5 steps to effective legal procurement
With a history stretching as far back as 3000 B.C. and the construction of the pyramids in Ancient Egypt, procurement’s hardly the new kid on the block. But despite its longevity, for many industries – legal in particular – it’s considered a process for the sourcing and purchasing of physical goods and materials, not professional services.
However, when you consider the legal definition of procurement as ‘The entire process of purchasing goods that includes the purchasing decision, the selection of the goods, and the payment made by the buyer to purchase the goods’, using it to procure professional services makes perfect sense.
In fact, it’s precisely the process to follow when engaging a law firm:
- A matter arises that your in-house team lacks the capacity or expertise to deal with, so you seek help from outside counsel – purchasing decision
- You establish precisely what assistance is needed, then, applying a range of factors (price, expertise, responsiveness, relationship etc) determine which law firm is the most appropriate to engage for the matter – selection of the goods
- After negotiating with your law firm, you agree on a pricing structure with payments made as the matter proceeds – purchase of the goods
But realising you’re actively participating in procurement is one thing, establishing systems and processes to make it as efficient and effective as possible is another.
Thankfully, successful legal procurement all comes down to good planning – something lawyers are particularly good at. Here are 5 factors you need to consider when formulating your procurement approach.
Step 1 – Specify your requirements
One of the biggest goals of procurement is establishing a system that allows you to compare like with like. By articulating and defining precisely what you need from your law firms for each matter, you enable them to respond to a specific call to action. The tenders you’ll receive will then be both assessable and comparable, reducing the time spent weeding out tenders that aren’t fit for purpose.
Step 2 – Define ‘value’
According to the Bloomberg and Buying Legal Council 2017 Legal Procurement Survey, when comparing legal service providers, legal procurement professionals aren’t solely focused on cost. Rather, they’re interested in firms’ knowledge and expertise, their ability to deliver value for money, familiarity with their organisation and relevant industry experience.
Your organisation’s priorities – and how you define value – may be different, but by determining how you plan to compare the firms competing for your business, you’ll establish a consistent, reliable baseline that will inform all future engagements, saving you time and frustration in the process.
Step 3 – Streamline your systems
The next step is to determine how you plan to source your legal service providers. If you’re looking for new service providers, you might want to consider putting matters out to market tender. If you’re working with the same law firms consistently and wish to continue doing so, a Request for Proposal (RFP) might be more appropriate.
Either way, you’ll need to put a streamlined, consistent and easily repeatable system in place. This may include establishing panels of law firms to deal with specific types of matters, culling your existing panels to a more manageable size, or creating an RFP proposal template. Everything that saves you time can potentially save you money, enabling you and your team to spend the majority of your time focusing on what you do best.
Step 4 – Set your scope
As the pressure on in-house teams to contain legal spend increases, so too does the need to set and manage scope. When establishing your legal procurement process, it’s imperative you work with your law firms to identify what’s in and out of scope, as well as the assumptions underlying those decisions.
Your strategy should also include frank discussions with your law firms about how you’ll negotiate and manage out of scope matters as they arise. That way, your matters stay on track, as well as your budget.
Step 5 – Drill down into your data
Effective legal procurement depends on ongoing and consistent assessment, adaption and refinement – none of which are possible without data. So besides setting appropriate benchmarks for assessing and measuring your procurement efforts, you also need to determine what data you need, and how you’re going to collect and store it.
Excel spreadsheets aren’t going to cut it, so you may need to invest in a system that automates your data collection and gives you an in-depth and overall view of your activity over time. Build up this knowledge bank and you’ll soon be able to predict your ongoing spend more accurately, as well as demonstrating the true value of external legal services to various stakeholders.
Want to know more about legal procurement and how to implement practices that provide valuable, trackable results?
Then join us at the Legal Procurement Forum Asia-Pacific 2017. Held in Sydney on 23 August, it’s an opportunity for law firms, in-house counsel and procurement professionals to learn from industry thought leaders and participate in an open and honest dialogue on transformation and change management. Details about the event, along with registration details can be accessed here.