Panel processes and law firms: there is no such thing as a free secondee
Are smaller law firms being treated unfairly by corporates looking for added extras from their advisers?
December 05, 2018 at 05:36 AM
4 minute read
I have recently had cause to reflect about why so many law firm panels are made up of larger full-service firms, whereas specialist and boutique law firms are generally underrepresented.
It may seem like special pleading from the managing partner of a boutique competition law firm – but please don't turn the page quite yet.
There is real benefit to companies that take a different approach. Where we have been appointed to a panel, it has been on the back of the fact that we are innovative, disruptive and able to offer premium quality at fixed or capped fees. Because we are not highly geared, and we control our costs, we have less emphasis on hourly rates. If we need to take on a large job, we will work with the client on how to staff it, often using in-house expertise and resource in a way that is 'built-in and not bolt-on'.
Our strength is precisely in the fact that we have the flexibility to take on those jobs that other firms might struggle to staff efficiently, while operating to the highest quality standards.
Over the years, many panel processes have become both more sophisticated and more complicated, and in addition to the normal requirements of diversity, IT security, health and safety etc, they often include detailed requests for 'free' knowhow, 'free' secondments, 'free' training, 'free' value-added services. Often, these developments are driven by internal forces inside the company that need to show the direct value derived from the procurement process.
However, the unintended consequence is twofold – first, it deters smaller boutique firms from competing for the business as they do not have the scale and margins to offer such add-ons; and second, it obscures the real price competition that exists between the different models. Ultimately there is no such thing as a 'free' secondee – lawyers cost money and firms will have to build those costs into their margins.
I am very encouraged by the fact that some large multinationals are looking again at their panel criteria in order to add boutique firms to the list – often by creating special appointment procedures for niche firms.
But there are many large domestic and pan-European players that are still stuck in a world where panel processes are still seen as a way of squeezing a bit more value out of the same small number of relationship firms, whose interest is not to challenge the status quo. That derived value is hard to observe and even harder to quantify.
Far from asking for special treatment, boutique law firms are delighted to compete on quality and price, if they are invited into the process. They are much more than a stalking horse for the larger firms and, in many circumstances, they can be useful complements as well as competitors. Companies that allow us into their panel process will see tangible benefits in the shape of great quality and a more flexible approach to pricing.
We all like getting something for free. Free alloys on your new car, a free luggage allowance when you book your ticket, or even a free secondee from your relationship firm. The difference is that you would never refuse to consider a car that does not come with free alloys, or indeed exclude an airline on the basis of its luggage charges. But that is precisely what many companies do when it comes to selecting panel firms.
So, if you are a general counsel or procurement manager reading this, I have a simple message: boutique law firms add skill, diversity, innovation and transparency to your panel, and they can bring real and tangible benefits to the way you do business. You just have to open the door.
Oliver Bretz is the founding partner of Euclid Law.
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