GSK Legal Procurement Reform: Reverse Auctions and AFAs
This paper examines the procurement inefficiencies within GlaxoSmithKline's (GSK) legal department, focusing on the high cost of outside counsel, resistance to standard procurement processes, and the absence of centralized spending oversight. The paper evaluates three potential solutions: implementing a reverse auction system for outside legal work, adopting Alternative Fee Arrangements (AFAs), and establishing a Global External Legal Relations Team. It recommends all three in combination, arguing that together they would increase efficiency, reduce unnecessary legal spend, improve vendor competition, and ensure merit-based compensation for law firms — ultimately freeing capital for deployment elsewhere in the organization.
- Problems and Issues in GSK's Legal Department: Procurement inefficiency, high spend, no central oversight
- Possible Solutions: Reverse auctions, AFAs, and new management team
- Recommended Solutions: All three solutions recommended in combination
- Expected Outcomes: Cost savings, efficiency gains, better legal representation
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What makes this paper effective
- The paper follows a clear problem-solution-outcome structure that makes the argument easy to follow and evaluate.
- Each proposed solution is grounded in a cited academic or professional source, lending credibility to the recommendations.
- The recommended solutions section synthesizes all three options into a cohesive strategy rather than treating them as isolated fixes.
Key academic technique demonstrated
The paper demonstrates applied case analysis: it identifies a real organizational problem, surveys possible interventions with supporting literature, and narrows to a set of concrete recommendations. This technique is common in business and law management courses, where students must connect theoretical frameworks — such as reverse auctions and value-based fee structures — to a specific institutional context.
Structure breakdown
The paper is organized into four discrete sections: (1) problem diagnosis, covering procurement inefficiency, high legal spend, and lack of central oversight; (2) three possible solutions evaluated individually; (3) a consolidated set of recommendations; and (4) expected outcomes for each recommendation. This four-part structure mirrors a standard management consulting brief and keeps analytical and prescriptive content cleanly separated.
Problems and Issues in GSK's Legal Department
GlaxoSmithKline (GSK) faced an inefficient procurement process in its legal department. Traditional procurement methods were not suited to the unique needs of that department, and standard procurement practices were simply not working. Lawyers were skeptical about having to follow the same procurement processes used by other departments, and that skepticism translated into resistance.
A further issue was the high level of legal spend. GSK's litigation exposure ran into the hundreds of millions of dollars, and the legal department spent heavily on outside counsel. There was no individual budget for lawyers, which contributed to unnecessary costs.
Compounding these problems, the absence of centralized management made it difficult for the company to monitor and control its legal spend. It also meant that GSK was not fully aware of its potential spending power — leverage it could have used to negotiate better rates with outside firms.
Possible Solutions
One possible solution is to introduce a new procurement system built around a reverse auction mechanism. In a reverse auction, law firms would bid competitively for GSK's legal work (Horlen et al., 2005). This would create direct competition among bidding firms and could help GSK obtain the best legal services at the lowest possible cost.
A second possible solution is to use Alternative Fee Arrangements (AFAs). AFAs would allow GSK to pay a fee structure based on the value of the services rendered (Corrigan, 2021). This could include flat fees for specific services, contingency fees where the law firm is paid only if the case is won (Kritzer, 2004), or retainer fees where the law firm receives a fixed amount for a defined period.
A third possible solution is for GSK to create a new Global External Legal Relations Team. This team would be responsible for managing GSK's outside legal spend and would give the company better oversight of how those funds are allocated (Cremona, 2008).
References
Corrigan, S. (2021). Alternative fee arrangements. Man. LJ, 44, 134.
Cremona, M. (Ed.). (2008). Developments in EU external relations law. OUP Oxford.
Horlen, J., Eldin, N., & Ajinkya, Y. (2005). Reverse auctions: Controversial bidding practice. Journal of Professional Issues in Engineering Education and Practice, 131(1), 76–81.
Kritzer, H. M. (2004). Risks, reputations, and rewards: Contingency fee legal practice in the United States. Stanford University Press.
Van Tulder, R., & Mol, M. (2002). Reverse auctions or auctions reversed: First experiments by Philips. European Management Journal, 20(5), 447–456.
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