The Complete Guide to Legal Vendor Management

Achieving strategic value, quality service, and cost efficiency is a top priority for legal operations and corporate legal teams in today’s fast-paced business environment. In fact, a structured and proactive approach to vendor management is one of the easiest ways to streamline costs, foster better collaboration and ensure consistent, high-quality service.

In this guide, we run through all the steps you need to take to keep your vendor management program running like a well-oiled machine and ensure efficient, mutually beneficial relationships with all your outside counsel.

What is Legal Vendor Management?

As the name suggests, legal vendor management is the process of choosing, engaging with, and managing the performance of external legal vendors. These may include law firms, alternative legal service providers, and other types of organizations that sell services to in-house legal teams.

For example, imagine your company is involved in an essential corporate merger. Choosing between multiple firms to handle this matter might involve evaluating their expertise in mergers and acquisitions, their historical performance on similar cases, and their proposed costs. In this context, vendor management helps ensure you select the right firm for the job and that their work aligns with your strategic goals and budget.

A key aspect of vendor management is using legal procurement best practices to balance engaging the right providers with cost efficiency—helping your in-house team to deliver optimal outcomes for the business. These practices include competitive bidding, where vendors submit proposals to secure work; performance metrics, which track factors like case outcomes and adherence to budgets; and periodic vendor audits to assess value delivered.

What is a Vendor Management Program?

Getting the most out of vendor management requires taking a structured approach. Specifically, your team should have a vendor management program in place that covers factors like performance evaluation, cost management and efficient use of your available resources. By centralizing these functions, your team can better align vendor services with organizational goals while maintaining control over legal spending.

Technology should also play an important role in maximizing the effectiveness of a vendor management program. Tools like Brightflag’s e-billing system allow for automation of tasks such as spend analysis, performance tracking, and invoicing. These platforms centralize vendor data, provide actionable insights in real-time, and streamline workflows—empowering your team to make strategic, data-driven decisions while reducing administrative burdens.

A robust program should also cover how your team will address problems or inefficiencies as they arise. Finally, measuring and sharing success is central to building trust and driving ongoing support for your strategy. It is important to establish metrics such as cost savings, reduced resolution times, or improved service delivery. These results can then be used to demonstrate the program’s impact and strengthen buy-in across your organization.

Why is Legal Vendor Management Important?

There are a wide range of benefits to having an effective vendor management system. The most common ones include:

Cost control: A vendor management program gives your team a clearer view of legal spending. That allows you to identify any areas where you could be saving costs as well as potential opportunities to negotiate more favourable rates.

Better vendor performance: A sound vendor management system also clarifies factors like current vendor performance and allows you to set benchmarks for improvement. That raises accountability and makes it easier to quickly spot the partners that are really driving value for your organization.

Improved vendor selection: By centralizing vendor information, vendor management systems allow your team to make the best vendor selections based on criteria like area of practice and cost efficiency. Many systems also provide a view into vendor diversity by allowing vendors to provide demographic details (e.g. gender or sexual orientation) that can help your team meet corporate diversity targets when onboarding potential vendors. However, you must remember that vendor diversity extends beyond being a mere corporate target; it is an important driver of innovative legal solutions and can align your department with broader ESG goals.

Operational efficiency: Finally, having all your vendor data in one place reduces administrative overheads and streamlines your team’s workflows — freeing up time for them to tackle the more important tasks in their day-to-day.

How to Create an Effective Vendor Management Program

Setting up a vendor management system that ticks all the right boxes and maximizes your benefits can be a challenge — so it helps to do your due diligence and take a systematic approach. Here are our five steps for implementing an effective and efficient vendor management program:

1. Create a system of record

2. Take stock of current relationships

3. Prioritize impactful “fixes”

4. Share successes

5. Review and monitor vendor relationships

Let’s run through each step in more detail:

1. Create a system of record

The first step is to create a comprehensive record of the vendors you’re working with and which legal matters they’ve worked on or are working on. Ideally, you’ll also need to be able to track how effectively they’re providing services from a single dashboard, but all of that is easier said than done.

There are many standard business tools available that can be used in this context, ranging from simple spreadsheets to accounting or project management software. But because none of those systems are designed specifically with legal teams in mind, they may still come up short when it comes to giving you honest, actionable insights.

Our advice? Invest in a legal-specific e-billing and vendor management system that tracks vendors, spending, and performance all in one place. This makes the vendor management process significantly easier.

2. Take stock of current relationships

Once all your vendor information is easily accessible, it’s time to take a closer look at what different providers bring to the table. Here are some key tips:

Gather general context

How many vendors are you working with?

And do any of them cover similar practice areas?

If the answer to the second question is yes, it’s worth digging into why that’s the case. It may be that one of the similar firms you work with offers expertise in a highly niche area (e.g., regulatory compliance within one aspect of your industry) in addition to the general practice areas they cover.

To find out, you’ll need to speak to the members of your team who work most closely with each outside firm or possibly even to members of the broader business if they have the authority to instruct outside counsel.

And if you find out, there are no objective differentiating factors? It may be time to consolidate similar services under one provider. This can help you strengthen that vendor relationship and drive cost efficiency within your team (e.g. they may give volume discounts).

Map pain points

When talking to members of your in-house team and other business functions, be sure to get their feedback on any pain points they’re experiencing with current providers. How do they find working with specific firms? What frustrates them in those relationships? And how would they like to see them improve?

Gathering that information can go a long way towards helping you refine how (and which) vendors slot into your broader ecosystem.

Monitor spending efficiency and performance.

Use data from your accounting or e-billing system to monitor legal spending and current vendor performance. Remember, the goal is to improve efficiency. Ideally, you should use a system that allows you to review individual matters, the time spent on them, any hiccups that arose, how these were resolved, and the pricing. From there, it’ll be easier to identify the best outside counsel options.

Talk to finance

Lastly, talk to the finance department to understand what vendor relationships look like from their perspective.

Which vendors are providing timely accruals that keep finance on track? Are all the firms you work with sticking to your billing guidelines?

Factors like repeated overbilling, poor adherence to budget or failure to follow guidelines all influence the efficiency and value add to your vendor relationships. So, you should definitely take stock of these issues as part of planning your vendor management priorities.

3. Prioritize impactful “fixes”

Once you have a clearer view of where current legal vendors are coming up short, you may be tempted to make sweeping changes to your system. However, it’s often a better idea to start by prioritizing specific, immediate “fixes” that would go a long way towards solving your team’s most pressing pain points.

For example, suppose your main problem is poor communication from one of your primary partners. In that case, it may be as simple as a conversation highlighting specific examples where this problem has impacted your team’s workflows. Or recirculating billing guidelines to fix billing inconsistencies across providers.

A bigger efficiency fix might be consolidating services under a single firm or firms. But if you decide to do so, we recommend doing it in one practice area first. Make that more minor change, and then monitor to ensure instructions are going to your selected provider(s) before rolling out a more considerable consolidation.

As you make changes, keep in mind that it’s essential to understand the context of any legacy relationships between senior members of your company and outside counsel. If there’s a legacy reason for using a specific firm, it’s worth discussing your plans with internal stakeholders before enacting any changes.

4. Share successes

As your vendor management strategy gains momentum, keep internal stakeholders updated on the success of the changes you’ve made. That might be cost savings, more streamlined and efficient legal service delivery, or a stronger relationship with other internal teams, like finance.

Where it makes sense, use specific metrics to measure success — like percentage reduced legal spend, time to resolve legal requests or time spent processing invoices.

By making these “wins” visible, you build trust and confidence in your processes. And that can be the key to rolling out bigger changes or even an overarching legal department strategy that reshapes how your team adds value to the business.

5. Review and monitor vendor relationships

Finally, keep in mind that changes aren’t necessarily “one-time fixes.” Reviewing, monitoring, and improving vendor relationships over time is often the key to long-term success. Especially if you can build a relationship that is closely collaborative and mutually beneficial.

Be sure to also update vendors as your team’s goals and legal priorities change and to clearly outline new processes to be followed and any new expectations on both sides.

By doing that, you create an environment of continuous improvement — one geared towards helping both you and your vendors grow over time. And one that ensures your outside providers become trusted, value-adding, and cost-effective business partners.

Legal Vendor Management Simplified with Brightflag

While getting your vendor management program up to scratch can be tricky, it doesn’t have to be a Herculean task.

Brightflag’s legal vendor management solution is designed to streamline every aspect of your outside partner relationships, from making it easy to adopt new vendors, to providing the metrics you need to make real-time, data-driven performance decisions and benchmark vendor services. All while keeping all your vendor information right where you need it — at your fingertips.

Book a demo today and see how Brightflag can transform your legal vendor management strategy.