Law.com reports in Now for Law Firms, Too: Competing for Business Online (New York Law Journal, November 10, 2003) that General Electric Commercial Finance is using the online procurement service Procuri to seek competitive bids for legal services.
The article quotes a couple of un-named partners of large law firms who complain about this approach. One says that cost and value are not equivalent and that auctions don’t value unique skills. Another suggests that the auction will drive away qualified lawyers who can get better pricing elsewhere; this same partner also suggests that the involvement of non-lawyers in the selection process is a bad idea. If I were GE, I would find such remarks insulting for they suggest that a sophisticated purchaser is unable to assess qualifications and pricing. It is also insulting to non-lawyers (let the record show that I am a lawyer) for it suggests that they cannot make intelligent purchasing decisions.
Any time a market becomes more competitive, it is disruptive for existing players. And it is no fun to have whole business systems changed. But that does not mean new ways are less effective. Perhaps the lawyers quoted in the article had visited the Procuri web site and were unhappy to see the services Procuri lists, which includes mail and delivery, waste disposal, lawn care, and security guards. Clearly the process for retaining lawyers is more involved than for these other services, but that does not mean it cannot be routinized and scrutinized systematically and qualifications weighed against price and other factors.
And speaking of other factors, from the strategic legal technology perspective, I would be very curious to learn whether GE considers the use of technology by a law firm when selecting counsel via Procuri. To some degree, the use of technology should be built into the price. But realistically, in complex matters, seeing the direct link between appropriate use of technology and pricing is hard. If I were making the purchasing decision, I would want to know not only what technology a prospective firm uses, but how the lawyers on the team serving me actually use the technology to provide effective and efficient service.