The Legal Aid system should be "fundamentally" reformed to strip out "inefficiency", the Lord Chancellor said.
Lord Falconer said making lawyers bid for publicly-funded work generated by police stations would save the taxpayer money.
Bringing in fixed fees for taking on cases would also cut the amount of time wasted in court, he added.
The Lord Chancellor was speaking as the Department for Constitutional Affairs prepared to publish the final results of a major review of the ?2 billion-a-year system of free legal representation.
Government trouble-shooter Lord Carter of Coles published his initial findings in February, which suggested measures including doing away with long-standing arrangements where solicitors are paid by the hour.
Lord Falconer told the BBC Radio 4 Today Programme that the reforms should not be "bureaucratic" or "costly", but "something needed to be done".
"It takes too long, it costs too much, and the state pays for inefficiencies. We've got to change that.
"We need a system whereby you encourage people to finish cases as quickly as possible, preserve quality, and encourage efficient firms.
"Fixed fees means that people will resolve cases as quickly as possible, (and) being able to compete on price will reward people for efficiency."
He added that with co-operation between judges, prosecutors and the defence, there was a lot of court time that could be saved.