Competitive bids

Earlier I describe 18 good practices for competitive bids and RFP processes (See my post of Nov. 30, 2007: 10 recommendations and 11 references; Aug. 13, 2008: 8 tips on competitive tenders and 2 references.). Despite some assertions to the contrary, law firms eagerly seek opportunities to compete for sizeable bundles of work (See my post of April 5, 2005: lackluster response levels by law firms to requests for proposals; May 19, 2006: Nestlé initially invited 30 firms, then winnowed them down after proposals and presentations; Dec. 14, 2005: in 2001 Viacom chose from among 20 law firms to handle its patent prosecution work.).

Seven more suggestions for how to pick law firms after a competition are below.

Disclose the names of the firms invited to compete (See my post of Sept. 13, 2006: disclose bidders’ names;.). I am less in favor of publicizing to the actual bidders the names of the other firms that submitted a response.

Create an evaluation scale for each question. For example, the scale might be from one to five, where each point on the scale has a pre-defined description. Then, reviewers can look at each answer and pick what point value the firm should get based on the evaluation scale (See my post of Dec. 18, 2006: a technique to evaluate competitive proposals; April 4, 2008: a technique to rank law firms on their RFP metrics.). A further step is to weight each question according to how important the answer is to the law department (See my post of Sept. 3, 2006: competitive bids.).

Include enough work to assure a return on investment. If a legal department faces less than $500,000 of spending for the near future that covers a cluster of related legal work, it does not make sense to lumber through a competitive bid (See my post of April 14, 2005: minimum amount necessary for competitive bid; Jan. 14, 2008: competitive bids and market cost; Dec. 14, 2005: TXU policy that requires outside counsel to bid on any litigation costing $750,000 or more; and Feb. 15, 2006: defense of $500,000 plus as threshold.). Bidding a single lawsuit or matter competitively presents more challenges, to both the law department and the bidding firms, than bidding a portfolio of matters over time (See my post of Oct. 31, 2005: the competitive bidding process.).

Incorporate a proposer’s good ideas, even if the firm does not make the final cut (See my post of Oct. 1, 2005: don’t exclude a good idea by an unsuccessful bidder.).
Stay away from online auctions (See my post of July 30, 2005: electronic auctions have not caught on; Sept. 4, 2005: GE’s online Dutch auction as poldergeist.). At the same time, think about different forms of auctions (See my post of Feb. 1, 2006: “double auctions” that match seller and buyer rankings as well as “unique bid” auctions.).

Tell firms about hours of work expected, not what you expect to spend or spent in the past (See my post of Nov. 8, 2005: an example from National Australia Bank; Dec. 5, 2005: use hours worked not amounts paid.)

Be realistic about the savings you expect from the competitive bid (See my post of March 12, 2006: provider of auction site claimed savings of 24 percent; Jan. 3, 2006: $6 million saved by convergence at Tyco through competitive bid.).