Keeping abreast of the latest techniques in the competitive bid process empowers general counsel to improve that process. Based on my recent consulting projects in which law departments put out requests for fixed-fee bids on large portfolios of work to be done over two or three years, 10 techniques deserve special consideration. Most of them also tend to further data transparency and increased objectivity.
1. Provide Ample Usable Data
Give firms as many facts as you can about the matters they will bid on, and provide those facts in a format they can work with. Tables are necessary at a minimum, but spreadsheets will give firms more opportunities to manipulate and analyze the data. Firms always want to know more information to sharpen their bids and assuage their worries; you should help them. They will ask for it in their questions, so you should anticipate the demand. Bear in mind, too, that unless your department has solid historical data, you won’t be able to evaluate the firms’ proposals reliably.
2. Combine Quantitative and Qualitative Responses
Ask for quantitative answers, such as, “How many of this kind of matter did your firm handle in the past 24 months?” Add qualitative questions, such as, “What innovative techniques did you use to handle these matters?”
We find it efficient to ask for numbers in spreadsheets and for text in Word files. Use an online survey tool to collect the numeric responses, or ask for Excel spreadsheets to be returned with the proposal. Require firms to adhere to the spreadsheet’s layout and specify unambiguously the format of the numbers you seek (e.g., do not use “thousands” or “K”).
Software can pull together the numeric answers from surveys or spreadsheets and rank the proposing firms on each of the numeric questions. Think ahead to how you will read each of the answers and combine the information for analysis. If, for instance, you ask for effective billing rates for partners, the data can help resolve many otherwise impressionistic debates about the relative expensiveness of the firms.
As to textual, non-numeric responses, department lawyers who review the proposals need to read several answers to the same question to develop a baseline of quality, and then rank all of the firms’ answers to that question on a scale, such as 1 being a relatively weak response to 7 being excellent. In the end, even the most judgmental answers can thereby be included as rankings, together with the numeric-question rankings, which creates overall scores.
To forestall objections from readers who disparage numbers and favor subjective impressions of firms, we do not believe that data alone can pick the winning firms. Not at all. But scores embody personal feelings, and you can test them against a framework for comparisons.
3. Select Mailbox, Directory and File Name Protocols
Law departments typically invite 10 or more firms that are already known to be capable of handling the upcoming work. All of the emails to and from those firms, it turns out, mount up. It’s best to create a separate mailbox to keep track of the email traffic. It also helps to specify how you want proposal files to be named so that you can order and find them in a directory. Request for proposal (RFP) processes demand conscientious tracking, so you should set up logical systems to facilitate them.
4. Answer Questions from Firms
Give law firms four or five days to pore over your RFP, and encourage them to submit questions about the work on offer or the bidding process. No matter how much your team has toiled to craft a clear and comprehensive RFP, firms will surprise you with their astute dissection of its shortcomings. You will field many questions, some of which are variations on something you overlooked – e.g., “What about non-U.S. matters?” It is an art form to summarize similar questions and tease out which questions raise meaningful differences.
Most important, try hard to answer the question the firm is asking and give them some useful advice. Even if you can’t return a precise answer, you can narrow some range of numbers or create an assumption they can adopt.
5. Enable Follow-Up Questions
Consider even a second round of questions from firms after you have responded to the first ones. This two-step feedback is likely to move the RFP process forward much more efficiently than conducting a bidders’ teleconference. Inevitably, no matter how the law department prepares for firms to dial in, a question will be asked that can’t be answered, or technical glitches will strike. Have questions sent to you, and you can think more clearly about your answers (and if necessary do some research).
6. Assign Multiple Reviewers Per Response
Have more than one lawyer review each proposal, and then average their scores. Yes, this commits more of your lawyers’ time, but the results yield more reliable scores that are less vulnerable to personal, subjective impressions than if only one person scores a proposal. All lawyers have their favorite firms or partners.
Your RFP process ought to try hard to counterbalance subjective favoritism that is not backed up by quantitative and qualitative responses. Multiple eyeballs on each proposal helps to create a level playing field (as does abundant information provided and useful answers to questions).
7. Weigh Topics Beforehand
Before the answers come back, decide their relative importance to your ultimate decision. That is to say, how much weight will you give each answer when the ranking calculations have been completed? For example, every department values experience on like matters and expertise of the proposed team. But some might weigh those factors as three times as important as the locations of a firm’s offices or the size of the firm. Or perhaps the amount bid to handle the work is weighed one and a half times as important as either experience and expertise. If you peek at the responses before you decide on emphasis, you risk skewing the evaluation.
We have also found that topics such as sustainability, diversity, technology and secondments justify weightings. When you honestly appraise the anticipated value of the firms’ responses to each question, you might decide to drop some questions, which is a side benefit for them and for you.
8. Welcome Collars and Assumptions
Collars on bids inject flexibility into fixed fees: “If the number of matters arising during a year exceeds the historic average by more than 20 percent, your fixed fee will increase by some corresponding percentage.” Firms protected by a collar can more comfortably bid less because of that protection from an unexpected bump.
Similarly, the more both sides agree to assumptions, the lower the bid amounts: “Assume no more than two Superfund amelioration hearings. Assume the Charles Plant will close in mid-2018.” Firms gravitate toward the specter of awful things happening; you can rein in their risk aversion and resulting fee escalation by shaping the boundaries of what they may rely on. If an assumption turns out to be materially mistaken, both sides will be aware of it and they can negotiate a proportional change in the fee.
9. Preset the Number of Firms to Choose
Decide ahead of time roughly how many firms you plan to retain. If choosing only one firm, that is clear; if creating a panel, preset some range, such as five to seven firms. Otherwise, with many more proposals than panel spots, it is easy for the reviewing committee to dodge difficult decisions by simply expanding the panel. Having a goal in mind helps committees winnow firms through comparative metrics, thoughtful discussion (and ever-present politics).
10. Keep Firms Informed
Let firms know the status of the process. They share a deep interest, to say the least, in the outcome, but many of them also harbor suspicions about the fairness of the process (“The incumbents were wired!”). The more you let them know what is happening and the timing of the upcoming steps, the more humane you will be. Purchasers should not be cavalier and insensitive about the anxious, natural feelings of sellers. A subpart of this recommendation is that if you make firms jump through rings to respond promptly, don’t be hypocritical and keep slipping on your own timetables.
These suggestions should strengthen a competitive bid process to obtain fixed fees. If implemented, they will also improve the terms the firms you select work under. The two themes furthered by many of the suggestions are (1) divulge as much data as you can and (2) mind the objectivity of the process.
Your law department is better served if it discloses as much as possible about the projected future (which presumes an NDA has been assigned or assumed), with the huge exception of how much you project spending. The more the firms know, the more precise (and lower) their proposals will be. A side benefit in striving for clarity and completeness is that the eventual agreement with the firm or firms selected will be more straightforward because you can incorporate by reference your questions and the firm’s responses.