Wednesday, 26 April 2017 14:40

‘Clients are reviewing legal spend and cutting the number of firms they work with, lawyers must react’

A relationship-only approach is increasingly uncommon among clients and is being replaced by a professional, business-driven method of sourcing legal services, says Silvia Hodges Silverstein

Many major international companies have a department dedicated to sourcing legal services. They bring in experts trained in data analysis and sourcing technology to help with spend management, carefully reducing the number of firms they instruct, ensuring billing guidelines are established and followed. Requests for proposal (RFPs) and intensive industry benchmarking have become accepted tools to support the legal department.
Clients want to buy better, buy smarter, manage to budget and have better outcomes. It is an industry mantra. The objective is to control costs, ensure quality and drive efficiency. Procurement’s expertise in getting the best value for the company, professionally managing the sourcing process and finding the right providers for the right price at the right time, makes its involvement a compelling solution for top management. Many law firms have responded, setting up organisations skilled in negotiation, responding to RFPs, and knowing their internal economics. Winning firms are gaining share, lowering cost to serve, and better controlling their processes.
The Buying Legal Council’s 2017 Legal Procurement Survey – conducted in partnership with Bloomberg Law – shows RFPs and alternative fee arrangements (AFAs) are popular among legal procurement professionals. Do not expect them to go away soon. Here are the five most effective activities legal procurement professionals use to get value from legal services providers:
1. Using RFPs
2. Use of alternative fee arrangements (AFAs) or project-based budgets
3. Working with a preferred provider list of vendors
4. Use of alternatives to traditional law firms
5. Using billing guidelines
RFPs were rated most highly and were used by 71.9 per cent of respondents. A total of 19.3 per cent of those who are not currently using RFPs are planning to use them in future. Legal procurement professionals see AFAs and project-based budgets as effective tools to drive value received from legal services providers, though currently only 63.8 per cent use them. A total of 25.9 per cent are planning to use them in future, and only 10.3 per cent do not have the intention. There have been discussions in the industry about the future of AFAs and whether clients want them – this suggests we have gone beyond the tipping point. AFAs should no longer be called `alternative’ fee arrangements as they are becoming mainstream.
Meanwhile, panels of preferred providers are seen as effective and are commonly used. A total of 82.5 per cent of respondents said they worked with a preferred provider list of vendors. The remaining 17.5 per cent are planning to use a panel. No respondents said they had no plan to use a panel. A continually developing area in legal procurement is the use of alternative providers instead of traditional law firms. Legal procurement professionals see it as an effective way to drive value. Currently, 63.8 per cent of legal procurement professionals use them and 25.9 per cent are planning to use them.

Invoice audits
Billing guidelines are seen as very positive. Most clients (80.7 per cent in our survey) use billing guidelines for legal services. A total of 15.8 per cent are planning to use them and only 3.5 per cent are not planning to use them. With the use of billing guidelines comes the next value-driving activity, conducting invoice audits. Currently only 50 per cent of legal procurement professionals conduct them, but 33.9 per cent are planning to conduct them in future. Using invoice audits to enforce the use of billing guidelines will get a lot more attention in future.
Almost everyone (91.2 per cent) negotiates discounted hourly rates. However, opinions appear to be divided about reverse/e-auctions. Currently, 14.5 per cent use them and 25.5 per cent plan to use them in future. However, 60 per cent say they have no plan to use them.
Legal procurement continues to increase its reach and influence: the majority of legal spend is under review. A relationship-only business approach is increasingly uncommon. It is replaced by a professional, business-driven approach to sourcing. For firms, the `noose’ is getting tighter; the pressure is on more than ever. Clients are reducing the number of firms they work with. React now or watch competitors win panel positions with clients you took for granted.

  IBL80 Sept Oct cover latam sept18 cover

Click image

This website uses cookies

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we'll assume that you are happy to receive all cookies on the IberianLawyer website. However, you can change your cookie settings at any time. Learn more

I agree

What do I need to know about cookies?

A cookie is a small text file that’s stored on your computer or mobile device when you visit a website. We use them to:

  • Remember your preferences
  • Tailor our sites to your interests.

There are different types of cookies

First party cookies

These are set by the website you’re visiting. And only that website can read them.  In addition, a website might use a separate company to analyse how people are using their site. And this separate company will set their own cookie to do this.

Third party cookies

These are set by someone other than the owner of the website you’re visiting. 

Some IberianLawyer web pages may also contain content from other sites like Vimeo or Flickr, which may set their own cookies. Also, if you Share a link to a IberianLawyer page, the service you share it on (e.g. Facebook) may set a cookie on your browser.

The IberianLawyer has no control over third party cookies.

Advertising cookies

Some websites use advertising networks to show you specially targeted adverts when you visit. These networks may also be able to track your browsing across different sites.

IberianLawyer site do use advertising cookies but they won’t track your browsing outside the IberianLawyer.

Session cookies

These are stored while you’re browsing. They get deleted from your device when you close your browser e.g. Internet Explorer or Safari.

Persistent cookies

These are saved on your computer. So they don’t get deleted when you close your browser.

We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.

Other tracking technologies

Some sites use things like web beacons, clear GIFs, page tags and web bugs to understand how people are using them and target advertising at people.

They usually take the form of a small, transparent image, which is embedded in a web page or email. They work with cookies and capture data like your IP address, when you viewed the page or email, what device you were using and where you were.

How does the Iberian Lawyer use cookies?

We use different types of cookies for different things, such as:

  • Analysing how you use the IberianLawyer
  • Giving you a better, more personalised experience
  • Recognising when you’ve signed in

Strictly Necessary cookies

These cookies let you use all the different parts of Iberian Lawyer. Without them services that you have asked for cannot be provided.

Some examples of how we use these cookies are:

  • Signing into the IberianLawyer
  • Remembering previous actions such as text entered into a registration form when navigating back to a page in the same session
  • Remembering security settings which restrict access to certain content.

Performance cookies

These help us understand how people are using the IberianLawyer online, so we can make it better. And they let us try out different ideas.
We sometimes get other companies to analyse how people are using the IberianLawyer online. These companies may set their own performance cookies You can opt out of these cookies here.Some examples of how we use these cookies are:

  • To collect information about which web pages visitors go to most often so we can improve the online experience
  • Error management to make sure that the website is working properly
  • Testing designs to help improve the look and feel of the website.
Cookie nameWhat it's for
Google DoubleClick The IberianLawyer uses Google DoubleClick to measure the effectiveness of its online marketing campaigns.Opt-out of DoubleClick cookies
Google Analytics From time to time some IberianLawyer online services, including mobile apps, use Google Analytics. This is a web analytics service provided by Google, Inc. Google Analytics sets a cookie in order to evaluate use of those services and compile a report for us.Opt-out of Google Analytics cookies