The winning tactics

Competitive fee levels alone will not get you past the post first in a tender.

Allery Scotts is often get asked to help professional people communicate better in the tender process. Even a single task and a single client can teach a professional firm volumes.

Lets assume there is an in-house lawyer. He runs the legal department of a company which licenses products to other businesses and collects fees for their use. This paper drawn from a debriefing session with him, describes how he picked his new legal advisers in a selection process involving 130 law firms.

The in-house lawyer's observations give rise to insights which suggest that the choice of any professional adviser in any discipline by any organisation is a good deal more subtle than fee level. The extent and depth of his observations also show how much valuable guidance is to be had for the asking from clients.

In particular, the unexpectedness of some of his reflections suggests a single overarching principle:

1. Assumptions are dangerous.

The company, which spends £700,000 a year on legal fees - mostly chasing debtors through the courts - decided to trawl the whole of the UK for a new firm to handle its legal work, primarily litigation. Through advertising, it attracted initial responses to its Invitation to Tender from 130 firms.

The company saw the exercise falling into three or four phases, starting with "hard" criteria like price and winding up with the more subjective criteria that could be assessed only at an oral presentation. But when he first came to compare the 130 for price, he found he had made the mistake of not asking the firms to quote on comparable terms.

So he sent out a second specification, based on an actual case which he wrote up for the occasion, and using a proforma which asked firms to detail what would need to be done for that case, including briefing counsel and so on.

Based on this comparable unit of work, the lowest quote for handling the job was £140 and the highest £2,863 - a difference factor of 20. As he said: "We wouldn't pay the one and we wouldn't believe the other." Hence a second maxim:

2. Price alone is not the issue

After throwing away half of the contestants on the grounds of excessive price ("excessive" being a reflection of legal fees in general rather than of this client being price-obsessed), he and his colleagues applied two more filters:

All but one of the firms with which the company had had previous contact, and which could therefore be expected to know its business, made excellent technical and business responses. They picked up the pressures on the company, the improvements that could be made, the social responsibility, and the practical effects of the legal transactions being considered.

On the other hand, several firms "got panned on complacency". More generally, the answers to the technical questions seemed to span from, at one end, an academic account of what the law said, through to a rather better understanding of what was likely to happen and what the company could do to stop the problem arising at all.

Some firms refused to answer the technical questions, presumably on the basis that they were being asked to do free work; one firm, after it had been told that it hadn't reached the finals, asked for its answers back. The firm that answered one especially knotty question in a way that showed depth of commercial understanding came through to the last four.

One London firm homed in on the business proposition that the company should undertake a pro-active promotion of copyright and thereby won themselves brownie points from operational people who had been talking about this issue hotly and strongly at the time. (It's not clear whether the focus was the result of research or a lucky coincidence). The same firm also got a positive reaction for having a 24-hour switchboard. That firm made it into the final six.

All of this suggests, in line with the consistent results of client research across all professional services, a third lesson:

3. Understanding the client's business is critical

The company had now brought the contestants down to 13 from 130. The last tranche down from about 20 had included those who were deficient technically but who were very cheap, and those who were very expensive but technically excellent. The incumbents fell out at 19 on price. That is to say, there were other firms showing as good or better performance who were cheaper.

At the 13-left stage, the selection process was handed over to departmental heads and the operational people who would be actually using the lawyers - and the price of each firm's work was kept confidential.

The thing that surprised the company was the very high degree of agreement on who was good and who was bad. The 13 very quickly separated into a pile of six who went through to the final round and a pile of seven who were out. Then with a bit of extra effort, a vote was taken as to who of the six were the least favourite and two emerged clearly: the London firm and one other.

The London firm knocked itself out by insisting that a computer interface with the company was not necessary - despite the fact that the Invitation to Tender had made it perfectly plain that this was regarded by the client as of high importance. Not surprisingly, that omission - accidental or not - was perceived as evidence of an arrogant we-professionals-know-best attitude. Commandment number four therefore is:

4. Ignore what the client says at your peril

And then there were four. Going into the oral-presentations "beauty parade" stage, there were .... let's call them Able, Baker, Charlie and Dodds.

Able blew itself away - which was easy because it was trailing a bad fourth - by not fielding at the presentation the assistant it had identified in the proposal as being the person who would handle most of the work. When the assistant turned out to be 22 years old as well, the offence was compounded.

In effect, the firm was judging the work from its own legal standpoint (simple debt cases, therefore do-able by a junior), not from the client's perspective (lots at stake, therefore needing senior attention). Lessons number five and six, therefore:

5. Clients buy people, not firms

6. Only one perception counts - and it's not yours

Baker had put in what was regarded as by far the best proposal - although it was three inches thick - and he kept voting for Baker throughout. But it lost because the key Baker lawyer also had media clients. Those clients used the company's licensed products in large quantities - and Robin's people were not persuaded (despite the lawyer's protestations) that he could handle the conflicts of interest between the users and Robin's company. Had Baker, then or earlier, offered to change the team ... but it didn't. So lesson number seven:

7. Take client concerns seriously

That left two, both of whom were appointed. Why? Because the MD, who chaired all of the final selection panels, was keen on the idea. The MD's motivation was very straightforward and commercial and in fact has paid off already. One of the firms had requested £2,800 to write the basic writ documentation for their slice of the work. He responded by saying the other firm had agreed to do it for nothing. Suddenly the firm decided that it would do the same.

Even the winners did not have an entirely smooth ride. After the presentation from Charlie (who had previously done some work for the company), the panel asked the senior Charlie partner to stay behind, whereupon they trotted out a long list of complaints about the firm's service and "gave him a good kicking". The moral:

8. Incumbents don't necessarily have the inside track

Dodds, the other winner, put on a slick computer-based slide presentation which had a negative reaction from the in-house lawyer but a positive reaction from some of his colleagues. The firm also won points for setting up the computer system they planned to use in the board-room, having brought the gear with them.

However, it almost blew itself away on two counts:

9. Let deliverers do the talking

Finally, the company made it clear that the selection process was not just a cost-cutting device. The year before, the company had spent £700,000 on litigation to chase up payments and recovered some £1.1m in the process. In other words, it made a 50 per cent profit on the money it invested in legal action. Litigation is not a peripheral overhead for the firm, but a core commercial activity.

The selection process - and its attendant fee-saving - has now opened up more options for improving the company's performance and margins. It could do the same amount of litigation next year for half the cost - £350,000 - or it could spend the same as before and expect to earn perhaps £2m - a return of around 200 per cent. Moreover, it can expect additional legal activity to enhance the effectiveness of all its fee-collecting activity because, as its reputation for litigiousness grows, its customers will be ready to pay up sooner.

How many of the 130 law firms picked up on this central aspect: that the company - unlike almost all other clients - views litigation as a business investment? It was very clear: "No-one." A lost opportunity for differentiation, certainly. But also an illumination of a 10th principle:

10. Getting ahead means getting closer, not getting by.