By Gina Passarella
Of the Legal Staff
In Tuesday’s Legal, I wrote about the interplay between procurement and legal departments and whether the two could work together in hiring outside counsel. The GCs I spoke to were skeptical at best about the idea, while a consultant to law departments praised the concept but said he found it lacking in the marketplace.
Since the article ran, we have received some feedback from those who are proponents of procurement taking a more active role in the purchase of outside legal services and say it’s already happening with increasing frequency. I thought I’d share some of their points.
Silvia Hodges Silverstein, a Columbia Law School lecturer who studies procurement’s influence on the purchase of legal services, said more and more GCs are not even asked "whether" they want to work with procurement—they just have to, as it is a top management mandate.
“GCs are often former law firm partners and are hardly the ones wanting to rock the boat,” Silverstein said. “Like anyone being forced to give up control over their budget and choice, they resist that development.”
Silverstein said the market isn’t the same as it was a decade ago, the time period during which those who spoke to The Legal first considered the legal and procurement departments working together. She said more data is available. It’s no longer unknown how much firms charge or how long they take for matters, for example.
“Law firms not being able to put a price tag on their services or legal departments not knowing how much they pay today shows negligence,” Silverstein said.
While it might not be the corporate procurement department selecting outside counsel, Silverstein said hardly any sizable legal department operates without a legal operations department staffed with quantitative business people helping the GCs make good business decisions.
Silverstein said paying less doesn’t equate to lower quality in a world when law firms are embracing project management and alternative fee arrangements.
Silverstein took issue with the argument that legal services are too unique to be included in a typical procurement process.
“My legal procurement research last year showed that about 20 percent of legal procurement professionals are, in fact, lawyers,” Silverstein said. “So the argument that the widget and pencil-ordering department ‘dares’ to buy legal services simply doesn't hold true.”
Silverstein pointed to GlaxoSmithKline’s use of online reverse auctions for any matter worth more than $250,000 as an example of how some legal departments have taken procurement beyond commodity work to other matters as well.
In the end, Silverstein echoed a sentiment the GCs had—that procurement can’t take over the entire process of selecting outside counsel.
“It is not procurement's job to pick the suppliers,” Silverstein said. “It is procurement's job to improve the process of sourcing and make better/more objective choices for the company on a total cost basis, not on the lowest price.”
Dave Sampsell’s company, BanyanRFP, looked to address some of the same concerns GCs expressed regarding their argument that legal services aren’t widgets that can be run through a sourcing department.
The Minneapolis-based company provides a cloud-based RFP application for legal departments. Sampsell said he often hears from GCs that they are hesitant to work with procurement departments or don’t like the applications procurement departments use to purchase legal services. Sampsell said that, in constructing his RFP process, he took into account that there needs to be a qualitative as well as quantitative aspect to purchasing legal services.
Gina Passarella can be reached at firstname.lastname@example.org or 215-557-2494. Follow her on Twitter @gpassarellaTLI.