Cutting Government Is Easy... If You Go After McKinsey

Elon Musk engineered a panic over government spending, thwarting major PBM reform and bans on junk fees.

But cutting government spending is easy, if you take on power.
💥And therein lies the rub.

There are plenty of studies showing massive government waste,
but it’s not in the Federal workforce.

It’s in procurement, the place where the government buys from the private sector,
everything from pencils to software to nuclear submarines.

The government spends about $750 billion a year on contracts.
How much of this money is wasted?

It turns out, the answer is a lot.

The Organization for Economic Co-operation and Development (OECD) points out that about a fifth of it is stolen by contractors through bid rigging,
the so-called “Collusion tax.”

Collusion is when contractors get together in groups and conspire on their bids so that the government overpays for goods and services.

According to the OECD, “The elimination of bid rigging could help reduce procurement prices by 20% or more.”

If you take $750 billion, just in Federal procurement spending, that’s $150 billion a year of pure overpayment, due to this one form of crime.

There are other boring reports saying something similar. Earlier this year, for instance the Government Accountability Office published a report on fraud,
showing the government loses between $233 billion to $521 billion on fraud.

That’s a lot of money.

There are plenty of ways to get at it,
two of them being to increase penalties against fraud and collusion,
and shift law enforcement resources from silly things like disinformation monitoring to investigating contractor fraud.

I don’t think that’ll happen,
the Republicans and Donald Trump are dead set on defunding the tax cops,
aka the IRS,
and that’s a key agency in taking on this kind of fraud.
But they could.

Still, there’s an even easier approach to taking on the problem.

💥Go after McKinsey and management consultants throughout the Federal government.

Why take on management consultants?❓

Well, for starters, the government spends far too much on people giving it advice.

In it's 2024 budget, the Biden administration requested $70 billion for management consulting,
aka “professional services,”
which is 5% of all discretionary spending.

The Defense Department alone asked for $32.9 billion.

So just cutting all management consulting would be a big chunk of savings.

🔥But it goes beyond just the raw spend on consultants, to how consultants misdirect other monies.

An important study in 2023 on what it costs to resurface roads at a state level
- a very simply and standard need everywhere
- showed why procurement waste in America is so persistent.

A key reason is consultant bloat.

It turns out, when you hire government employees for long-term planning,
costs go down,
-- but when you use third party consultants, they go up.

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