Engaging external lawyers effectively is one of the most fundamental roles performed by in-house counsel.
Having a panel of external lawyers in place allows you to get the best possible service and value for money. And the key to an effective panel arrangement often lies in the way it’s selected and established.
Picking your panel of laws firms
Depending on the size and complexity of your organisation and the resources available in your in-house legal department, you may need to put together a panel of law firms to provide external counsel.
Although a panel can consist of just one firm, it usually comprises more. Some firms may offer inducements for exclusivity on your panel, such as:
- Discounted fees and other flexible fee arrangements such as blended rates, volume discounts, fixed fees for standard work;
- Guaranteed key performance levels and regular performance reviews with senior partners;
- Free or discounted bespoke training and access to selective client training;
- Free services such as hotlines for one-off questions and meeting room facilities;
- Secondments; and
- IT services and portals for billing and major matter management.
We recommend having at least two or more law firms on your panel as:
- You may need specialist legal counsel in different areas across your business; and
- You’ll benefit from the competitive tension if you ask two or more firms to bid for work.
You can, of course, request bidders to include some or all of the above inducements in their bid – or leave it open for them to offer them if they wish.
To make a panel arrangement effective, it’s important for your organisation to establish genuine and long-term relationships with the law firms on it. As these relationships mature, the firms will get to understand your needs in ever-increasing depth.
For this reason, think hard before choosing panel members on cost alone. Firms who win because they charge the lowest fees may not be as committed to a long-term relationship as you are.
If you already have a long-standing and respected panel of law firms, you probably won’t need a formal procurement or panel process. In this case, a less formal approach, or a shortened version of the process we set out below, could impel these incumbent firms to 'sharpen their pencils' and reaffirm their commitment to you.
The five-stage selection process
There’s no right or wrong way to run a formal panel process. However, your organisation may have an in-house procurement process and useful templates. If so, work with your colleagues in procurement and build these five key stages into your process.
1: Create an internal team
As an in-house lawyer, you, or a close departmental colleague, are best placed to lead the law firm panel selection process.
Next, think about who else in the organisation to involve. Do HR, the commercial teams or the estates department have a stake in who provides external counsel? If so, give them a voice in your team.
Your organisation’s procurement team may wish, or even be obliged, to be involved in the process. They can advise on specific policies that may need to be included in bid documents. Also, find out if there are any internal policies that determine whether you can accept any hospitality offered by bidding firms.
2: Write a request for proposal (RFP)
Your RFP should set out, among other things, the purpose of your panel, your selection timetable and the information you want bidders to provide.
A key part of the RFP is the scoring criteria, so decide how you’ll select your panel members. You could, for example, create a scoring system with your criteria weighted to reflect any additional value you place on them.
Leave room in your scoring system for human discretion. Remember, we buy on emotion and justify logically and this can apply when selecting law firms, even when they’ve not attained the best score in an RFP.
Also, keep the response mechanisms in your RFP as simple as possible. Apply word limits to open ended questions. Given the chance, many firms will include their brochures in their bids.
3: Choose your bidders
When deciding which law firms to request proposals from, consider how large you want the panel to be and how soon you want it established. The more firms you invite, the longer the process will take.
You may wish to include incumbent firms, renowned industry specialists (check the Legal 500 and Chambers and talk to peers) and firms aggressive in the market and hungry for new business. If you can, engage a firm you’ve not worked with before on actual work. This will give you a better idea of their suitability than a polished RFP response.
Let the law firms know in advance that you’ll be sending them your RFP. They’ll be delighted to be invited and even more grateful for the time to prepare, as most of them will involve their internal and/or marketing teams. This is also the time to flag up any potential conflicts of interest.
The next stage is to invite shortlisted firms to a meeting. This is your opportunity to learn more about firms you don’t have an existing relationship with, flush out any concerns or issues raised in the RFP and determine the strength of the rapport you’ll have with the firm.
4: Choosing the winners
Use a combination of scores and your team’s discretion to choose your panel winners. Then seek the necessary approval of senior people in your organisation to invite your chosen firms onto your panel.
Be sure, too, to notify the firms who weren’t successful in the process. Do this personally or by phone first, then in writing. Most firms will want to understand why they didn’t make the final cut, so consolidate your notes, their scoring and any other feedback to make your follow-up meeting or conversation meaningful for them.
5: Putting the panel to work
With your panel in place, your focus turns to realising the benefits it can provide.
Start by setting and agreeing the objectives of your relationships (or resetting where the panel includes any incumbents) or creating a 100-day plan. You could also invite key lawyers from the panel to visit operational sites to get a better understanding of your organisation.
When selecting a panel member for future instructions, approach all, or the most appropriate firms on panel, with a mini-tender and use their agreed fee structures and any additional discounts to place the work.
Few panels are based on any formal agreement between the client organisation and the relevant law firms. For this reason, review your organisation's engagement terms to comply with any tender requirements, such as limits on liability and billing requirements.
Creating a panel of law firms is a great way to get the very best external counsel. It offers a valuable learning opportunity and enables you to own the procurement process, collaborate with internal stakeholders and influence the outcome.
There’s no right or wrong way to run a procurement process. You’ll build the best panel for your organisation by balancing the time and resources you can commit against the outcome you need. To make your panel a success, focus on building quality, sustainable, long-term relationships.
If you’re looking to control your organisation’s expenditure on external counsel, a good way to start is to analyse all your legal spend. Click here to see our Legal Spend Table Diagram.Legal Spend Table Diagram (PDF 317 KB)