More Frequent and Elaborate RFPs a Challenge for Outside Counsel

Shannon Green

Corporate Counsel

09-11-2012

According to a recent survey by LexisNexis, 42 percent of law firms have seen an increase in requests for proposal from in-house law departments this year. The increased pressure to compete for corporate business is putting added strain on firms. (Note: Corporate Counsel’s parent company, ALM, is a business partner of LexisNexis.)

The LexisNexis RFP Activity Survey [PDF] was conducted between July 23 and August 3 of this year. The majority of respondents had at least some responsibility for developing business for the firm. But of the survey’s 359 total participants, 41 percent could not quantify the level of RFP activity at their firm. The findings are based on answers from the remaining 213 respondents from 185 different law firms.

The survey findings fall in line with a trend in recent years for corporations to seek formal proposals from firms, says Brad Sidwell, senior director of sales at LexisNexis. In the last few years, he has seen departments formalize their methods to identify, vet, and engage outside counsel.

The big issue for the law firms that are making these proposals is that although they’re spending more time responding to RFPs, there’s no guarantee that their time-intensive labor will bear fruit. “That’s frustrating for firms,” says Susan Hackett, CEO and chief legal officer at Legal Executive Leadership in Washington D.C. In the current economy, there is less work for outside firms than there was a few years ago, and Hackett says the reality is that firms must compete for what is there.

Although there are legitimate purposes for RFPs, Hackett says she sometimes sees law departments abuse the process. Clients used to solicit proposals from firms when they were taking on a matter in which they lacked expertise, she says, but Hackett now often sees departments using the process to keep their existing firms from becoming complacent.

“They’re pushing their existing firms to compete against each other,” she notes, “and they’re shopping for ideas” from other firms. While a firm may not have a “snowball’s chance in hell” of winning a bid, she says, it has no choice but to respond to the proposal.

Larger firms respond to a higher level of solicitations than their small-firm counterparts. Sixty-six percent of respondents came from firms with at least 100 lawyers. Overall, firms averaged five to 16 proposals per month, but 15 percent—mostly firms on the higher end in terms of staff—averaged more than 21 RFPs each month. The largest firms in the survey dedicated 4,800 hours to law department proposals per year.

Sidwell points to his company’s InterAction software, which he says LexisNexis developed in order to help firms streamline the RFP process through more efficient cataloging and proposal generation.

Working with in-house procurement teams, says Sidwell, general counsel are engaging in a much more commodity-driven approach. Companies pit existing counsel against those they don’t have relationships with in order to determine which firm can produce a good outcome relatively quickly and cheaply.

“It used to be that law firms sent their rainmaker out to sit across the table from a company’s general counsel and sell them on the firm,” says Sidwell. Today’s departments are taking a much more methodical approach to the RFP process. “It’s a wake-up call for law firms,” he says.

And in the current business environment, even the successful work a firm did for a company in the past might not carry the same weight it once did. According to Sidwell, “What you did for the corporation yesterday becomes less and less important.”