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This entirely misses the forest for the trees. And granted the author's bias gets in the way of his attempt to point out that forest. Their bias aligns with min

This entirely misses the forest for the trees. And granted the author's bias gets in the way of his attempt to point out that forest. Their bias aligns with mine, but with less editorialization IMO the following would be more clear: It's not that the work is or isn't valuable, or where that value is. It's that McKinsey charges 72% more than a competitor for the same consulting, and that there's a massive perverse incentive for public servants in charge of awarding contracts to pick the most expensive one. From the article, bias left in: Back in August, I noted that McKinsey’s competitor, the Boston Consulting Group, charges the government $33,063.75/week for the time of a recent college grad to work as a contractor. Not to be outdone, McKinsey’s pricing is much much higher, with one McKinsey “business analyst” - someone with an undergraduate degree and no experience - lent to the government priced out at $56,707/week, or $2,948,764/year. ... And this gets to the second reason why McKinsey can charge so much, which has to do less with McKinsey and more with an incentive to overpay more generally. It’s more likely something called the ‘Industrial Funding Fee,’ or IFF. The GSA’s Federal Acquisition Service gets a cut of whatever certain contractors spend using the GSA’s schedule, and this cut is the IFF. The IFF is priced at .75% of the total amount of a government contract. In the case of McKinsey, since 2006, “FAS has realized $7.2 million in Industrial Funding Fee revenue.” ... Does McKinsey do a good job? The answer is that it’s probably no better or worse than anyone else. I’m sure there are times when McKinsey is quite helpful, but it’s in all probability vastly overpriced for what it is, which is basically a group of smart people who know how to use powerpoint presentations and speak in soothing tones. You can just go through news clippings and find areas McKinsey did cookie cutter nonsense. For instance, McKinsey helped ruin an IT implementation for intelligence services. In the immigration story, MacDougall shows that the consulting firm encouraged ICE to give less food and medical care to detainees. That’s cruelty, not efficiency.

JoshTko 7y ago
I've seen this trend get worse on HN were top voted comment is just a response to the title and not the actual heart of the article.
- kinkrtyavimoodh 7y ago
  HN in the last 3-4 years has had the discussion quality of a mediocre subreddit (there are plenty of subreddits which are better than HN), but with an extreme air of self-importance. I sometimes wonder what the demographic looks like, since most replies betray 1) lack of actual domain expertise and 2) the humility required to recognize (1)
bumby 7y ago
> there's a massive perverse incentive for public servants in charge of awarding contracts to pick the most expensive one. I'm not quite following your logic here, could you elaborate a bit more? There's nothing prohibiting well-funded competitors from similar GSA approval, is there? My understanding is that this method is used to streamline contract awards...being listed on a GSA schedule means you've gotten a stamp of pre-approval (i.e., you've checked all the boxes to meet government contract requirements). An overly simplified example would be that an agency can go from a whole soup-to-nuts bid process that takes, say, nine months to award. Or, they could select a contractor from a GSA schedule list of contractors and have it awarded in two months. Those numbers are arbitrary, but hopefully you get the point. Agencies have a variety of reasons they may want to hurry the process along, but over-paying isn't likely one of them. Further, most government contracts go to "lowest bidder"; in order to be awarded to a higher priced contractor, they usually need to be part of a "best value" contract that is generally more difficult to justify. I could be off on this, but understanding has been that the government is almost overly incentivized to award to the lower bidder, even when the lower bidder is the riskier bet.
- Freestyler_3 7y ago
  They pick more expensive because they get a percentage. They get to ghost write their own assignment.
  - deleted 7y ago
    [deleted]
  - bumby 7y ago
    The GSA awards the contract which sets the price for the services/products. The contract just sits there until another agency decides to leverage it. (i.e., the GSA isn't spending money executing the contract or forcing other agencies to do so either). That contract isn't executed until another agency decides to use that service or product. The end-user agency benefits from a streamlined procurement process but does not receive any percentage of the contract. They are generally de-incentivized from selecting an expensive contract from the schedule, all things being equal. Contractors influencing an unfair price is still a problem, but much less so if there are other contractors offering comparable products/services at a better rate because agencies are forced to buy the expensive option. What I haven't seen is discussion or evidence that the price inflation is systemic across a schedule that would elevate this to a full-blown scandal. As stated in other replies, this doesn't appear to be nearly as outrageous as the article is interpreted in this discussion unless the GSA is inflating costs across the board. In the absence of that, end-using agencies can just select the cheaper option. What was eluded to by another comment is that the more expensive contract may be selected if it's perceived to carry other social value above competitors. (e.g., "If it's coming from the prestigous McKinsey, it must be accurate")
unreal37 7y ago
One could argue that $3 million per year for a university undergrad with no experience is not merely "72%" overpriced, but is in fact 1000%-3000% overpriced.

JoshTko 7y ago

I've seen this trend get worse on HN were top voted comment is just a response to the title and not the actual heart of the article.

kinkrtyavimoodh 7y ago
HN in the last 3-4 years has had the discussion quality of a mediocre subreddit (there are plenty of subreddits which are better than HN), but with an extreme air of self-importance. I sometimes wonder what the demographic looks like, since most replies betray 1) lack of actual domain expertise and 2) the humility required to recognize (1)

bumby 7y ago

> there's a massive perverse incentive for public servants in charge of awarding contracts to pick the most expensive one. I'm not quite following your logic here, could you elaborate a bit more? There's nothing prohibiting well-funded competitors from similar GSA approval, is there? My understanding is that this method is used to streamline contract awards...being listed on a GSA schedule means you've gotten a stamp of pre-approval (i.e., you've checked all the boxes to meet government contract requirements). An overly simplified example would be that an agency can go from a whole soup-to-nuts bid process that takes, say, nine months to award. Or, they could select a contractor from a GSA schedule list of contractors and have it awarded in two months. Those numbers are arbitrary, but hopefully you get the point. Agencies have a variety of reasons they may want to hurry the process along, but over-paying isn't likely one of them. Further, most government contracts go to "lowest bidder"; in order to be awarded to a higher priced contractor, they usually need to be part of a "best value" contract that is generally more difficult to justify. I could be off on this, but understanding has been that the government is almost overly incentivized to award to the lower bidder, even when the lower bidder is the riskier bet.

Freestyler_3 7y ago
They pick more expensive because they get a percentage. They get to ghost write their own assignment.
- deleted 7y ago
  [deleted]
- bumby 7y ago
  The GSA awards the contract which sets the price for the services/products. The contract just sits there until another agency decides to leverage it. (i.e., the GSA isn't spending money executing the contract or forcing other agencies to do so either). That contract isn't executed until another agency decides to use that service or product. The end-user agency benefits from a streamlined procurement process but does not receive any percentage of the contract. They are generally de-incentivized from selecting an expensive contract from the schedule, all things being equal. Contractors influencing an unfair price is still a problem, but much less so if there are other contractors offering comparable products/services at a better rate because agencies are forced to buy the expensive option. What I haven't seen is discussion or evidence that the price inflation is systemic across a schedule that would elevate this to a full-blown scandal. As stated in other replies, this doesn't appear to be nearly as outrageous as the article is interpreted in this discussion unless the GSA is inflating costs across the board. In the absence of that, end-using agencies can just select the cheaper option. What was eluded to by another comment is that the more expensive contract may be selected if it's perceived to carry other social value above competitors. (e.g., "If it's coming from the prestigous McKinsey, it must be accurate")

unreal37 7y ago

One could argue that $3 million per year for a university undergrad with no experience is not merely "72%" overpriced, but is in fact 1000%-3000% overpriced.