The Department of Government Efficiency (DOGE), helmed by Elon Musk, has been tasked with optimizing federal processes, cutting redundancies, and improving transparency in government operations.
Now, large consulting firms are in DOGE's crosshairs. The top 10 largest consulting firms that do business with the U.S. government have been called in to "defend the spend" this Friday. These firms represent over $65B in outstanding consulting contracts.
Whether you agree with DOGE's mission or not isn't the point - the U.S. government is the single largest consumer of consulting services in the world, and this steady revenue stream is under threat for some of the world's largest consulting firms.
The Wall Street Journal broke this news - read the original article.
Additional Resources
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Transcription:
0:06
Hello, and welcome to this special episode of Strategy Simplified.
My name is Namaan.
I'm the chief operating officer of Management Consulted, and I'm here today to unpack a breaking news story that was first broken by the Wall Street Journal this last weekend.
Now, here's the headline.
0:21
DOGE, the Department of Government Efficiency, has over $65 billion in federal consulting contracts on the chopping block.
Now, this news has major implications for top consulting firms, for the industry at large, and for job seekers who are looking for opportunities in the federal consulting space.
0:43
So what I'm going to do today is I'm going to quickly walk you through what federal consultants do, what is DOGE, what the state of play is in the market right now, what this means for consulting firms, and then finally what this means for job seekers.
1:01
So let's start from the very top.
At a high level, what do federal consultants do and what are some of the major federal consulting firms?
Well, you have firms like Booz Allen Hamilton, which by the way, generates 97% of its revenue from the US government.
1:18
Just staggering.
So you have Booz Allen Hamilton, you have firms like EY and other BIG4 firms who have large federal consulting practices.
You have firms like Guidehouse and dozens of other consulting firms who work closely with government agencies to streamline operations, reduce costs, and enhance service delivery.
1:41
That is my one sentence definition of what federal consultants do.
And I've LinkedIn the show notes to additional resources that you can take advantage of that you can read up on if you want to know more about the kind of work that public sector or federal consultants do.
1:58
But that's the high level.
They streamline, streamline operations, reduce costs, and enhance service delivery.
Now what?
It's DOGE.
Doge is the Department of Government Efficiency set up by the Trump administration and helmed by Elon Musk.
Now DOGE has been tasked with optimizing federal processes, cutting redundancies, and improving transparency in government operations.
2:22
I'm going to have another episode soon that breaks down how DOGE is operating like a consulting firm.
It's incredibly fascinating the way that DOGE has been structured, the way that it's going about its work.
Whether you agree with what DOGE is doing or not isn't really the point.
2:38
It's just a fascinating case study and how you can spin up a consulting-like organization quickly and how they're going about solving some of the things that they see as problems inside the federal government.
So I'll have another episode breaking down the organizational structure of DOGE coming really, really soon.
2:56
But again, at a high level, DOGE exists to cut redundancies, optimize processes, and improve transparency in government operations.
Now, what's the state of play?
What's happening right now in the government consulting space and why should you care?
3:14
Well, here's what's happening. 10 top federal consulting firms and their partner agencies have been asked to defend the spend before the government this Friday.
So this is something that's happening right now.
You have internal teams, you've got partners who are working on PowerPoint decks this very minute because they're walking into a meeting this Friday with leaders inside of the US federal government looking to defend the consulting contracts that they have already signed with the government.
3:49
Now the 10 highest paid consulting firms are set to receive more than $65 billion in total fees this year and in coming years.
This $65 billion is money that has yet to be spent on contracts that have been tagged as consulting services inside the government wide procurement system.
4:11
And sources told the Wall Street Journal that a part of these meetings on Friday might be the federal government coming in and asking these consulting firms to make pricing concessions on these existing contracts.
Now, what are the criteria that DOGE is going to use to determine which projects get saved and which projects get cut?
4:35
Here's the criteria #1 projects that will be saved will be those that are defined as mission critical.
So you can believe that the story that these consulting firms are working on this week before they walk into the meeting on Friday is how are they going to pitch and define as many projects as possible as being mission critical to the government?
4:56
Because that is criteria #1 for which projects will avoid the chopping block.
Criteria #2 projects that will be saved will be projects that are related to rolling out advanced technology.
So one of the mandates that DOGE has is to cut the federal workforce.
5:15
And if you are going to cut the federal workforce, then you need to have technological solutions in place to make up for the service delivery that was being carried out by human beings.
And so the goal ultimately is that you have advanced technology that can deliver as good or better service, faster and cheaper.
5:37
And so consulting firms that are working on advanced technology roll out those projects should avoid the chopping block.
Number three, and related to criteria #2 are projects that have to do with modernizing agencies.
And this goes beyond just technology.
5:54
You can modernize a problem solving approach.
You can modernize an analytical approach.
You can modernize a service delivery approach.
This includes technology, but goes beyond technology.
So projects that have to do with modernizing agencies, modernizing operations, modernizing the way that they deliver services, modernizing the criteria that they use to make decisions, those projects are also going to be prioritized moving forward.
6:22
And then 4th and finally, DOGE is looking for projects that have a demonstrable return on investment.
So consulting firms who cannot draw a Direct Line between the work that they're doing and the bottom line for the government will see those projects more than likely cut.
6:41
So to recap, you've got 10 top consulting firms, 10 of the highest paid consulting firms by the US government walking into meetings this Friday being asked to defend the work that they're doing.
And over $65 billion in unpaid work is on the line.
7:01
Now, what does this mean for consulting firms that do work with the government?
Number one, this administration often rightly sees consulting firms as producers of PowerPoint decks.
And so firms have to alter the perception of the value that they bring to the table.
7:19
And how are they doing that?
We've received early indications that firms are repositioning themselves as being on the cutting edge of modernizing the government through digital transformation.
This is language that will appeal especially to Musk and to the folks with tech backgrounds who work at doge #2.
7:41
This continues to mark a big distinction between commercial and federal consultants.
More often than not, federal consultants are like contractors.
They're not always advising on strategy.
They're in the trenches, carrying out projects like technology implementation hand in hand with the federal workforce.
8:04
So if you're interested in federal consulting, know that a lot of your work is going to be more like contractor work.
It's going to be more like staff augmentation work.
This can be interesting and exciting in its own way, but it's not the same as going to do generalist strategy work at a place like McKinsey now.
8:24
Third, I've already mentioned this, but this has big implications for the future of this space.
Reducing the size of the federal workforce does require better systems and technology.
Firms that can offer this to the government are primed to succeed during the Trump administration.
8:42
Now that's what it means for consulting firms.
What does this mean for job seekers #1 It's not a great time to be targeting roles in federal consulting practices.
There's too much uncertainty right now.
It may be better for you if you're interested long term in becoming a federal or public sector consultant.
9:01
It may be better for you to go build skills elsewhere and wait for the dust to settle.
Now, what are some alternatives for you while you're waiting for that dust to settle #1 Nonprofit and social sector consulting offer a lot of parallel parallels to public sector consulting.
9:19
So you can go work in the social sector practice at Guide House, You can go work at Bridge Span.
Those firms and those practices are hiring, from what we've been told at Management Consultant.
You can also pursue commercial consulting.
9:36
A lot of the same transferable skills that public sector practices are looking for are what you would hone in a commercial consulting practice anyway.
And it is relatively easy to transition to federal consulting from commercial consulting.
It's that backwards transition that's more challenging.
9:53
So if you're looking to go from federal consulting to commercial consulting, you can do it, but you really have to rebrand and you really have to work with someone who knows how to reshape your narrative to make that transition successfully.
But to go from commercial consulting to federal consulting, much, much easier.
10:13
So there you have it.
This week, $65 billion worth of consulting spend is potentially on the chopping block as 10 consulting firms go before the government on Friday to defend the contracts that they already have in place with the federal government.
10:31
And the implications of those meetings will be far reaching.
Some firms could be affected to a degree that we've not seen in a really long time.
Booz Allen Hamilton garners 97% of its revenue from federal consulting.
10:47
So firms that are not diversified in terms of their client base, in terms of the offerings that they bring to market could be really, really heavily impacted by the result of these meetings on Friday.
Stay tuned to Strategy Simplified, stay up to date with Management Consulted, and we'll keep you informed on what happens in the coming weeks and months as we learn more about the state of play inside of the federal consulting practices.