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The Internet has changed the way lawyers communicate, both professionally and personally. Firms have Web sites, use the Internet for legal research, have regular contact with clients and others through e-mail, and in some cases advertise on the Internet. Now some law firms are taking the Internet one step further, turning to a process called e-bidding. While most Pittsburgh law firms have not engaged in bidding their services online, several firms are at least investigating the possibility of doing so. Companies have effectively used e-bidding. FreeMarkets, the Pittsburgh-based online auction house, lists Heinz, Alcoa, Bayer Corp. and American Airlines as customers. Tom Kerr, vice president and assistant general counsel at Bayer, sings the praises of online auctions for services, although he said the pharmaceutical giant was not high on the idea when approached by FreeMarkets last year. AVOIDING A HEADACHE “At first we said, ‘No, we are professionals,’ ” Kerr said during a recent presentation on the topic sponsored by the Pittsburgh Legal Marketing Association. “ After engaging in a few pilot projects, we realized we condensed two months of negotiations into 30 minutes.” Kerr described Bayer’s involvement in three auctions involving immigration law, labor law and products liability. He cited cost savings and the experience of working with new firms as some of the advantages. In each instance, Kerr said, the company saved money because many of the firms bid below what it historically cost the company to obtain legal services. In one case, the firm that had done business with Bayer in the past was willing to provide services at 25 percent less than its usual cost. Still, Kerr emphasized that Bayer did not sacrifice quality but instead based its decision on several factors relating to a firm’s profile. The firm submitting the lowest bid was not chosen in any of the auctions discussed. “We were looking for the one that provided the best cost and quality of services,” Kerr said. “We told firms in advance that the lowest bidder would not necessarily be accepted.” Through the process, Bayer signed on a firm that it had never done business with before, and that firm was invited back to participate in the next auction. Kerr said one firm pulled out of the auction because of “security” concerns, requesting that it be allowed to submit written quotes. Bayer rejected the request. “We wanted them to play the game,” Kerr said. “They called recently on another project and we told them, ‘No, thank you.’ We wanted to stick with people who were loyal to the game.” HIGH-STAKES GAME The “game” has high-stakes for the players. The company, in this case a multibillion-dollar one, needs to attract the best firm. In turn, the firms responding to the auction could get more than a juicy business deal. They could end up with a new client and the potential for more work. Those in favor of participating in online auctions cite the ability to open doors for a firm to attract new clients. They also say that as more companies use e-bidding, firms will be pressed to participate to remain competitive. “I don’t think we have a choice,” said Gregg Michael, an associate in Eckert Seamans Cherin & Mellott’s corporate department who worked briefly as in-house counsel for FreeMarkets. “The customer determines the way to obtain legal services. I see more companies doing it, and this type of procurement will exist for all types of services.” Eckert Seamans has participated in at least one online auction with good results, according to Michael, but attorneys who were active in the auction were not available for comment. Frank Guadagnino, the lawyer in charge of Reed Smith’s practice development, said the firm had not yet participated in online bidding. But Reed Smith is investigating whether participation would be worthwhile. “It’s an interesting idea to match up someone looking for a service with someone who would be able to provide the service,” he said. Still, some say the method is not appropriate for legal services. APPREHENSION Doepken Keevican & Weiss’ managing director, Leo A. Keevican Jr., said it is a “fantastic” idea for those offering commodity services. But when it comes to legal services, he said, online auctioning is not necessarily the way to go. Specifically, Keevican said success depends too much on cost considerations and does not give a company the ability to differentiate on the basis of quality. “I believe strongly that clients hire us not just because we offer the lowest price but because we offer the highest quality,” Keevican said. “We need to differentiate the services we offer because our clients are picking services that are a little higher up on the value curve. I think online bidding of commodity services is a fantastic way to do it. When people come to us, they aren’t looking for the lowest-priced firm, but the firm able to offer the highest value.” Joe Mack, head of Thorp Reed’s labor and employment group, said e-bidding is here and will most likely become more popular. “It breaks the preconception people have about how firms get business,” Mack said. “It also threatens some longstanding business relationships between clients and law firms.” Mack said he believes the method would allow firms to get business on the basis of general reputation and ability as well as to get things done in a cost-effective way. A firm successful in an online auction could sign on a new client with a significant amount of business, he said. In the end, it’s not much different from bidding for services without a computer, he said. “It’s not a radical idea in today’s world,” Mack said. “Technology helps carry it out in such a way that makes it unique.” HOW IT WORKS FreeMarkets’ Aneesh Suneja said the company has control over which firms are allowed to participate in the bidding. For the products liability auction, Bayer interviewed 37 firms throughout the country and certain ones, in nine different geographic regions, were invited to participate. Suneja said the process gives unprecedented access to firms around the world. He added that the request for quotation, or RFQ, is important to the bidding process because firms must be comfortable stating a price for a potential client. FreeMarkets personnel say that a “stringent selection process” is used to accept bidders and that steps are taken to ensure privacy. Most agreed that larger firms would most often use the process, but Eckert’s Jay Blount said that is because of the nature of the business involved and not because of access to a computer. “To justify the cost, you have to have a large chunk of business to bid out,” said Blount, an associate in Eckert’s corporate group. “You won’t see a lot of participation by sole practitioners or small firms, but, in most cases, they wouldn’t be involved in this type of business deal anyway, whether it was online or on paper.” Blount, who also worked at FreeMarkets as an associate market maker before joining Eckert, said law firms would have to participate in the process or risk losing clients. “If I’m a law firm and my client is committed to e-bidding, then I don’t have a choice,” he said. “If I don’t participate, I risk losing an existing client. If I participate, I may keep the client and get more business. It doesn’t change the process. Clients used to collect bids manually by letter. This just makes it a little more efficient.”

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