Building better rosters: 7 things in-house counsel need to know about the RFP process

By Jim Middlemiss Web Only

Building better rosters: 7 things in-house counsel need to know about the RFP process

Michel Belec, Vice President of Legal Services, TELUS Corporation


In late 2014, TELUS Corporation was looking to implement more cost controls across its business units and identify efficiencies it could bring to bear in its operations, including legal services. It fell on the shoulders of Michel Belec, Vice President of Legal Services; and Alan Dabb, Vice President of Litigation, to figure out what that meant for the corporate law department. But before they could begin, they had a problem common to many large organizations in Canada: legal spending was fragmented and distributed across the organization. Figuring out the total legal spend would not be an easy operation.

“Not all of the external legal spend was concentrated in the corporate law department,” Dabb explains. For example, the labour, regulatory and tax teams had their own external legal spend, which was outside the corporate law department. “Our objective was to look at the overall external counsel spend to try to come up with some efficiencies to make sure that we were spending our dollars in the right places and getting maximum bang for our buck.”

What they found was that TELUS had an unwieldy 59 law firms on retainer, conducting a wide variety of work. “Some we used more frequently than others,” notes Belec. This meant different retainer agreements and work processes were in place for each of the law firms TELUS dealt with.

The duo saw it as an opportunity to use a Request for Proposal (RFP) process to refresh TELUS’s external counsel program in order to not only get a better handle on legal spending, but—equally important—find ways to standardize the way it worked with law firms, identify administrative efficiencies, and bring additional value-added services to the company for its legal spend.

Today, TELUS works with a more streamlined 21 law firms, not all of which were on its original roster. The company has a standardized retainer agreement in place and has built deeper relations with its top tier law firms, which are now more aligned with its business. The company hopes to lower its legal spend by as much as 15 per cent annually.

A growing number of legal departments are turning to tender and procurement processes when it comes to doling out work to external law firms.

However, procurement comes in a variety of shapes and sizes. For example, there is the RFP, used by companies seeking solutions to problems. It sets out the scope of the engagement, specifies what the company is looking to do and establishes criteria that bidders must meet. It’s a highly formalized process that generates detailed responses. A Request for Tender (RFT) is similar in nature and allows suppliers to respond to a detailed bid.

There is also a Request for Information (RFI), often used by organizations to gather comparative data to help determine next steps. An RFI often precedes the formal issuance of an RFP. For example, if you don't know which law firms have specific expertise in a certain area, an RFI can narrow the field.

Finally, there is a Request for Quotes (RFQ). An RFQ is usually used to solicit bids on a specific good or service, for example, a piece of litigation or a specific transaction. RFQs work best with commoditized services.

RFPs, as in the case of TELUS, are not new. Government, regulatory organizations and Crown corporations have been using tendering for years to acquire legal services. For example, in January, the Ontario’s Independent Electricity System Operator (IESO), a Crown corporation responsible for operating the province’s electricity market, closed an RFP to establish vendors of record for a wide range of legal services. That followed an earlier RFP seeking legal services for the design and delivery of an industrial accelerator program.

When it comes to the private sector, RFPs were slow to take off but seem to be gaining more traction. They started with banks and insurers, and are slowly spreading down the industry food chain. That trend has been aided in part by globalization, the rise of national law firms, and the focus by companies on cutting costs and finding efficiencies in their operations.

Take BMO Financial Group, for example. In November 2013, it formally launched a program to refresh its external counsel program. However, the process actually started in 2012, says Bindu Dhaliwal, Associate General Counsel and Director of Environmental, Social and Governance, at BMO. That’s when the global financial giant began a review of how it delivered legal services internally and its external legal spending. It identified more than 1,000 law firms with which it was doing business in some capacity around the world. Today, that has been reduced to less than 200. “It came down very, very dramatically,” Dhaliwal explains. “It allowed us to have greater sight lines into the work that was being done.”

Daniel Desjardins, Senior Vice-President, General Counsel and Corporate Secretary at Bombardier Inc., knows a lot about the procurement process, as his company builds trains and airplanes through competitive bids. He believes that an RFP has now become part of the in-house counsel toolbox. However, he’s quick to warn that “it is not the answer to everything.”

So what do in-house lawyers need to know about RFPs and when should they be used? Here are seven tips for running a successful RFP.

1. Consider your spend

There is some disagreement over when a legal department should consider using an RFP. Richard Stock, a partner with Catalyst Consulting who has worked with legal departments to develop RFPs, advises not to consider it if your legal spend is less than $500,000. It’s simply not worth the effort.

Rees Morrison, a consultant with Altman Weil in the U.S., however, sets the floor price lower. He agrees that “you better have enough money at stake to make it worthwhile,” but says that “at least one-quarter of a million dollars a year [justifies] the time and expense.”

2. It takes time

Once you jump the cost hurdle, the next thing you need to know is that RFPs do not come together quickly. “Managing an RFP process seriously is not something you do off of the cuff,” notes Desjardins.

Both TELUS and BMO spent months preparing to issue theirs. Part of the problem is gathering the necessary data to figure out what the goal and objective should be.

In TELUS’s case, it had to pull together information about its legal spending, some of which resided with existing law firms. It used the services of Catalyst Consulting’s Stock to help them gather the data and categorize it. Belec says that was “very valuable when it came time to defining the RFP.”

BMO used SeyfarthLean Consulting, part of the U.S. law firm Seyfarth Shaw LLP, to help in its process. “We wanted to make sure we were drawing on best practices,” says Dhaliwal.

This upfront work is just the tip of the iceberg. Much more time is spent interviewing firms and reviewing proposals, which can run hundreds of pages depending on the scope of the project, how many people are approached to submit and what parameters you set around responses.

If he were to do it over, Dabb says, “I would probably invite fewer firms. It takes up an incredible amount of time to review that many firms and their extensive proposals.”

3. Get the scope right

The computer science concept, “garbage in, garbage out,” applies equally to RFPs—the output is only as good as the input. So if you don't properly define the scope and goal of the project, the responses will be all over the map and not of much use. The key is understanding your objective, experts say. Is it simply to cut costs? Or is it more fulsome than that?

“We expect the law firms we use to deliver excellent service,” explains Dhaliwal. “For us, it was trying to step beyond that.” She said what was important at BMO was “innovation” and how law firms were proposing to work with the bank. What type of alternative fee arrangements would they consider? “We wanted to make sure our law firms were aligned with our organization’s corporate values. That was a key part of the process.”

Desjardins adds, “A lot of your strategy will depend on what you are going after.” Is it a large volume of standard work that you need help with, or is it a specific type of litigation or corporate transaction?

For example, the recent IESO proposal, which closed in early January, was looking for legal expertise covering 12 practice areas, ranging from litigation to corporate-commercial, privacy, labour and electricity regulation. It sought to qualify up to six vendors of record under each practice area, with the exception of corporate-commercial and litigation, where it would bump the roster to 10. (Because it was currently evaluating the responses, the IESO declined to comment to CCCA Magazine about the process.)

For TELUS, Belec says it wasn’t simply about pricing and securing discounts: “We weren’t interested in managing our law firm relationships in that manner.” One of the important things TELUS considered was the value-added services that law firms proposed, things like access to library services, continuing legal education seminars, seconding lawyers to TELUS and, like BMO, the willingness to explore or propose alternative fee arrangements.

4. Mind your metrics and measurements

One of the important elements of an RFP are the criteria upon which you will judge law firms, and a lot of time and thought has to go into that. It means building a matrix and assigning values.

Take the IESO evaluation criteria. It basically covered three categories: skills, practice area and general experience accounted for a total of 60 out of the 100 points ascribed to respondents; conflict mitigation was worth 10 points; and pricing came in at 30 points. It also included a formula law firms needed to use to calculate their average hourly rate.

In TELUS’s case, Belec says, “We created a lot of evaluation factors.” They judged firms on things like expertise, rates, conflict mitigation, value-added services, willingness to adopt alternative fee arrangements and willingness to consider reciprocal business, among others.

5. Evaluate and rank

Once you receive the responses, the hard lifting and number crunching starts. It’s time to figure out how firms stack up—and you may be surprised at what you find. TELUS’s point system tallied to 200, and firms were scored on a scale of 1 to 3, with one being the optimal. Belec says some law firms did better than expected, while others did worse.

It's not an exact science, he notes, so to build in an added layer of scrutiny, they had the other lawyers in the department run through the metrics and compare scores. “It was interesting to see how all the firms were ranked,” he says. The various lawyer assessments “were slightly different, but not radically different.”

6. Communicate, communicate, communicate

Don't underestimate the impact of running an RFP, says BMO’s Dhaliwal. It permeates across the organization and reaches into your outside supply chain. That’s especially true if the business units are used to managing their own legal spend and suddenly someone from the law department is knocking on their door, looking for information or recommending internal counsel become more involved in their affairs. By the same token, existing external law firms may start to get nervous if they learn their client is setting up an RFP process, fearful that they may get the boot.

Dhaliwal calls it a classic “change management” program, which requires winning people over and getting buy in. “I think the big [thing] that we learned through all of this is that you can’t communicate enough, both externally or internally. Thinking back, we probably could have done more.”

7. Follow up

Once you have issued your RFP, evaluated the responses and selected your firms, don't think you are done. This is simply the beginning. Now you need to monitor and measure the progress and results to ensure you are on track and your assumptions were correct.

“If you are not implementing any kind of process to measure the outcome of efforts, how do you know it was ever worthwhile?” asks Belec. Lawyers from the TELUS legal department meet quarterly with an assigned top tier firm to review a scorecard Belec says was “developed with each firm and is intended to measure the success of the relationship.” It looks at different metrics, including total spend, the work done, the number of files rejected because of conflicts and the various value-added services the firm has provided.

So what about the law firms? A lot of work can go into an RFP only to result in no invitation to the party or, worse yet, to be shown the door after years of service.

Belec says he found the firms that participated put their best foot forward. “I didn't get a sense they held back a lot. It's a pretty competitive market out there.”


Jim Middlemiss is a writer based in London, Ontario. This article was first published in the Spring 2016 issue of CCCA Magazine

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