In 2013, executives and in-house leaders at 3M decided they needed to drastically reduce the number of law firms on the Minnesota-based manufacturing company’s preferred network panel. The list of 300 firms would ultimately be cut to about 80. The carving knife? A request for proposal that featured more than 50 questions.
Including all those questions seemed like a good idea at the time. But when the RFP responses began flowing in they were hundreds of pages long. Many were filled with marketing literature that was readily available on a firm’s website and of little interest to the company’s decision-makers, says Maureen Harms, associate general counsel and managing counsel at 3M’s corporate headquarters in St. Paul.
“There were binders and binders of pages,” she remembers—and not fondly.
3M used that unpleasant RFP process as a learning experience. Three years later, when it was time to re-evaluate the company’s panel, 3M whittled the list of questions down to fewer than 20, ensuring they were succinct and useful. Whereas the earlier RFP was scattered, the new version was laser-focused. It even included word limits.
“The questions we asked were too broad,” Harms admits. “We’ve refined the questions that mean the most to us now and are the most reflective of the qualities that we want to have in our firms.”
The revelation 3M had years ago—overly expansive RFPs beget superfluous responses—seems to have eluded many other companies, according to interviews with consultants, former in-house leaders and law firms.
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Whether client or provider, just about everyone who believes the RFP process is broken—and there are many who feel that way—says it’s because the requests and responses aren’t thoughtful, targeted or tailored enough.
“Legal departments have to get a lot better at not only writing the RFP with enough detailed information about what they want so that they can assess responses, but they also have to know exactly what they’re trying to get out of the process,” says Susan Hackett, CEO of law practice management consultant Legal Executive Leadership in Chevy Chase, Maryland.
When a company unleashes a poorly defined RFP including every question suggested during the legal department’s spitballing process, it’s a waste of time and resources. It’s also an invitation to law firms to respond with puffery, says Cash Butler, CEO of ClariLegal, a vendor management platform.
“That is like the golden ticket to a provider to tell people that the sky is pink and you need to pay a lot for that pink sky,” he adds.
Distrust is another problem that taints the RFP process. Casey Flaherty, principal at legal technology consultancy firm Procertas and former corporate counsel at Kia Motors America Inc., says law firms often complain to him that companies are using RFPs as fishing expeditions when they already know that they’ll end up going with a firm they’ve used in the past.
“One thing you hear all the time is that someone has sent an RFP after already deciding what firm they’re going to use just so they can get competing bids to beat the original firm over the head with pricing,” Flaherty says.
When law firms begin to question whether they have a legitimate shot at getting hired, they might not bother responding to an RFP. Or they’ll slap together a thick binder full of marketing materials as a quick response.
“When we start playing games and beating people up, we damage the relationship,” Flaherty says. “In the near term you might be able to show material benefits. ‘Hey, we got a 5 percent discount.’ But in the long term it’s not good for anyone.”
Of course, it’s not just legal departments that are botching the RFP process. Law firms also share the blame.
Ed Ryan, retired general counsel of Marriott International Inc. and now an adviser to the hospitality company, says his main gripe was that law firms often submitted lengthy, generic responses.
“Several of them could have used a really good editor,” he says. “Sometimes you’d have these long bios of 10 lawyers, and that’s not really what you’re interested in. It was hard to get a good focus on what distinguished this firm from another firm.”
Another former legal department leader, Richard Otera, who was general counsel of Sumitomo Electric Industries, says firms spent too much time “trying to win on price” when they should have been crafting a substantive, in-depth answer to an RFP.
“Does your team have the right expertise for this thing that you’re bidding for or are you just trying to sell us a bill of goods?” says Otera, now a partner at Nelson Mullins Riley & Scarborough. “I’d much rather you spend more time convincing us that you can help us on the merits.”
From both sides, he says, the process is broken by a failure to tailor to the matter at hand.
Can Tech Help?
As is the case in most corners of today’s legal market, a growing cast of technology companies is lining up to solve the RFP problem. While their solutions are designed to make today’s RFPs easier to manage, some have a longer-term vision: creating a transparent market for high-end legal services.
In early October, a new software platform called Virtual Pricing Director made headlines thanks to its use of guided interview templates to help law firms create more rigorous budgets for work proposals. The software rolls pricing expertise from U.K.-based legal consultancy Validatum into a Neota Logic reasoning engine. The engine suggests the tasks likely to be involved in, say, representing a company being acquired. Richard Burcher, Validatum’s CEO, says he received more than 150 inquiries from law firms looking to join a beta test of the platform.
“I think we’ve hit at a bit of a nerve,” he says.
One of Virtual Pricing Director’s long-term benefits is its ability to capture data from the work law firms price on the platform. That data will eventually be used to help firms learn where they stand in the market, Burcher says—how long it takes to complete certain tasks compared with other firms; how their rates stack up; and how their brand is measured.
The software also uses other pricing concepts that most consumers now understand, such as how urgency should factor into the cost of a good. Burcher compares it to the difference between same-day delivery and 10-day shipping.
“We’re all completely used to that,” he says. “But the legal profession has largely lacked the ability, forethought, tools and insight to make that work in their world. But it can, and it does.”
BanyanRFP is among the more established companies helping legal departments manage the process. Kathy Heafey, the Minneapolis-based president of the company, says legal departments often lack the purchasing expertise to take advantage of an increasingly buyer-friendly market. That can lead to a more burdensome process when corporate procurement departments attempt to purchase legal services through platforms designed to buy basic goods like chairs and desks.
“It’s super ill-suited to use to buy something like professional services,” Heafey says. “Law firms are trying to answer a long-form, complicated question about litigation strategy in one little cell. And there’s no customer service.”
Heafey says BanyanRFP next year will be incorporating Tableau’s interactive data visualization software into its service in an effort to provide a more data-focused solution.
Bodhala has developed a matter-based RFP system that incorporates data the company says it has gathered from more than 10 million line-item entries from law firm invoices. Its data can be used by corporate legal departments today to compare how different law firms are handling their work. The data also gives companies insight into how work is being handled on a task-specific level, which can be used to match resources based on the difficulty of a given task. Clients that refuse to pay partner rates for document review, for example, can use the data to enforce their guidelines.
“We’ve had clients change their outside counsel behavior by signaling to firms, ‘Hey, we’re using analytics and analysts. We value your work, but we may see some things that are unusual,’” says Raj Goyle, Bodhala’s co-CEO. “That, in and of itself, has an impact.”
Jim Delkousis is a believer in a future legal market that involves far more certain pricing than exists today. Delkousis, a former partner (and current consultant) at DLA Piper, founded Persuit, an Australia-based RFP management platform, in June 2016. He’s since been working with forward-thinking legal departments including Shell, Walmart and Microsoft. He was motivated to launch Persuit, in part, by his own experience with RFPs. He tried to envision what it would be like for a client to print out all the glossy pitches they receive as PDFs from an RFP. It seemed brutally inefficient, he says.
It wasn’t just his own experience, though. Delkousis says he also saw how other industries, from retail to taxis to food delivery, had undergone transformations thanks to platforms that cluster buyers together. The sellers in those industries are compelled to use the platform to reach customers.
A move to platform-based purchasing would allow purchasers to rate the services they receive on the platform. Think of an Uber driver’s rating. Delkousis says once enough corporate legal departments are making purchases on a platform like Persuit, it will be a natural evolution for those platforms to rank the lawyers that win work. That dynamic could have the largest impact on the business of Big Law, by turning a market that has historically competed on brand and pedigree into one driven by performance.
“Prestige and credentials are really hard to measure,” Delkousis says. “And the shift to data-driven buying is all about what’s measurable. … A move from relationship- to data-driven purchasing decisions necessarily encompasses measurables like performance.”
Delkousis is convinced buyers of legal services will congregate on platforms as a way to leverage their collective purchasing power. The biggest question in his mind is not if, but when it will happen.
“Whether it’s Persuit or someone else, that is what will happen in the future,” he says. “It’s just obvious to me that what is happening now can’t be the case for the next five, 10, 20 years. It’s too painful a process.”
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