US Courts to Encourage Competitive Bidding to Control Costs?

The National Law Journal reports on US judges using competitive bidding to select lead counsel in securities actions - one of the reasons to justify this position being that there is often little oversight of the conduct of the matter by an actual client.

The practice was introduced in the early 1990s, but the was frowned upon by some courts in 2000 and 2001. However, the judge who introduced the practice has urged Congress to codify such auctions to save investors money.

In 2003, the New York Law Journal reported on the use by GE Commercial Finance of online auctions for legal services and other GE groups followed this with further online auctions in 2005. Any such auction would need to carefully take into account the services and skills on offer from bidders to ensure a comparison of "apples with apples". Lawyers have complained that such auctions are labour and time intensive, and the recommended strategy is that adopted in any auction - set a limit (in this case a bottom line) and stick to it.

As with any negotiations on fees, a law firm must clearly identify:

• What is the cost base?
• What is the scope of the work?
• What are the client expectations?
• What is value to the client?
• How will the firm deliver the work?

This can be more difficult with on-line bidding as the opportunities to identify scope, expectations and value are more limited.