City firms are hitting back at increasingly aggressive cost-cutting by their corporate clients by rejecting offers of panel pitches or putting in pitches that they know are destined to fail, the Gazette has learned.

Senior lawyers from the magic circle down to mid-tier commercial firms told the Gazette they have been forced to reject offers to pitch because the billing terms offered by in-house counsel or by the company’s procurement department would have secured them little or no profit.

Offers to pitch from procurement departments came in for particular criticism, with lawyers concerned that a lack of knowledge of legal business was leading to overly simplistic demands to cut costs.

One senior lawyer in the London office of a major US firm said that he had been sent a list of his firm’s and other firms’ hourly billing rates by one procurement department, and told that he would need to beat his competitors’ pricing if his pitch was to succeed. ‘It was appropriate if you were selling sheets of metal, but not legal services,’ he said. ‘We’ve put in pitches knowing that we have no chance of getting on that panel, because we hadn’t followed the terms requested by the company.’

Moira Gilmour, managing partner at City firm Field Fisher Waterhouse, said: ‘Some firms will pitch just to maintain turnover, in the hope of later renegotiating fees. We analyse our pitching very carefully. We know what’s profitable and what’s not. There has to be a very good strategic reason to take on unprofitable work.’

Tony Williams, principal at management consultants Jomati, estimated that each panel pitch could cost a five-figure sum. ‘To do a proposal is an expensive investment,’ he said. ‘Firms big and small are beginning to analyse not just the fee income, but also the profitability of the work and the suitability of the relationships with their clients.’