The General Services Administration is making a second, more direct push to strongly encourage agencies to cut “nonessential” consulting contracts by March 7. And this time, it’s telling agencies to target contractors they believe agencies are spending the most with.
“Based on available procurement data, we have identified the 10 highest paid consulting firms listed below are set to receive over $65 billion in fees in 2025 and future years. This needs to, and must, change,” wrote Stephen Ehikian, acting GSA administrator, in the letter to agency senior procurement executives, which Federal News Network obtained. “By March 7, please provide us with a list of the contracts with these firms that your agency intends to terminate and those that it intends to maintain. For any contracts between these firms and your agency that will continue, please provide a signed statement from a senior official verifying that such contract is mission critical and provides substantive technical support.”
The 10 firms GSA is focused on include:
- Accenture Federal Services
- Booz Allen Hamilton
- CGI Federal
- Deloitte Consulting
- General Dynamics IT
- Guidehouse
- HII Mission Technologies
- IBM
- Leidos
- SAIC
This new memo follows one from Feb. 6 that initially asked agencies to review a list of contracts GSA identified as “nonessential consulting” and then complete a survey indicating whether the agency plans on terminating them.
DoD, VA getting started
Ehikian said in this latest memo that agencies haven’t taken enough action and they should review the contracts again given the size and scope of the spend.
Emails to each of the companies seeking comment were not immediately returned or some declined to comment altogether, except for IBM.
“For decades, IBM has been advocating the use of technology to help U.S. federal agencies streamline operations, increase efficiency and deliver better return on taxpayer dollars,” a company spokeswoman said in an email. “Today, IBM supports the modernization and delivery of mission critical federal services and systems, from processing veteran health claims more quickly, to enabling a more efficient digital taxpayer experience. We are proud of this and our additional work across the U.S. government and are committed to helping agencies become more efficient and deliver even more for the American people.”
While GSA wants agencies to move faster, at least two big spenders are just getting started. The Defense Department issued a memo on Feb. 18 asking for military services and defense agencies to begin a phased review of “nonessential” consulting contracts, starting first with GSA awarded deals.
The Veterans Affairs Department initially canceled 875 contracts earlier this week that it said would save $2 billion, before pausing that effort when it realized the move would hurt critical veterans’ health services.
DoD says the first review focused on GSA is due by March 19.
“Components shall take action to terminate, descope or forego exercising options for requirements determined to be nonessential as a result of this review,” wrote Steven Morani, who is performing the duties of the under secretary of defense for acquisition and sustainment. “For contracts or elements thereof deemed as essential, components shall provide a short justification to continue the service, as endorsed by a general officer/Senior Executive Service member who represents the requirement is valid.”
Phase 2 will review and validate the remaining non-GSA consulting service contracts. That data is due by April 19.
“GSA has taken immediate action to fully implement all current executive orders and is committed to taking action to implement any new executive orders. GSA values partnership with other federal agencies and looks forward to working collaboratively to achieve shared goals,” said a GSA spokesman in an email to Federal News Network.
The spokesman referred other questions about which contracts, including which NAICS codes, are impacted to the specific agencies and declined to further define what “nonessential” really means beyond how GSA defined it back on Feb. 6 as contracts that “merely generates a report, research, coaching, or an artifact.”
More thoughtful approach needed
Former federal contracting experts say GSA’s definition is part of the problem with this exercise. The experts, who spoke on the condition of anonymity because of fear of retaliation, said the idea to reduce consultant contracts, or even all contracts, more specifically, isn’t necessarily a bad one. But it has to be done through a thoughtful exercise, not haphazardly, which seems to be the case.
“Anything could be considered a consulting contract and while they did attempt to define it as something that generates a report or doesn’t do actual delivery, it’s important to understand that a significant portion of the government’s core mission is oversight, audits and analysis. This work is not often times in any way wasteful. It’s important work that drives decisions the government needs to make to deliver for public,” said a former GSA official. “While one could debate whether some of this work is necessary or nice to have, a lot more of a thoughtful approach is needed about work that if eliminated doesn’t lead to gaps in government understanding, decision making and ultimately delivery of services to people.”
Stephanie Kostro, the executive vice president for policy at the Professional Services Council, said during an interview with the Federal Drive with Tom Temin that the lack of clarity of the consulting contracts to focus on is a big problem for agencies and vendors alike.
“It’s important to know how the department is going to define consulting services. There are particular NAICS codes here that align to consulting. There is a definition within the FAR regarding consultant services. But we also know that in recent weeks, contracting officers have been doing keyword searches and so we’re not entirely sure what the processes by which somebody can determine whether it’s something as a consulting contract,” she said. “Are they going by NAICS code? By the FAR definition? Or are they doing a keyword search? That kind of process will be very helpful for contractors to know, mostly because if their program is deemed essential by the component head, we’d like to help support with justification materials. So how they are defining things is really important to that end.”
Spending on services increases
The amount of federal spending on services has steadily increased over the last two decades. The Government Accountability Office said in fiscal 2023 agencies spent $478 billion on services and $281 billion on products.
Of that $478 billion, DoD accounted for $230 billion, including $21.3 billion on support, professional and engineering/technical services.
Civilian, or non-defense agencies, spent about the same, which were $21.4 billion on professional services.
Trevor Skelly, the president of Strategic Growth Partners and a former federal contracting officer, said agencies already are supposed to review service contracts annually and determine if they are still necessary and whether the agency should pick up the option.
“I’m not sure if this is some sort of scare tactic or if administration got a hold of Services Contract Act reporting data and saw the total labor hours and spending,” Skelly said. “I don’t know the exact statistics, but on a services contract, unless there are significant performance issues, the chance of the options not getting picked up are small. They are pretty much a five-year service contract.”
Skelly and other experts were also surprised by the initial focus of DoD on GSA contracts.
“This is short-term thinking to call out only GSA contracts. If your true goal is a more streamlined way for the government to operate, then you need a wholistic view of the market,” the former GSA official said. “While GSA provides multiple contracts, why not look at direct awards and other contract vehicles? If it turns out most of the awards fall into GSA vehicles, then we need to look at that. But many DoD agencies also purchase against NASA SEWP or NITAAC’s CIO-SP3 vehicles. Why not look at those sources as part of a wholistic review?”
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