McKinsey bills the US government $3m a year for anodyne advice from 23-year-old college grads

McKinsey made more than $20m helping ICE design its gulags, advising them to skimp on medical care, food and supervision in a cost-savings measure. But if Uncle Sugar really wants to save some money, it should fire McKinsey, which is by far the most expensive consultancy with a US government contract.

Ordinary beltway bandits like the Boston Consulting Group charge $33,063.75/week for consulting from just-hired, recent college grads. But McKinsey bills out the same kind of consulting at $56,707/week ($2,948,764/year).

As Matt Stoller (previously) writes, the one thing McKinsey is really good at is figuring out how to bill its government clients at rates that vastly exceed the caps set by law and policy, which is how they've grossed $956.2m in US government contracts from 2006 until now, a figure so high that the General Services Administrations Inspector General recommended that all McKinsey contracts with the US government should be canceled (they weren't) (yet).

Stoller explains how McKinsey used its insider contacts to overrule GSA managers who refused McKinsey's requests for a 10-14% hike on its IT services, finding a GSA Division Director who would lie to the inspector general, "manipulate pricing data, break rules on sole source contracting, and pitch various other government agencies, like the National Oceanic and Atmospheric Administration, to buy McKinsey services" (that director was quoted as saying, "My only interest is helping out my contractor").

The reason that federal officials are happy to see McKinsey gouge all of us is that their departmental budgets are partly set through the Industrial Funding Fee, a Clinton initiative that was supposed to encourage "entrepreneurship" in federal contracting by awarding the GSA 75% of the funds it spent on contractors as a bonus to its budget (this has led to widespread collusion between GSA officials and contractors to raise prices). Read the rest