Design of a Successful RFP
Author: Richard Stock - Lexpert, June 2016 at pg 66
One RFP simulation outlines the concerns clients have when comparison-shopping.
THIS SPRING, at a couple of legal conferences, we presented a request for proposals simulation. The scenario was designed to question assumptions held by both buyers and providers of legal services. For the simulation, we imagined a company called Perpetual Power Corp. (PPC), which manufactured and sold wind turbines. Their headquarters were in Norway and their law department had lawyers in Oslo, Turkey, the United States, Brazil and India. PPC used 12 firms for 21,500 hours of legal support on five continents.
One of PPC’s initiatives was to reduce its number of firms to around three. Its general counsel invited three incumbent firms to make proposals for as much of the work that they believed they could competently manage. About 30 per cent of the work was commercial, 45 per cent was litigation, with the remainder for labour, IP and environmental matters distributed across the regions. Apart from reducing its administrative workload and securing predictable pricing for the future, PPC wanted the firms to offer the right balance of coverage, competence and costs.
The imaginary Fudd & Leghorn LLP had been doing most of PPC’s US work — about 40 per cent of its global requirements. Fudd offered to cover all of the Americas by collaborating with law firms in Brazil and Argentina. Fudd’s proposal was not specific about coverage for Chile. Also, it offered limited information about its capabilities for environmental work. Overall, Fudd & Leghorn was light on quality assurance protocols and the credentials of its South American firms, preferring instead to emphasize its own history of service delivery with PPC to secure more work. Still, the firm did increase its discount to 20 per cent, and it agreed to a fixed price and 36 equal payments, with no hours to be reported to PPC. In summary, Fudd & Leghorn employed a calculated strategy to increase its market share.
Prudential & Gibraltar LLP, another creation, was a Swiss firm with offices in 20 European cities. The firm had a 25-year history with PPC, dating back to the creation of the company, with legal support mostly in Europe. Prudential’s proposal was to take on all of the European and African work, approximately 40 per cent of PPC’s global requirements, by collaborating with firms in Cairo and Nigeria. Their proposal did not mention legal project management or budgeting. There was no apparent link of service delivery to available collaboration technologies.
The financial side of Prudential & Gibraltar’s proposal consisted of an hourly rate of ?300, plus an annual rate increase of 2.5 per cent for Europe, and ?200 plus an annual rate increase of 2.5 per cent for work in Africa. A 15-per-cent rate discount was built in. Billing would continue on an hourly basis. Prudential was expanding its coverage slightly, albeit by collaborating with secondary firms. Overall, its proposal was designed for a conservative client looking for predictable pricing.
The third fictional firm, Mark & Whatney Inc., had supported PPC for five years with IP, environmental and specialized litigation work. It had expertise in Six Sigma and other process-improvement methodologies, with experts in India, Japan and the US. The firm was prepared to bring that expertise to PPC’s headquarters in Oslo.
With a proven track record in process improvement and a solid network, Mark & Whatney proposed to do 70 per cent of the PPC work worldwide — virtually all of its litigation, IP and environmental legal requirements. Its strategy would not disrupt PPC’s relationships with long-standing commercial and corporate firms.
The firm proposed a fixed fee, discounted by 10 per cent, and then discounted again by 15 per cent if PPC was prepared to commit to ongoing efficiency projects. The firm believed that it could reduce PPC’s requirements for legal services and was prepared to adjust its price up front to reflect this approach.
This simulation illustrates a watershed opportunity for companies like PPC to move away from hourly billing in favour of a fee arrangement promoting efficiency, innovation and lower costs. The scenario has two firms offering simplified billing, reporting and payment — attractive to law departments that want to shed administrative activity. PPC could well accept to allocate all of its non-commercial work to a global provider that can balance competence, coverage and costs. Provided the data analytics are solid and the RFP is thorough, the winning combination of firms should be clear. Designing the right type of RFP makes the choice easier. Most law firms are ready for a change.