Since the beginning of the Trump administration’s crusade to remake federal contracting, many political leaders consistently signaled their dim view of industry and their similarly perceived value of what they considered “consulting contracts.”
“The model has been very adversarial,” said one senior executive from one of the first 10 consulting companies targeted for review by the General Services Administration in February. “The first letter was like, ‘bring me a rock.’ And they leaked the letter to the Financial Times before we had even seen it.”
The executive, who like many sources in this story requested anonymity for fear of retribution by administration leaders, said the initial letter back in February asked for a lot of information, provided no real instructions, and the PowerPoint template GSA provided conflicted with the letter.
The early days of this consulting review effort, which on the surface few disagreed with and some companies even welcomed, by many accounts was sloppy and haphazard. It also failed to live up to the well-earned reputation GSA has long strove to establish as a collaborator with its agency and industry partners.
Five months into the contracts review, vendors and industry observers say while anxiety levels may be lower as they have adjusted to the “new normal,” many are waiting for GSA to act on the data and ideas they provided and re-establish the partnership environment that political leaders and the U.S. Department of Government Efficiency Service tore apart.
“Companies definitely are on alert. But a lot of these DOGE-style reviews are now being driven at the agency level — and being driven, for example, by the Defense secretary,” said one industry observer who works closely with federal contractors. “It’s amazing how quickly people adapt to the new environment. But people are waiting to see where this is all going. After the initial round of cuts, a lot of us assume more spending cuts are coming. But companies also want to see what positive changes the administration wants to pursue. That isn’t clear and industry would feel a lot better if they had some sense for that.”
The first letter to agencies identifying the initial 10 companies caused quite a stir back in February when GSA asked agencies for a list of contracts with these vendors they would terminate or justify keeping in place.
It was clear at the time, and maybe still is, that the Trump administration’s goals lack clarity. While laudable in many regards, the initiative remains scant on specific outcomes beyond “cutting costs” or obtaining some sort of “rebate” due to what the administration saw as overcharges.
Value misunderstood?
Industry experts say the lack of understanding of what “consultant companies” do or the value they bring to the agencies continues to be one of the most frustrating and damaging aspects of the initiative several months into the effort.
To help understand the early gulf between the Trump administration’s hypothesis and the reality of the value of so-called consulting contracts, SAIC CEO Toni Townes-Whitley shared a particularly illustrative example.
SAIC, which also was one of the first 10 “consultant” contractors to come under GSA’s scrutiny, reached out to one of its military customers about a program it was supporting when the analysis began.
“I was talking to a two-star general, and just letting them know, ‘Hey, this contract is being reviewed.’ This very tough, hardened major general came back to me and said, ‘Do they know what we do? Should I call? Do you want me to pick [up the phone]?’” Townes-Whitley said during a recent webinar sponsored by the Baroni Center for Government Contracting at the George Mason University. “It was super clear to her the role that we were playing. [She was saying,] ‘let me just clarify that. Let’s engage. I don’t want to see any change in [my] continuity of service.’ We know what value we add.”
Townes-Whitley’s anecdote is a microcosm of the bigger issues with the administration’s approach to this cost-cutting initiative focused on consulting contracts.
“If GSA wants you to review and look for areas to operate more efficiently, then there needs to be an intentional and purposeful effort,” said another industry consultant. “The thing that is tough is vendors are large, and the requests are coming through asking for information on large and complex programs, and they are given only a few weeks to respond.”
Many vendors believe GSA is asking the right questions, but to the wrong people. Agencies awarded these contracts through a competitive process and for specific needs. It’s the agencies, not the companies, who are in the best position to decide if a contract is critical or not.
“What’s interesting in this approach is we are not able to make a contract outcome-based without the customer,” said the second industry executive, whose company also was in the initial “top 10” review list. “It feels a little bit like we are being put on the opposite side of the table with our clients, which can be damaging for relationships.”
The most recent set of letters to six consulting contractors, issued June 26, also are leaving some experts with more questions than answers. Of the six companies — AlixPartners, McKinsey & Company, Ernst & Young, Alvarez & Marsal Federal, Boston Consulting Group and FTI Consulting — several do small amounts of contracting.
For example, McKinsey & Company received about $14 million in federal contracts over the last three years through their GSA schedule and received only 28 total contracts from other agencies in fiscal 2024, according to USASpending.gov. Those contracts, all together, were worth about $63 million. GSA terminated McKinsey’s schedule contract in 2020, but the agency allowed them back on the schedule last September.
Alvarez & Marsal Federal won about $3.5 million through their schedule since 2024. According to USASpending.gov, the company won its first new award outside of the schedule since 2008 just this fiscal year, worth $119,000.
Changes to contracts to increase costs
Industry consultants say GSA has become smarter in the questions and data requests in its third round of consultant company reviews.
But in the beginning, industry sources also say it was clear Federal Acquisition Service Commissioner Josh Gruenbaum, who is leading the consulting review effort, faced a learning curve in the nuances of the federal procurement market, how the companies work within it and how it’s much different than the private sector where he spent his career.
Gruenbaum’s first set of letters asking vendors to suggest contracts to cancel, requesting “credits” or for them to cut their prices, illustrated some lack of understanding. His aggressive tone, which is rarely seen outside of the most heated bid protests, without a doubt struck more than one nerve across the community.
“At the end of the day, we participated in federally run procurement activities. The vast majority of our contracts were competed in full and open competitions, often with a large number of competitors. If I out-performed the market in any given year, it’s because we had a more creative or better solution. The government shouldn’t deserve a credit because of that. It didn’t feel like that was an appropriate request,” said the first executive. “And no one grows at 20% Compound Annual Growth Rate unless you do a really large acquisition. Over multiple years, maybe you could grow that big, but the compound growth rate is never that level in federal. GSA’s math just doesn’t work, even if you out-performed the market.”
GSA claimed in one of its letters that companies’ CAGR was way out of line with industry standards and the companies were profiting too much off the government.
Additionally, vendors say GSA’s desire to limit the length of the contracts to three years and compel the use of firm fixed-price contract types would all but guarantee agencies will pay more for services. The executives say if vendors are assuming more risk of a project for a shorter amount of time, then they will offset that with higher prices.
Experts say vendors were put in a tough spot and, as one industry principal described it, the administration is trying to “shake them down.”
Gruenbaum demanded meetings with the CEOs of the companies, seemingly not realizing many of the executives of these multi-billion dollar global companies have only limited understanding of their federal business. While the government may spend hundreds of millions or even billions of dollars with any one company, for many of these “consulting companies,” their federal business represents a fraction of their overall global revenue.
GSA launched the scrutiny by sending letters to either the CEOs themselves or to general email boxes, despite GSA having specific contacts for each company in its database. Many of the vendors said they were unaware of GSA’s requests until news outlets began reporting about the letters.
GSA declined to respond to 10 detailed questions from Federal News Network about the FAS consulting review initiative or about specific criticisms of Gruenbaum’s and GSA’s overall approach.
Instead, a GSA spokesperson said in response to the request for comment, “GSA is proud to lead the administration’s efforts, in close coordination with our agency partners, to reduce our unsustainable spend on consultants and transform how these contracts are structured to provide better accountability, services and value. We look forward to continuing this vital work, which has already resulted in more than 2,800 consulting contract terminations valued at $23.2 billion in ceiling value and $10 billion in savings.”
Discussions with GSA have ‘turned the corner’
Over the last few months, the executives said subsequent meetings with Gruenbaum and his team were mostly friendly and constructive.
“There was definitely more of a ‘yeah, we get there are some challenges based on what the government created, but we are here to break it all down and rebuild it’ tone,” said the second industry executive. “It was not a tone of ‘you’re dumb and we’re smart.’ We have experienced that in other places, but not with Josh. He’s been responsive and he understands why we can’t do something and offered other ways to meet GSA’s goals.”
Townes-Whitely said at the recent Baroni Center event that her conversations with Gruenbaum have “turned the corner” most recently, going from a lot of back and forth to understand what work SAIC was doing for the government to identifying opportunities for efficiencies.
She said the discussions now focus on “new ideas for consolidation, for shifting to [a different] contract type, [to] new ways to bring [in] commercial technology. The messages have landed.”
Still, the initiative’s early tone and chaotic start caused repercussions throughout the government.
While GSA said this was a governmentwide effort to reduce reliance on these types of contracts, vendor sources say their agency customers rarely were aware of what was happening.
Executives at several companies say their agency customers either weren’t familiar with the review effort or had a very limited understanding of what GSA was seeking to do.
“We are being asked to bring up sacrificial lambs to the altar, and there is no reason why it should be that way,” said the first executive. “We received a mixed bag of reactions from our government clients. They don’t want us making suggestions for what to cut. But this puts us in a tough position because our clients don’t think we should be defining the scope. They are asking us why we are being asked to do this, and telling us please don’t do anything. Our response is GSA asked us to include every contract so what do we do?”
While GSA did talk to agency senior procurement executives and other acquisition leaders to “defend the spend” with the initial 10 consultant contractors, the executive said their clients were asked to submit a 1-2 sentence justification for why the contract should continue.
“We know our clients submitted it, and maybe GSA is treating it as clients’ input, but asking us to reduce scope or consolidate contracts is much different. It doesn’t appear that GSA communicated that goal to the agencies, or at least we haven’t seen outcomes of that,” the executive said. “We’ve had clients ask us ‘tell us what you submitted to GSA’ because we don’t know, and that includes some clients inside the walls of GSA.”
Fallout from being on GSA’s list
The executive said GSA caused additional stress and confusion by naming an initial 10 companies without fully explaining that the agency plans on pursuing this effort in waves.
“There’s been a negative impact. Agencies were afraid to award anything to us. They were saying they don’t want to award to anyone in top 10 right now,” the second executive said. “We had one where we had gotten a verbal confirmation of award, but after the list came out, the agency told us they can’t make the award now and made a different decision. They ended up cancelling the contract altogether. While we haven’t seen option periods not being picked up, we are getting questions about what things we can do to drive down costs.”
The first executive added there definitely is a stigma attached to being on the top 10 list, including being called into one agency to discuss their contracts only because they were on the top 10.
“We’ve been asked about it by our clients. They want to know things like, ‘can I buy from you? What are the implications?’” the source said. “I don’t know if I’ve seen a direct tie between being in the top 10 and not getting awards, but there is definitely more scrutiny and questions.”
That stigma today remains strong as agencies are hesitant to make awards for certain professional services, and when they do, no one wants to publicize them.
Five months into the consulting consolidation initiative, the results of the data collection and discussions are difficult to fully nail down. GSA said they or agencies have cancelled more than 2,800 contracts, but there is no transparency or understanding of the specifics of the terminations and how much money GSA really saved.
A more softened tone
Vendors say, however, GSA’s tone has softened and is more willing to listen to suggestions or ideas.
In the most recent letter to the six consulting firms, Gruenbaum acknowledged the need for partnership, and set clearer expectations: “We expect transparent, comprehensive responses that include significant cost reductions and taxpayer-friendly pricing adjustments.”
The second industry executive said they too have seen GSA engaging in more constructive conversations on several ideas that they submitted.
“The engagement has been positive,” the executive said. “But we are eager to move more quickly into the actual ‘build phase.’ We think and hope things are turning a corner, but would like to move faster into the work that would create meaningful savings and value for the government.”
Townes-Whitely said SAIC also is waiting on GSA and other customers’ responses to ideas for improvements.
“Many of us in this industrial base, we see where there are opportunities to tighten, to streamline and to introduce more technology. We’ve taken the kind of the back foot to front foot approach,” she said. “I think the team is up to about 100 white papers across the government that we have offered up new ways to do business, and that, I think, is a great energy that’s come from this exercise.”
At the same time, industry experts say GSA created the “fire drill” for data and information about consulting contracts and now their lack of action is just as frustrating.
The first executive said their company also sent GSA a lot of information and ideas and it’s gone into a bit of a “black hole.”
“We are open to doing more outcome based contracts. We welcome opportunities to do more creative approaches. But the characteristics of government buying doesn’t always line up with that model,” the source said. “We put together some pretty innovative ideas to leverage technology, to consolidate contracts and to use shared services. If we can pivot from these nicks and cuts, we will be able to drive much more material impact for the government. We are hopeful we can make that pivot soon.”
The pivot the executive is talking about has to come sooner than later, industry experts say.
The first industry consultant said there is a feeling among contractors that GSA has a lot of unfinished business to take care of.
“They’ve been through multiple rounds and meetings with company leaders. It does feel like for some of those firms, they are waiting for the government to come back to take us up on ideas or not,” the consultant said. “It’s one thing to cancel a contract or not pick up an option, but in terms of having ideas to improve or change things, people are waiting on the government to do something. It feels like there are a bit of loose ends. The government needs to close out on these things and they need to do it by the end of the fiscal year at least. It’s easy to say the government moves slowly, but it’s not a message they want to put out there.”
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