Who's getting the most and least from the RFP process

I noted in my last column that most in-house and outside counsel feel that their outside counsel retention guidelines and requests for proposals (RFPs) don't do much to improve their relationships, even though both sides agree that both are very important and they spend large amounts of time on them. Like the outside counsel guidelines discussed in an earlier article, RFPs are not well fashioned to achieve their designed objectives. This article will focus on the short-comings of a legal department's RFP process; a subsequent article will focus on strategies to improve that process.

Unlike outside counsel retention guidelines, which are intended to cement the terms of a partnered relationship between the law department and its law firm, RFPs are more adversarial. The law department issuing one is often in the position of hosting a contest between the firms responding, and there will be more losers than winners in the process. While I don't think that RFPs will ever be about flowers and candlelight dinners, the process could be more productive and respectful of the relationship it is designed to promote. This will take a bit more pre-thinking about what it is the parties are trying to drive, and how to assure success.

To host or not to host? Drivers of an RFP process

Legal departments may turn to an RFP process for a variety of reasons:

• the department is re-assessing its current portfolio of firm providers (often in a convergence process to winnow down the number of firms the department uses with the intent of increasing the value provided by the firms);
• the department is dissatisfied with the value or results it's getting from a particular firm or group of firms providing a specialized service;
• most often, there's a new matter involving a subject that the department is not familiar with and they need to find new firms with process and expertise in the unknown area of law; or
• company management, and particularly procurement or finance leaders, would like to see in-house counsel engage in more "business-like" practices in selecting and retaining firms to focus on value (rather than simply hiring and relying on high reputation firms without a lot assessment or oversight).

These are all valid reasons to host an RFP. However, there's a troubling trend with the RFP process that a number of outside firms have confirmed. Sometimes, when a longstanding and trusted legacy firm is perceived to be less responsive than the client would like, or is charging more than the company would like to pay, some legal departments turn to an RFP to address their dissatisfaction, rather than working directly on these shortcomings with relationship leaders and asking the firm to improve. Maybe some departments feel that such conversations are a wasted effort and that firms won't change without the threat of losing the work. And there's an added benefit to engaging in an RFP in this situation: the process offers the legal department the opportunity to learn new ideas, offered by the competing firms, for how to do the work better/faster/cheaper. However, rather than rewarding the firms that propose these new approaches, once the department has collected the responses, they suggest that the legacy firm may keep the work if it will guarantee results such as those outlined by the other RFP respondents.

Bidding firms are thus often asked to spend time, energy and money putting together proposals for work that the legal department has no intention of awarding to any of the firms they've solicited. Sometimes this doesn't happen intentionally. The department may start the process intending to consider both the legacy firm and new contenders, but when the legacy firm complains that they're being treated as if they had no existing relationship, the department caves in, agreeing to let the firm keep the work if they will agree to the terms that other firms responding to the RFP proposed. One of the resulting ironies is that departments engaging in these kinds of RFP practices rarely reap the benefits they're seeking. When they require a legacy firm to provide work via the better process or at the cheaper price, if the firm is not equipped to deliver on the new RFP terms, everyone fails.

Other than already having a "winner in mind", another issue plaguing this process is that many RFPs are not well designed or written. Put together inconsistently or without attention to detail, RFPs are rarely written well enough to solicit responses that can accurately inform the legal department's decision. Some RFPs are incredibly short – devoid of critical details and legal department's expectations or the company's values; it's no wonder they produce proposals that fall short or miss the mark. Others are incredibly long, requiring the production of binders of material that are largely irrelevant to the selection of the best firm.

To respond or not respond: The outside counsel dilemma

Regardless of the legal department's impetus for the RFP or the quality of the RFP's design, reliance on this technique is growing and firms that regularly receive these requests are having a hard time handling the volume. A growing number of firms have simply stopped responding to RFPs, especially the smaller firms where the investment in responding to the RFP is relatively higher in terms of opportunity cost. Of those who do respond, a significant number don't do so with any meaningful strategy in mind. They don't measure how much time or effort is going into RFP responses and they rarely follow through to learn more about why they were or weren't chosen by the legal department to inform future bids. Moreover, those writing the bids often have little expertise in putting together the relevant data or the pitch, and others have no idea whether the investment they're making in responding to an RFP is worth the price.

One of the most common complaints from legal departments is that outside counsel responding to an RFP fail to take the time to think meaningfully about what it is that the client is asking them to provide. The law firm's response is automatic and generic: they just start selling what they've got, they don't call to get more info from the client, they never address the key points that the client values, and so on.

But on the other side of that issue, firms have their own complaints. For instance, there's great frustration that many clients can't or won't articulate what it is that is valued in the matter, or "success" is not clearly articulated. Is it a certain result? A cost containment system? A specific turn-around time? Unfortunately, the RPF process can become a proclamation of little more than "let the games begin!", with the presumption that the right firm will need little additional guidance to shine through.

Summary

A legal department may be driven to initiate an RFP process for a variety of reasons, including seeking greater value (as defined by the legal department) for a particular matter (or a portfolio of matters) by creating a competitive market for the work. While there are benefits to be achieved by the process, behaviors by both legal departments and their law firms preclude achievement of these objectives. In my next article, I'll talk about strategies to improve the RFP process to support stronger relationships between legal departments and law firms. In the meantime, share with me some of the highlights (and lowlights) of RFPs that you have participated in, either from the legal department or outside counsel perspective. Send an e-mail or tweet me at @HackettInHouse.