Update: On April 22, news broke that 7 of the top 10 consulting firms that serve the federal government had identified $20B in additional cuts. These cuts are primarily based on two factors: A shift to a performance-based vs hourly consulting model, and a reduction in what consulting firms charge the government for staff.
"This is undoubtedly good news for the U.S. taxpayer, but has important implications for anyone considering a career at major public sector consulting firms," MC COO Namaan Mian said.
"- Hiring will be depressed
- Salaries will stagnate
- Bench time will be reduced or eliminated
More fundamentally, the public sector consulting model is shifting from a billable hours to performance-based model. In the long run, this may bring the public sector consulting experience more in line with the commercial consulting experience."
April 1: Large consulting firms that rely on U.S. federal government contracts are under the microscope. After a recent review, the General Services Administration (GSA) has identified at least $1.5B in cuts that it will make to existing consulting contracts.
In terms of revenue lost, Guidehouse was hit the hardest, with Deloitte coming in a close second. However, Deloitte lost the most number of contracts, which tells us something about the average price per engagement that these firms are charging, as well as the types of work they're undertaking.
According to reporting, Deloitte has lost contracts across the federal government as the administration continues to root out what it deems as excessive and wasteful spending. Here is a breakdown of how much revenue major consulting firms may lose.
In a major shift, consulting firms are offering to cut back additional contracts, forgo price changes, and shift to performance-based compensation. As the Financial Times reported, firms are also taking this opportunity to give the government cost savings ideas that will hurt their competitors.
What's next? The government has indicated that after it completes its review of the 10 consulting firms who make up the bulk of federal consulting spend, it will begin a review of smaller consulting firms.
If you're working in public sector consulting, this may be the right time to start examining your exit opportunities. The Trump Administration seems to be achieving its goal of reallocating human capital away from the public sector and into the private sector, where it is more likely to be optimally / more efficiently allocated.
And if you're looking to break into management consulting, use our personalized Black Belt program to break into commercial consulting practices, which are booming.