From The Economist, February 19:
Why the American government could turn against consultants
It should be a management consultant’s dream. The organisation is immense. Bloat is a problem. And the new boss is eager to shake things up. President Donald Trump and his disrupter-in-chief, Elon Musk, have already begun hacking away at America’s federal bureaucracy. Mr Musk’s Department of Government Efficiency (DOGE) has set itself the target of cutting government spending by a colossal $2trn.
For an industry that helps organisations remake themselves, that seems like an opportunity like no other. Yet consulting firms, which have come to rely on the federal government for a growing share of fees, are looking on nervously. None of them appear to have a seat at Mr Musk’s table. They could instead be on the menu.
Consultants have a long history of cashing in on government projects. McKinsey, the world’s most prestigious strategy adviser, at least by its own estimation, helped Dwight Eisenhower establish the post of White House chief of staff in 1953 and designed NASA’s first organisational structure in 1958. By 1977 Jimmy Carter was grumbling that the federal bureaucracy was employing consulting firms “excessively, unnecessarily and improperly”. That year Booz Allen Hamilton, a consultancy, was paid $320,000 ($1.7m at today’s prices) by the Department of Agriculture to figure out how many chickens its inspectors should examine per minute.
Such a contract would look like chump change these days. The same firm received $9bn from the federal bureaucracy in the most recent fiscal year, according to government data. Add in the other top government consultancies—Accenture, BCG, Deloitte, EY, Guidehouse (formerly part of PwC), KPMG and McKinsey—and the figure exceeds $18bn, up from just $5bn a decade before (see charts).
The importance of America’s government for consulting revenue varies across these firms. Booz Allen Hamilton, which parted ways with its private-sector consulting business in 2008, is nearly entirely reliant on the public sector. McKinsey, whose work for the federal goverment slowed after its association with opioid manufacturers tarnished its reputation, makes less than 1% of its global revenue from federal contracts. Across the firms we examined, though, the federal government accounted for about 8% of total revenue last year. There is no bigger single client.
Some contracts are enormous. EY has made nearly $70m since 2020 supporting a reform plan at the Department of Housing and Urban Development. BCG has been allocated $380m since 2022 by the Defence Health Agency, which provides medical care to the armed forces, as part of an initiative called “Workforce 3.0”. Accenture has received $700m from the Department of Education since 2019 to build and manage a website, mobile app and virtual assistant for student aid....
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