Navigating the e-auction minefield

How law firm auctions can work in your favour.

More and more often, corporate law departments are turning to law firm auctions in order to streamline operations, ensure optimal legal representation and control costs. While they are often perceived as blunt instruments designed solely to reduce pricing for legal services, smart law firms don’t have to finish first in order to benefit from the process.

A typical auction normally involves four to five firms that bid their prices downwards for a discrete piece of work, or larger numbers of law firms bidding to get a place on a panel.

Law departments consider them an important tool for two reasons: savings and speed. An average law department can save millions of pounds in legal fees, with average savings adding of 40 per cent.

The speed of auctions are particularly attractive as well. Instead of a review that spans multiple months, auctions ‘vet’ multiple firms in 15 to 30 minutes. At the same time, they demonstrate due process, adherence to company policies and offers valuable market intelligence.

The auction process can provide positive results for law firms. One firm won more than £5m in new business as a result of participating in an auction process. A partner for a different law firm commented that, “auctions are a chance to win work we would not normally have won as the business used to always go to one firm”.

How to Manage Auctions

An auction is not always about price. Intelligent firms can use an auction to create a good impression with clients. General advice for auction success includes:

  • Even if you are not bidding, always login (and login early) so you can track where you’re pricing ranks and gain valuable market intelligence.
  • Build a strategy much like you would a normal negotiation. Know your walk away position and stop bidding then. Also, be sure to know if “first place wins” or if other factors are being taken into consideration as you can then build a more robust pricing strategy.
  • Don’t bid at the last second as the bid may not go through in time. It’s not eBay and there is no advantage to bidding late.
  • The law firm’s decision maker should always be at the event.

Remember, auctions have high visibility and general counsel are often watching. Show that your firm is taking the process seriously by not finishing last, placing bids and attending the training.

My final advice is this: Don’t keep bidding just to win. Remember that your firm will have to do the work and that bids are legally binding. In my time, I’ve seen firms bidding to do work for free, at really low and / or at unprofitable pricing levels, which they have later regretted.  Additionally some firms I worked with have staffed matters with lower level resources – as they priced the work so low – which has created a really bad impression with the client.

Stacey Coote, chief executive officer, Yerra Solutions Ltd UK