Last year GE Capital began an experiment to purchase legal services via auction (see my posting). Two years into the experiment, GE reports savings of up to 20%. 

GE Capital Wins Big with Legal-Services Auctions in the Corporate Legal Times September issue quotes Barbara Daniele, general counsel of the GE Capital commercial equipment finance division: “We’ve realized dramatic cost reductions from the auctions – up to 20 percent for most areas, compared to 2003 rates.” Daniele makes some other interesting points:

  • The “very best” firms have participated in auctions.
  • Work quality has been high.
  • GE has not yet bid out high-end litigation.
  • Information technology is important in achieving these successes.

GE is a trend setter in law practice (e.g., creating a law department as good as any large law firm). This development raises at least two very interesting questions: (1) will other clients follow and (2) have the winning bidders simply accepted a lower margin or have they found ways to be more efficient, for example, by using technology? Comments welcome from anyone who can answer these.