Lexpert Magazine

78 LEXPERT MAGAZINE | JUNE 2016 BY RICHARD STOCK | COLUMNS | Richard Stock, M.A., FCIS, CMC, is a partner with Catalyst Consulting. The firm has consulted to more than 250 law departments over 20 years. He can be reached at rstock@catalystlegal.com. Design a Successful RFP THIS SPRING, at a couple of legal con- ferences, we presented a request for propos- als simulation. e scenario was designed to question assumptions held by both buy- ers and providers of legal services. For the simulation, we imagined a company called Perpetual Power Corp. (PPC), which man- ufactured and sold wind turbines. eir headquarters were in Norway and their law department had lawyers in Oslo, Turkey, the United States, Brazil and India. PPC used 12 firms for 21,500 hours of legal sup- port on five continents. One of PPC's initiatives was to reduce its number of firms to around three. Its general counsel invited three incumbent firms to make proposals for as much of the work that they believed they could competently manage. About 30 per cent of the work was com- mercial, 45 per cent was litigation, with the remainder for labour, IP and environmental matters dis- tributed across the regions. Apart from reducing its administrative workload and securing predictable pricing for the future, PPC wanted the firms to offer the right bal- ance of coverage, competence and costs. e imaginary Fudd & Leghorn LLP had been doing most of PPC's US work — about 40 per cent of its global require- ments. Fudd offered to cover all of the Americas by collaborating with law firms in Brazil and Argentina. Fudd's proposal was not specific about coverage for Chile. Also, it offered limited information about its capabilities for environmental work. Overall, Fudd & Leghorn was light on quality assurance protocols and the cre- dentials of its South American firms, pre- ferring instead to emphasize its own his- tory of service delivery with PPC to secure more work. Still, the firm did increase its discount to 20 per cent, and it agreed to a fixed price and 36 equal payments, with no hours to be reported to PPC. In summary, Fudd & Leghorn employed a calculated strategy to increase its market share. Prudential & Gibraltar LLP, another creation, was a Swiss firm with offices in 20 European cities. e firm had a 25-year his- tory with PPC, dating back to the creation of the company, with legal support mostly in Europe. Prudential's proposal was to take on all of the European and African work, approximately 40 per cent of PPC's global requirements, by collaborating with firms in Cairo and Nigeria. eir proposal did not mention legal project management or budgeting. ere was no apparent link of service delivery to available collabora- tion technologies. e financial side of Prudential & Gi- braltar's proposal consisted of an hourly rate of €300, plus an annual rate increase of 2.5 per cent for Europe, and €200 plus an annual rate increase of 2.5 per cent for work in Africa. A 15-per-cent rate discount was built in. Billing would continue on an hourly basis. Prudential was expanding its coverage slightly, albeit by collaborating with secondary firms. Overall, its proposal was designed for a conservative client look- ing for predictable pricing. e third fictional firm, Mark & What- ney Inc., had supported PPC for five years with IP, environmental and specialized liti- gation work. It had expertise in Six Sigma and other process-improvement methodol- ogies, with experts in India, Japan and the US. e firm was prepared to bring that expertise to PPC's headquarters in Oslo. With a proven track record in process improvement and a solid network, Mark & Whatney proposed to do 70 per cent of the PPC work worldwide — virtually all of its litigation, IP and environmental legal re- quirements. Its strategy would not disrupt PPC's relationships with long-standing commercial and corporate firms. e firm proposed a fixed fee, discounted by 10 per cent, and then discounted again by 15 per cent if PPC was prepared to com- mit to ongoing efficiency projects. e firm believed that it could reduce PPC's requirements for legal services and was prepared to adjust its price up front to reflect this approach. is simulation illustrates a watershed opportunity for companies like PPC to move away from hourly billing in favour of a fee arrangement that will promote ef- ficiency, innovation and lower costs. e scenario has two firms offering simplified billing, reporting and payment — attrac- tive to law departments that want to shed administrative activity. PPC could allocate all of its non-commercial work to a global provider that can balance competence, cov- erage and costs. Provided the data analytics are solid and the RFP is thorough, the winning combi- nation of firms should be clear. Designing the right type of RFP makes the choice eas- ier. Most law firms are ready for a change. One RFP simulation outlines the concerns clients have when comparison-shopping LAW DEPARTMENTS 'THIS SIMULATION illustrates a watershed opportunity for companies like PPC to move away from hourly billing in favour of a fee arrangement promoting efficiency, innovation and lower costs.'

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