Summarize this content to 2000 words in 6 paragraphs in Arabic Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldConsulting firms have long thrived on the inefficiencies of the public sector. In the US, they are called in to help the government perform all kinds of functions, from beefing up cyber security for the Department of Homeland Security to streamlining the websites used by student borrowers. Between 2019 and 2023, Uncle Sam paid $500bn in consultancy fees.But the consultancy industry now faces a reckoning. A chainsaw-wielding Elon Musk and his so-called Department of Government Efficiency (Doge) have pledged to cut $1tn out of the federal budget. The slash-and-burn approach has already resulted in thousands of federal lay-offs. Management consulting contracts may be next on the chopping block.The General Services Administration, which manages procurement for the US government, has reportedly asked all federal agencies to list and justify consulting contracts from 10 companies by the end of this week. Among Big Consultants, Booz Allen Hamilton looks the most exposed. The company, which split from its private sector consulting arm in 2008, generates nearly all of its revenue from the public sector. This has more than doubled over the past decade to $11bn in its last fiscal year. Its shares are down 43 per cent since the election of Donald Trump in November. At Leidos Holdings, where US government contracts accounted for about 87 per cent of total revenue last year, shares have fallen over a third. Size has offered little succour from the Doge-induced anxiety. Consultancy giant Accenture, which gets about 8 per cent of its revenue from the US government, according to analysts at Mizuho Securities, has lost about 14 per cent of its market value over the past month.Not all government contracts are equally vulnerable. Those that the GSA is reportedly looking to cull are so-called Oasis contracts that cover professional services such as management and consulting, engineering, logistics and financial services.This means companies that focus on technology-centric services such as cyber security or artificial intelligence should be less affected. Palantir Technologies — the AI-powered data analytics firm co-founded and chaired by Peter Thiel, a longtime Musk associate — may be a case in point. Palantir specialises in defence, and got 42 per cent of its revenue from the US government last year. The stock has doubled since November, despite a recent sell-off.Consulting firms, of course, would generally argue that their whole purpose is to help clients save money over time. How to verify this is a debate as old as the industry itself. Perhaps those that can prove they are an additive to Musk’s efficiency drive can avoid the axe. And if that sounds like a management challenge, at least they know where to turn for advice. pan.yuk@ft.com
