ABA Section of Business Law

ABA Section of Business Law
Business Law Today
July/August 1998

Sneider is a consultant with Hildebrandt Inc. in Chicago.

A Request for Proposal arrives on your desk. It was sent from a client that (you thought) trusted and relied on you.

It's a great client. It has national products liability litigation and you have been handling most of the cases in your region. You have served the client well, and on the few occasions when fees were disputed, they were adjusted to the client's satisfaction. You were always paid promptly. Your targeted, cross-selling efforts were often successful. You spoke to the various client contacts on a "how's your spouse and kids" basis.

But, as you read the cover letter, you realize not only that the RFP isn't personal, but the intimacy you were so sure of may no longer exist. There are many other firms handling similar cases in your region, and a chill comes over you as you understand that yet another client is saying, "Too many law firms are handling our work, it's costing too much money and we've lost control of our national strategy."

Or, perhaps, the RFP on your desk looks like a cause for celebration. After years of trying to get a foot in the door of this prize client, the opportunity has finally come. The RFP gives you the opportunity to compete on a level playing field against one of the client's main outside counsel for a significant piece of the client's legal business. It looks like a dream come true.

Whether your reaction to the RFP is dread or exhilaration, the challenge in preparing it is quite similar. In either case, you need to know why the RFP was sent. Until you do, you can't distinguish your firm from the other firms fighting for this client.

If you currently represent this client, you don't need to be told to be wary. You're already concerned that the RFP may be sending a signal that the relationship you have worked so hard to establish is no longer what the client wants or needs. To be sure, you need to uncover the reason for the RFP. If there has been a change in management, find out whom you can count on as your allies within the legal department, management and at various business units in the company.

You need to determine if your relationship is really at risk, or if the RFP is just an exercise designed by the CFO as part of a company-wide cost-cutting measure. Even if the process started as a company-wide measure, you are still at risk if, in their responses to the RFP, your competitors can establish that they can provide better services and, ultimately, better value.

If you are the hopeful new firm, you also need to beware. Some companies sending out the RFP or holding the beauty contest do not really want new outside counsel. What appears to be a dream opportunity may simply be the company's use of the RFP process to force alternative-fee arrangements from its long-standing outside counsel. Many firms have fallen victim to wasted time and effort (not to mention professional disappointment) under these circumstances. It is imperative that you understand as much about the reason behind sending out the RFP as possible.

You are not being hired as a mind-reader. No rule states: "You must answer the RFP in isolation from your (current or potential) client." Call and ask for an opportunity to discuss the RFP. Move beyond the paperwork. After all the economics are measured and the expertise is established, remember that at the core of the selection of outside counsel remains the client's desire for a meaningful relationship.

To best understand some of the underlying rationale for the RFP process generally, put yourself in your client's (or potential client's) position. Corporate management is most likely directing all business units, including the legal department, to cut costs. Each unit is told to consolidate vendors. To the legal department, law firms are vendors. Whether you currently represent the client or hope to do so soon, how can your law firm tell from this formalistic RFP what the client really wants? Part of the answer is that the client is looking for the obvious. Can you do the work competently? Can you do the work competitively? Do you have the technology and the infrastructure to support the work?

Clients want their lawyers to understand their businesses and short- and long-term strategies. They want their lawyers to dedicate themselves to furthering these objectives. This requires an investment from the law firm, one that ultimately creates the basis for the long-term relationship.

Understanding the client's business is a complex matter. In the fast-paced global economy, the market leader on Monday may find itself with an obsolete product on Friday. Reading The Wall Street Journal on a daily basis is insufficient to understand a client's business. Just as a litigator develops the necessary technical expertise before examining a witness, so must the law firm develop an appreciation of the business issues confronting its clients. This may mean that partners and associates alike tour the factory, talk with the engineers and become familiar with the company's products. Reading the same industry journals as the client also helps to build this awareness.

Similarly, clients want to understand their lawyers' expertise. If you currently represent the client, do not assume that this answer is known. Perhaps they know you and one or two other lawyers from your firm. But, do they really know the depth and breadth of your firm's capabilities? The client will scrutinize all competing firms for the special knowledge or skill each firm brings to the table. What is your firm's depth in the key areas of the company's business? What comparable work have you done for other clients? How much time is your firm willing to dedicate (or has already dedicated) to training its associates about the client's business (on the firm's dime?). Can your firm be seen as a collection of resources? Do you work as a team on your projects?

Part of what the client wants to know about you is more complicated than your firm's expertise. Sophisticated clients know that some firms' compensation systems adversely affect the partners' willingness to share their clients with other members of the firm. Other aspects of your firm's compensation system may adversely affect your partners' willingness to participate in your projects. Who controls the project
the business developer or the lawyer with the expertise in the matter at hand? In the case of one West Coast law firm with a formula compensation, it lost a $3-million-a-year client because the partner in charge was unable to get his partners to work on his clients' matters. Sophisticated clients also know that firm management and practice-group management may affect the quality of representation. How is the client assured that the right team from your firm is dedicated to a given assignment? How are your practice groups structured to work together on complex litigation or merger and acquisition issues?

Technology is also often a significant factor in the firm selection process. What technology link-ups does your firm use with its clients? Is your firm's technology and project management sophisticated enough to act (for example) as national counsel with the responsibility of oversight for cases and budgets of other firms at the local and regional level? Can you manage the client's documents? Do you use technology to track budgets? Most clients who have used the RFP process will not hire a firm as national counsel that lacks the systems and technology necessary to manage the work.

Also crucial to the client is whether your approach to the practice is compatible with their needs. To grasp this, outside counsel must understand the company's strategies and objectives. For instance, some cleints have strong arbitration, mediation and alternative dispute resolution policies. For these clients, a brilliant, successrul, no-costs-spared defense that burdened the company's management and financial resources would win you no supporters for your next RFP bid. Thousands of dollars of lawyers' time has been lost when a firm represents its skills as "take-no-prisoners trial lawyers" when the client has been looking for a new approach to arbitrating and settling, not litigating, claims.

When preparing your response, do not forget the critical role that the in-house legal department plays in your relationship with the company. Effective relationships require team work not only within your firm, but between your firm and the client's law department as well. The team includes the in-house legal department, business unit leaders and members of the law firm. Clients seek seamless legal services with all their lawyers.

Particular attention must be given to the complementary roles played by the legal department and your firm. Legal departments, like all business units within a company, submit budgets that are expected to be met. Will your response assist the general counsel in focusing on his or her duties rather than micro-managing your law firm's work? Examining outside counsel bills constitutes an imposition on a general counsel's crowded docket. When your firm's bill arrives, the general counsel wants to believe the correct member of the firm handled the matter, the work was done in a time-efficient manner, the billing was accurate and reasonable and that the project is on budget. In-house lawyers do not relish nitpicking time charges. But general counsel are also keenly aware that their performance within the company will be evaluated, in part, on their delivery of legal services (both internal and external) within budget. They know, too, that many of their CEOs will look to benchmarking studies to determine if the legal department's spending is appropriate. Always conscious of industry benchmarking, general counsel are under constant pressure to reduce costs in a manner consistent with their competitors' efforts.

One approach to fees you may want to consider is a flat fee to be charged quarterly. Flat fees eliminate the need to monitor bills monthly and also offer predictability for the client. Law firms that propose flat fee arrangements often continue to keep time internally and propose to split the difference in savings at the end of the year.

General counsel also want to encourage their staff to work with the outside firms in defining and developing the best solutions for their companies. Your response should provide an approach for how the law firm's partners, associates, paralegals and support staff will work with their counterparts in the legal department. Your response should indicate how you propose that your firm, the law department and the client will work to reach key strategic decisions. The RFP may give you an opportunity to suggest cost efficiencies to the client. For example, outsourcing document production or hiring contract lawyers and paralegals may be a cost-effective mechanism for some types of litigation.

A frequently overlooked aspect of an RFP response is its readability. Lawyers frequently feel compelled to write in convoluted styles. Your firm's response should be concise, articulate, attractive and easy to digest. Not unlike a job interview where you are evaluated (usually on a subconscious level) for your dress and your manners, the RFP is a type of handshake and a show of apparel. If your response is too cumbersome, the client may worry that your legal documents will be equally unwieldy.

It comes full circle to the reason why you were sent the RFP (or asked to participate in a beauty contest) in the first place. The client wants to trust you. It doesn't want to haggle over your fees. It wants you invested in its business. In some cases, the client seeks alternative billing arrangements to demonstrate your willingness to share the upside and the downside of its legal travails. Maybe you'll provide a more realistic assessment of a case's likely success if you don't see any fees should it fail. They don't want advice that is good for Chicago, but death in Los Angeles. They want to know that it is in your interest to understand them.

When the process is completed and the law firm is selected, there are few surprises to the well-informed. The client seeks a partnership with a law firm built on integrity, competence, risk-sharing, understanding and mutual rewards.