Canadian Lawyer

20 S E P T E M B E R 2 0 1 6 w w w . C A N A D I A N L a w y e r m a g . c o m hen McCarthy Tétrault LLP was asked to bid for work through a reverse auction, the Canadi- an law firm set out to explore the intricacies of the competitive bidding process. It then put togeth- er a team to develop a strategy on how it would proceed and created a tool allowing its members to immediately see an earnings analysis as bids changed in real time. Reverse auctions build upon the approach typically employed in request for proposals and are primarily used for large- volume legal work in an attempt to clearly define the work required, identify appropri- ate firms that could do the work and then seek out competitive pricing. It's being used in the United States primarily by large cor- porations in search of creative alternative fee arrangements and is slowly being intro- duced into the Canadian legal marketplace through international companies. But so far, it hasn't been embraced by Canada's business world and many lawyers have eyed the approach with a great deal of apprehension. There is a fear that firms are being pushed into a corner, far from their comfort zone of the billable hour, and are being asked to discount their rates. McCarthys hadn't before bid on work through a reverse auction when it was invited to participate in one by a multi- national corporation. And the experience was not consistent with the fears expressed by the legal community. "The process is run very well" and the forum allows for development of the relationship, observes Matthew Peters, a partner at McCarthys and its national innovation leader. "Price is clearly a factor that they're taking into consideration and organizations weigh that differently." But, he adds, just like RFPs, price isn't the only consideration. Talent and expertise are also heavily weighted in the consideration. The process begins very much like an RFP in that the corporation lays out what it expects from the firm, what the work entails and how it anticipates work will break down. The firms then respond, detailing their proposed approach, the team it expects will be involved and its relevant experience and specific expertise. The com- pany then selects the firms it is interested in working with and invites them to par- ticipate in an auction. There are a variety of different ways the auction itself can be conducted, but a typical auction is a timed, real-time, online process that might last only 20 or 30 minutes. The idea of reverse auctions is to get law firms to compete for the legal work by low- ering their bid over a short period of time by seeing the bids made by other firms, although they aren't able to see the names of the other participating firms. GlaxoSmithKline started using reverse auctions for legal services in 2010 and con- tinues to use them almost exclusively for any legal project worldwide that is valued in excess of US$250,000. The pharmaceuti- cal company uses third-party software to conduct the live online auction, but the entire event as well as the preparatory work is managed and handled internally. For GSK, it begins with a request for proposal template where firms provide details on why they're the best fit for the L AW O F F I C E M A N A G E M E N T By Marg. Bruineman W JEREMY BRUNEEL Reverse auctions A new trend for companies seeking bids for legal work is causing apprehension at Canadian law fi rms.

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