handled. Clients want to know exactly how you’re going to make those legal widgets. And institutional values come into play—those of the client and those of the firm—to ensure a good fit. For example, eyebrows went up a few years ago when Shell Oil Co. asked its outside law firms to disclose not only how many women and minorities worked for them, but also what percentage of Shell’s work they handled.
That now is the biggest new wrinkle in the game.
“It’s not just about price but also about putting things in RFPs that reflect values and principles,” says P.D. Villarreal, lead litigation counsel at Schering-Plough Corp., which has its headquarters in Kenilworth, N.J. “Diversity is up front and center in RFPs,” he adds.
Some of the best advice for approaching RFPs sounds a bit like wooing a romantic interest. Don’t talk too much about yourself, but instead ask questions—thoughtful ones—that indicate knowledge of the client and sincere interest.
“When I put out some bidding in the past I was amazed at how few firms asked us what we wanted,” says Michael Roster, general counsel of Golden West Financial Corp. and formerly a managing partner with San Francisco’s Morrison & Foerster. If you ask and the client isn’t forthcoming, experts say, the RFP is probably wired and you’re just window dressing.
For the real deal, companies will want to know how law firms monitor work flow. Questions may include: Will different lawyers be rotated in and out, with the client paying for them to get up to speed? Will deadlines be anticipated to avoid extra costs for expediting transcripts or overnight shipping?
“Lawyers are trained to think about end results, not project management techniques, and clients end up paying the price for poor process management,” says Hanna Hasl-Kelchner, associate general counsel with Greensboro, N.C.-based Lorillard Tobacco Co. “Communicating that you’re sensitive to how legal services are delivered is important for winning the business as well as retaining it.”