Determining whether you’re getting a good price from your law firms has historically been challenging due to a lack of transparency and consistent data, leading to significant cost discrepancies across the legal industry.
In this piece, we will walk you through the process that PERSUIT uses to discover what we call the “true market price” for legal services.
While it might seem counterintuitive, identifying a true market price can actually shift the focus away from cost when selecting a firm. By doing so, you empower your team to choose the firm best equipped to manage risk and deliver results, rather than just the one offering the lowest rate.
Defining a True Market Price
A “true market price” refers to the common, average price that buyers and sellers are generally expected to agree on for a particular service or product. However, in markets lacking transparency and competition, such as legal services, it can be difficult to pinpoint what that price should be.
Fortunately, the legal industry is beginning to evolve.
In-house legal teams are facing growing pressure to prove their value and justify their spending decisions. This has led to an increasing adoption of new methods to engage with outside counsel, incorporating transparency and competition to help establish a true market price.
Four Steps to Identifying the True Market Price for Legal Services
At PERSUIT, we use a straightforward, four-step process to help in-house teams find the true market price for legal services. Here’s an outline of how it works:
Step 1: Break Down the Matter by Milestones and Deliverables
Most legal cases follow repeatable patterns. While you may not know every detail of how a case will unfold, you can predict the types of activities that are likely to occur.
For instance, in litigation, depositions are almost always part of the process, even if you don’t know how many will be required. Every case can be divided into predictable phases that lead to the desired outcome or deliverable.
In a litigation scenario, these milestones could include steps like depositions, discovery, pre-trial motions, trials, and appeals. Even in complex areas like intellectual property litigation, certain phases such as claim construction or the Markman hearing can be scoped in advance. Taking time to scope the matter creates a foundation for transparency and healthy competition among law firms.
Additionally, having access to pre-built templates for common legal matters can make this process much more efficient.
Step 2: Invite Proposals from Preferred Firms
Once you’ve scoped the matter by phase, invite three to four preferred law firms to submit proposals outlining how they would approach the work.
You should ask each firm to include their price estimate, an outline of their strategy, and any other relevant information you’ll use to evaluate their bid (e.g., DEI commitments or relevant experience).
While you can manually send these invitations via email, utilizing a platform designed for managing law firm relationships can streamline this process.
In some cases, firms are encouraged to ask questions to refine their understanding of the matter, helping ensure an “apples to apples” comparison of proposals.
Step 3: Use a Competitive Bidding Process
When reviewing proposals, you might find that firms are quoting similar prices. In this case, the competitive RFP process has likely already revealed the true market price, giving you confidence that you aren’t overpaying.
However, sometimes you’ll receive bids with widely varying price points. This often means the firms are unsure what other firms charge for comparable services, preventing a clear market price from emerging.
To address this, we recommend a reverse auction. This process involves setting a time window, showing firms their ranking or price quotes, and giving them an opportunity to revise their bids. This real-time competitive process typically lasts 30 minutes to an hour.
For example, in a recent reverse auction on the PERSUIT platform, the initial spread between the highest and lowest price quotes was $1.275 million. After just over an hour, the spread had narrowed significantly, with all firms offering bids within $270,000 of each other. In this case, the true market price centered around $1 million.
Step 4: Select the Firm Best Suited to Meet Your Needs
Following this competitive process, you’ll be equipped to choose the firm that’s most likely to deliver the results you need. Interestingly, by fostering competition, price becomes less critical in the final decision.
At the beginning of the auction mentioned earlier, the price difference between the top and bottom bidders was too large to justify selecting the highest bidder. However, by the end of the auction, the bids were much closer, allowing the decision to be based on which firm was best positioned to manage the risk and achieve the desired outcome — rather than simply on cost.
The Payoff: Making Price Less of a Deciding Factor
PERSUIT’s internal data, which includes over $8 billion in proposals and $1 billion in legal work awarded, shows that this competitive process consistently reduces price disparities. By driving firms toward a consensus price or true market value, cost becomes less of a deciding factor. Instead, legal teams can focus on more meaningful differentiators such as experience, strategic insights, diversity, and ESG factors.
