Trump administration asks McKinsey, BCG to justify consulting contracts

The General Services Administration on Thursday sent a letter to leaders of about a half dozen consulting companies, asking them to justify their work with the federal government and to propose cost savings, according to a person familiar with the matter and a copy of the letter reviewed by The Wall Street Journal.

“Our objective is to critically evaluate which engagements deliver genuine value," the GSA’s Josh Gruenbaum, who serves as commissioner of the Federal Acquisition Service, wrote to the firms Thursday. “In keeping with this Administration’s laser focus on fiscal responsibility, our baseline presumption is that most, if not all, of these contracted services are not core to agency missions."

The latest round of letters is part of a broad review of government spending on consultants, tech providers and other contractors working with federal agencies. The GSA helps oversee procurement across the government and is coordinating the administration-wide review to determine which tasks can be done internally by federal employees, and which must be done by outside consultants.

In addition to McKinsey and BCG, the GSA on Thursday also sent letters to EY, AlixPartners, FTI Consulting and Alvarez & Marsal, the person familiar with the effort said.

A McKinsey spokesman said the firm welcomes “the opportunity to engage with GSA to demonstrate the value we provide to our federal clients and the American taxpayer."

BCG and AlixPartners declined to comment. Representatives for EY, FTI Consulting and A&M didn’t immediately comment.

Gruenbaum is a former director at private-equity firm KKR. For months, he and his colleagues have been reviewing federal contracts and asking executives at large companies including Accenture and Deloitte to identify potential savings opportunities and work that could be terminated.

The Journal in April reported that seven of the 10 largest consulting firms to the government had offered up to $20 billion in savings by proposing to either terminate existing contracts or reduce the scope of their work within federal agencies. GSA’s review of consulting contracts so far has resulted in savings of $23.3 billion in multiyear awards, Gruenbaum wrote in his letter Thursday.

He asked the consulting firms to respond by July 11 by detailing their existing federal contracts in plain language (“no consultant gobbledygook") and explaining the pricing structure of projects. The GSA is also asking firms to move to so-called outcomes-based contracts in which federal contractors are paid based on achieving certain results.

“Submissions that fail to identify meaningful waste and spending reductions will not be considered credible," the letter said.

McKinsey appreciates “the government’s emphasis on outcome-based pricing, which is a model we often follow," the firm’s spokesman said. “As we have highlighted in our research, there is significant opportunity to improve productivity in U.S. government services, and we are eager to contribute to these efforts."

Write to Chip Cutter at chip.cutter@wsj.com