June 12, 2020

 Tariq Hassan

procurement law department law firm covid-19 next normal cost savings expenses

Even before COVID-19, law departments and law firms faced growing pressure to better manage procurement expenses. Now, with new economic and competitive realities, the pressure to streamline and economize has become acute. There is also the added challenge of an explosion in volumes of work as businesses and law firms race to adapt to the “new normal.” How can you optimize procurement? Try these five steps to deliver savings:

Use a Non-Invasive Approach. The first step to optimizing procurement is a review of existing contracts and procurement expenses. In completing this step, you ought to employ an approach that maximizes the use of automated tools and lower-cost labor, and minimizes the need for your experienced lawyers to review individual contracts one-by-one. Those lawyers can then concentrate on higher-value work.

Information Is Power. Your primary goal when reviewing contracts and spend is to obtain information that you can then leverage to your organization’s advantage. This includes identifying standard clauses that offer opportunities for savings–force majeure, exclusions, defense to (and penalties for) non-performance, and other contingencies. Understanding the terms of a particular contract is a precondition to obtaining savings under that contract.

Prioritize. Not all opportunities to reduce procurement expenses are equal: not only will the amounts of potential savings vary, but the time and effort necessary to obtain those savings will vary, too. This makes it crucial to prioritize savings opportunities in a systematic, fact-based way. Which contracts are the largest ones? What goods and services are available from multiple vendors? Which contracts contain provisions that present the most favorable opportunities for savings?

Start With Existing Contracts. As part of prioritizing savings opportunities, don’t overlook the potential savings available with your existing contracts. Relatively simple steps, like errors and omissions reviews and vendor compliance audits, can yield significant savings. Are vendors being overpaid, or do payments match what they are actually providing?

Apples-to-Apples. Often, a company or firm will use multiple suppliers for the same goods or services, and typically there are alternative suppliers available. You can leverage this to your advantage. Rather than sending a new RFP to existing and alternative suppliers–a labor-intensive, arduous, and time-consuming process–you can instead use like-to-like benchmarking. If similar goods or services are supplied or performed by multiple vendors, you are in a position to benchmark the cost of that category of work or service, which in turn enables you to set (and justify) a standard rate that you will pay for it. Even if you only have a single supplier for a given good or service, benchmarking may still be possible. For example, by working with a third-party that is privy to cost information from other companies, you can determine like-to-like pricing information to obtain reduced prices from your existing suppliers.

For many law departments and law firms, deeper involvement in procurement activities may seem like a daunting task. The key to success is a principle-guided, systematic approach that prioritizes opportunities and leverages information. The resulting savings can be more than you bargained for.

Learn more about Elevate’s unique procurement benchmarking services.