2009 Feb Center on Policy Initiatives The Government Consulting Industry
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The Government Consulting Industry: A Landscape Map

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Over the past several years the debate over the proper role of government has shifted dramatically. Beginning with the 2005 defeat of the Bush administration‘s effort to privatize social security, and with a steady drumbeat of private contracting and outsourcing scandals at all levels of government, the twenty year ideological campaign of the conservative movement to shrink government “down to the size where we can drown it in the bathtub” has begun to come apart at the seams.

Perhaps the most glaring example of paradigmatic failure is that had the agenda of the right wing think tanks and Wall Street operators to shift the social security trust fund into the stock and financial derivatives markets succeeded, the retirement security system would have been devastated. Formerly mainstream approaches that had been struggling on the margins for decades, from Keynesian demand management to industrial policy to countercyclical public works expenditures now command bipartisan support.

The onset of a global financial crisis and the inauguration of the Obama administration, which has committed itself to a program of active government, has also transformed the ideological and policy landscape around privatization and government contracting.

Nevertheless, the debate on the role, size and management of government has changed in important ways over the past two decades. The “business model of government” has taken deep root, and pressure for the privatization of government assets, procurement practices and services has migrated beyond a few fringe think tanks such as the Reason Foundation, Cato Institute, Heritage Foundation and American Legislative Exchange Council (ALEC).

It is now driven largely by the “public sector practice” divisions of mega-consulting firms such as Accenture, BearingPoint, Boston Consulting, Carlyle, Capgemini, Deloitte, Goldman Sachs, Grant Thornton, McKinsey and PricewaterhouseCoopers (PwC). The language of privatization has also evolved, with the much more seductive concept of “public private partnerships” (PPPs or P3s) used much more frequently.

Public-private partnerships are contractual arrangements between private sector entities and government agencies that permit more private sector involvement in infrastructure projects (such as roads, water delivery, waste disposal, etc.) and services (such as information technology and social services delivery).

The large consulting and project financing firms, and a raft of smaller companies in the privatization and contracting industry, have moved in to take over public assets and services on an unprecedented scale. Through their management consulting practices, they have also changed the face of decision-making within the federal, state and local governments, enabling them increasingly to drive the agenda of public services.

Consultants now often have better access, deeper institutional knowledge and, due to the high rate of turnover among public sector personnel, longer tenure. “They know our business better than us,” one Pennsylvania state worker, who requested anonymity for job security reasons, told the Harrisburg Patriot News. “It gives them a distinct competitive advantage.”

This has enabled the large consulting companies to create a durable cash stream while downsizing not just state and municipal services, but the political scope of decisionmaking. What follows is a brief landscape map of the key players in this global industry.