You can write the best pitch proposal with all the strategy and bells and whistles you want, but if you don’t have the right pricing methods you won’t win.

This is the message that was clearly acknowledged at our recent seminar, entitled “How Procurement Impacts Law Firm Selection”, held in in Houston this February. Speakers included Vincent J. Cordo, Global Sourcing Officer at Shell Global; and Marco Perez, Senior Director and Head of Procurement USA & Legal Global Category for the Royal Bank of Canada. The speakers gave great advice to lawyers, pricing professionals and proposal managers on how to be creative when pricing proposals and on-going client services.

In-house lawyers receive the questions lawyers ask regarding the request for proposal (RFP), the panel noted. Perez admonished “Send in your questions, don’t guess. Procurement rarely gets good questions for clarification on fees. Communicate with us, it is not happening often enough.”

Price right — not high — and go in different, the panel also advised.

Pricing’s Lateral Move

A recent survey from The American Lawyer and LexisNexis survey found that only 28% of respondents said that hiring laterals had been “very effective” over the past five years, and 10% said hiring laterals was either neutral or negative. Cordo told attendees to be creative. “If a lawyer moves laterally to a different law firm they should strategize on how to partner with their clients on building their book of business,” he said. “Therefore, provide the client with a 30% discount off their rate while they are trying them out at their new firm, for example.”

If the matter (for example, litigation) goes beyond your expectations and estimates, work with your pricing person in advance and explain why you will be over-budget and by how much.

I asked the panelists for suggestions on how to provide a fixed fee when information on the scope or volume is not provided in the RFP. The consensus was to provide assumptions. For example, provide the math for assumptions based upon the team structure (number of attorneys, level and expertise) and kind of matter. Provide fees based on hypothetical volume levels. “We all love examples, so give examples on pricing in your proposals,” Perez said.

The panel also had another word of advice: If the matter (for example, litigation) goes beyond your expectations and estimates, work with your pricing person in advance and explain why you will be over-budget and by how much. That is much easier to deal with and less trouble for the client versus working extra time beyond the budget, billing your client after the fact, and then having uncomfortable billing or write-off discussions months later. “If it is a corporate matter and the schedule is off, scope impact needs to be broached with the lawyer right away,” added Shell Global’s Cordo. “It all comes back to project management. It’s not just about price, it’s about how the schedule also impacts the overall commercial value and risk.”

Basically, as the panel explained, pricing comes down to a paradigm shift, rather than plugging in hourly rates with a 10% discount — ask questions, seek clarification, and do the math.

“Challenge us if you don’t understand what we need,” Royal Bank of Canada’s Perez recommended. “Give us strategic suggestions based on your knowledge of our business, industry and the law.”

Cordo agreed, summing it all up by saying: “If you aren’t familiar with your true costs, and effort needed around supporting the client on any opportunity, it will make our discussions tougher when planning out appropriate pricing.”

Indeed, my observation during the seminar that “procurement is the new normal” was strongly underscored by members of the panel, and the sooner law firms understand how to work with procurement and provide value based pricing, the faster we can all get back to business.