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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.).