To help legal departments apply greater sourcing discipline, many companies involve procurement in buying legal services. Law firms are experiencing this shift as they work on pricing and answering RFPs. This series brings together recommendations on how to best work with procurement from articles published in the Legal Procurement Handbook published by the Buying Legal Council. It was first published as an article in the Legal Marketing Association‘s magazine “Strategies.” To read Part 1, click here.
In “Creating a Level Playing Field,” Richard Burcher, managing director and pricing consultant at Validatum, recommends firms systematically triage RFPs since direct and indirect cost of the firm’s participation in RFPs “can be astronomical in the aggregate.” Ask yourself:
- What is the process for evaluating firms and their proposals?
- Who is the ultimate decision maker, and will we have any opportunity to interact with them, or is someone else running interference?
- How many bidders are being considered, and who are they?
- How many firms does the client wish to end up with?
- What are the selection and evaluation criteria?
- When and how do we get an opportunity to understand how we can add more value to the relationship?
- If you have no existing relationship with the client, why are you being asked to bid?
Burcher warns of RFPs “where the in-house team or procurement flatly refuses to provide answers to even the most reasonable questions. It often signals another agenda. My advice: Run a mile and let someone else ‘win’ the work.” Once you have a good understanding of what you are up against, “it is time to get to work on preparing your strategy so that the negotiations are just that, a negotiation, and not an unconditional surrender.”
John de Forte of Proposal Training Ltd. and de Forte Associates counsels firms to qualify RFPs rigorously in “Bidding to Win: Six Winning Moves.” He recommends to not chase too many targets and waste resources on RFPs you can’t win or are unsuitable for you. He believes “[f]ocusing on the most appropriate opportunities is critical to achieving and maintaining a decent win rate.” De Forte recommends advises you to carefully consider the following areas before answering the next RFP:
- Logistical: Do we have the resources availability for the assignment? Do we have the resources availability for answering the RFP?
- Tactical: Do we have an existing relationship with the client? Do we have access to decision-makers during the RFP process? Are we competitive in terms of pricing?
- Commercial: Is the project likely to be profitable? What are the risks involved? What are the costs for answering the RFP? Are they appropriate for the size/volume of the matter?
- Strategic: Is the matter part of our core business? Is it in our target sector? Is the client a target client for us?
Firms should also develop a dialogue with procurement: “Increasingly, procurement is involved in developing tools and metrics for assessing supplier performance and getting greater value from service providers. Firms [that] help the client further these aims are putting themselves in a good position to win and retain work in the future.” De Forte warns that once an RFP is in progress, the scope to achieve this is limited. Just as partners continue to nurture the relationship with the in-house legal team, business development is well-placed to maintain contacts with procurement. Responses to questions on added value in RFPs will be more persuasive if they reflect continuing dialogue with procurement about how external legal advisers can best support the business. De Forte counsels firms to invest time in thinking through the issues affecting the client and developing a response that addresses them specifically, rather than producing mini-brochures or credentials statements as RFP responses.
In regards to pricing, de Forte recommends a Price-to-Win (PTW) approach. He says, “Companies bidding for large contracts in the defense, IT and outsourcing sectors have adopted PTW. It is increasingly used in professional services, including accounting firms and management consultancies. There is no reason why it can’t be embraced by law firms.” PTW involves in-depth competitor analysis, including pricing estimates based on competitors’ past performance and likely approach to the solution. “A common technique is the appointment of a ‘black hat’ team to second-guess competitors’ pricing strategy,” de Forte says. Another critical element is setting work streams a price target and incentivizing them to undershoot it. Firms should also adjust the way they allocate RFP resources: Spend at least 10 percent of your overall budget on competitor analysis and a similar amount on strategic pricing.
To read Part 3 of the series, click here.