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Why Taxpayers Pay McKinsey $3M a Year for a Recent College Graduate Contractor

mattstoller.substack.com

221–230 of 328 posts

Re: Why Taxpayers Pay McKinsey $3M a Year for a Recent College Graduate Contractor

#221
Ugh...

I work at a much, much smaller niche-focused management consultancy. I'm really glad we don't do this or play political cover...

but also it would be fantastic to make what they make. The perils of actually having expertise that clients need and not playing pork games, I guess.

Re: Why Taxpayers Pay McKinsey $3M a Year for a Recent College Graduate Contractor

#222
post #207

Earlier quoted context omitted.

As a consultant I like to flip this situation around, and let the internal staff who are already advocating for the direction I feel is best to be my biggest cheerleaders. Engage them early, let them know you're there to help them personally, and they'll help you do a better job when presenting your shared ideas to the brass.

Meta, but this comment reads exactly like it was written by a consultant.

They literally wrote "As a consultant..."

Re: Why Taxpayers Pay McKinsey $3M a Year for a Recent College Graduate Contractor

#223

Earlier quoted context omitted.

It's exactly this. Within any organization, you can have 3 or 6 important people pushing in completely different strategic directions. And it can be clear to any unbiased observer that there's only one good, responsible choice, but within your org that gets met with essentially "but that's just your opinion , man". So you call in a consulting firm and they deliver what most of the people already know. The consultants…

I know y’all want to repeat the whole thing about consultants we've all heard before, which sure, is “exactly this”, but the article goes much deeper, and is specific to the government. Here, consultants are ripping off taxpayers because a Clinton-era rule financially incentivized the government to outsource work to “entrepreneurs”. This department is literally given a percentage of the money it gives to consultants.

GSA gets a cut of contract purchases that go through them but this makes sense because it incentivized them to be better alternatives than an agency’s own contract shops. Typically working through a GSA schedule like this can lead to faster turnaround and lower prices - nobody can charge the government more than their best commercial customer, legally, under this framework. If you don’t get value, put your own RFP on the street.

The incentive to get more dollars if you get more under management as a contract-service-provider does make sense. They’re not a monopoly on procurement in government, despite the author writing a book about monopolies.

Note: in some cases they have monopolies on some things in government, but not procurement.

Re: Why Taxpayers Pay McKinsey $3M a Year for a Recent College Graduate Contractor

#224

Earlier quoted context omitted.

Wouldn't one enjoy some benefits from being proven right?

I've been in this position. The feeling of satisfaction wears off in a few minutes. My resume was updated later that week and I was on to the next adventure within two months. And this was with a DR who stuck up for me and mentioned to the CEO directly that we paid a consultancy big bucks to tell us something a chorus of engineering team members have been saying for years.

Their loss. Your new employer's gain.

Re: Why Taxpayers Pay McKinsey $3M a Year for a Recent College Graduate Contractor

#225

Earlier quoted context omitted.

Other countries have solved this issue simply by automatically forcing an election if a budget is not passed. Their representative are somehow able to overcome ideological differences and pass legislation once their jobs are on the line.

That doesn’t solve the problem because the idea here is that some laws should sunset, some shouldn’t. When a civil rights law sunsets, lots of bad can happen in a short period of time. I’m using the example of the government unable to agree on a budget as an analogy. What happens when we can’t agree on how to renew the Civil Rights Act and it sunsets for a period of time?

If the civil rights act requires over 1/2 votes to extend it and it doesn't gather that much support, maybe it should sunset. The budget votes are different because they require 2/3 of the votes which is what allows the minority party to block it from passing.

Re: Why Taxpayers Pay McKinsey $3M a Year for a Recent College Graduate Contractor

#227
post #216

Earlier quoted context omitted.

This is reading more and more like you're begging the question. One of the sibling replies that predates this comment by a quarter of an hour already addresses your specific missing connecting dot here. Not to mention the article itself, which is also well cited. It's good. I suggest you read it. Interrogating my two sentence oversimplification of the forest is not a useful way to learn about this.

I get the impression some of the commenters don't really have experience with government contracts on either the public or private side. The IG report points out real problems, but I think people are extrapolating too far because they don't truly understand how contracts are awarded via the GSA schedule. I think people are confusing being awarded a listing on a GSA schedule with an actual order. Being on the GSA sche…

I get the impression you're over-simplifying this and grasping for whatever assumption you need just to try to make your point.

While some of us have run with my oversimplification, there are plenty of comments in this sub-thread about down-selecting. Your answer to that is a giant assumption on what the article (which again is rigorously sourced) 'implies'.

> The article also implies other contractors are also listed, although they don't get similar preferential price treatment.

In fact, the IG report[0] that is cited in the selection of the article I replied with has nothing to do with McKinsey, but a different contractor altogether. Reading comprehension is your friend here: "In 2013, the GSA Inspector General traced a similar situation with different contractors."

Agencies aren't necessarily selecting the more expensive item. As you point out, in most cases they have a mandate not to. They're awarding the bid to an already-short list designed to generate the highest IFF possible for the GSA.

Which is what the article's about.

[0]https://www.gsaig.gov/sites/default/files/audit-reports/A120...

Re: Why Taxpayers Pay McKinsey $3M a Year for a Recent College Graduate Contractor

#228

Earlier quoted context omitted.

I know y’all want to repeat the whole thing about consultants we've all heard before, which sure, is “exactly this”, but the article goes much deeper, and is specific to the government. Here, consultants are ripping off taxpayers because a Clinton-era rule financially incentivized the government to outsource work to “entrepreneurs”. This department is literally given a percentage of the money it gives to consultants.

Isn't this the definition of a kickback?

A kickback is when you personally get reimbursed for your decision, which isn’t the case here. A government office is being funded by a fee on services rendered.

Re: Why Taxpayers Pay McKinsey $3M a Year for a Recent College Graduate Contractor

#229

Earlier quoted context omitted.

Right up until you realize the 23 year old snot who made the recommendation billed ~$3 million against your ~$100k salary.

If you look at entry-level consultant salaries at McKinsey and then divide by the fact that they're often working 7-day, 100-hour workweeks... you'll quickly discover that your "23 year old snot" is actually making around minimum wage on an hourly basis. They could be flipping burgers instead with a lot less stress. The consultants aren't the ones taking the money home, the firm is. So don't blame the 23 year old. He…

100 hours a week at federal minimum wage is less than $38k. These people are not making anything remotely close to minimum wage.

Re: Why Taxpayers Pay McKinsey $3M a Year for a Recent College Graduate Contractor

#230
post #200

Sort of a buried lede here. There's nothing shocking about overpriced, underdelivering consultants. But the bit about how the GSA is essentially profit sharing with said overpriced consultants at the expense of the rest of the government and taxpayers, via the IFF incentive structure, is pretty mind blowing. Another brilliant financial "innovation" by the Clinton Administration that's been quietly burning billions of…

It is not only a US pattern, go to every major European capital and the consultancies will be located right next to the ministries.
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