[bumby]

Thanks, what I'm not quite getting is that the other contractors are listed. What seems to get lost is that the GSA doesn't select the contractors, they just list them.

The connecting dot that's missing is why agencies choose the more expensive option when it benefits the GSA, not the agency using their schedule.

For the perverse IFF incentive structure logic to hold true, it seems like GSA would be incentivized to approve rate increases across the board. Why just McKinsey?

In other words, the GSA sets the contract but not the order. If there are cheaper contracts available in place on the GSA schedule, I would think agencies are incentivized to choose the lower bid.

edit: mistakenly stated "agencies" instead of "contractors" regarding what gets listed

[ndarwincorn]

This is reading more and more like you're begging the question. One of the sibling replies that predates this comment by a quarter of an hour already addresses your specific missing connecting dot here. Not to mention the article itself, which is also well cited.

It's good. I suggest you read it. Interrogating my two sentence oversimplification of the forest is not a useful way to learn about this.

[bumby]

I get the impression some of the commenters don't really have experience with government contracts on either the public or private side.

The IG report points out real problems, but I think people are extrapolating too far because they don't truly understand how contracts are awarded via the GSA schedule. I think people are confusing being awarded a listing on a GSA schedule with an actual order. Being on the GSA schedule just means is there is an agreed upon price for a product or service. An agency still needs to chose that product or service before any money changes hands.

The GSA essentially produces a catalogue of products and services. Like the article mentions, it seems like the GSA allowed McKinsey to name their price and that is, as the article says, "honest graft". The article also implies other contractors are also listed, although they don't get similar preferential price treatment. So the GSA isn't down-selecting the number of "items" listed in the "catalogue" to force agencies into selecting the expensive McKinsey. It's just inflating the price of one item. What isn't covered is why agencies are selecting the more expensive item. To me, that is where the real corruption would be.

To play devil's advocate, the whole IG issue could potentially be attributed to a bad contracting supervisor who reassigned the contracting officer who was fighting against the price increase. The fact that the other companies were denied similar price increases indicates to me that it's not a cultural issue of "honest graft".

[ndarwincorn]

I get the impression you're over-simplifying this and grasping for whatever assumption you need just to try to make your point.

While some of us have run with my oversimplification, there are plenty of comments in this sub-thread about down-selecting. Your answer to that is a giant assumption on what the article (which again is rigorously sourced) 'implies'.

> The article also implies other contractors are also listed, although they don't get similar preferential price treatment.

In fact, the IG report[0] that is cited in the selection of the article I replied with has nothing to do with McKinsey, but a different contractor altogether. Reading comprehension is your friend here: "In 2013, the GSA Inspector General traced a similar situation with different contractors."

Agencies aren't necessarily selecting the more expensive item. As you point out, in most cases they have a mandate not to. They're awarding the bid to an already-short list designed to generate the highest IFF possible for the GSA.

Which is what the article's about.

[0]https://www.gsaig.gov/sites/default/files/audit-reports/A120...

[bumby]

If anything, my intent was to guard against the oversimplified conclusions by adding some nuance. I concede the point that it's larger than just McKinsey. But it seems like people are extrapolating to make a point that the government is forced into picking between just a few favored firms. That point is central to the author's larger theme about the politics of monopolies. The issue I have is, while there seems to be some graft, it doesn't mean there is a monopoly. In the same vein:

> They're awarding the bid to an already-short list

This makes it sound like the GSA is forcing agencies to select from a small handful of contractors from a list catered to make the GSA the most money. I don't think it's actually true and it seems like it's inferred from the article without evidence. There are literally thousands of vendors just in the IT Services schedule mentioned in the article[1].

What seems more likely is what another commenter stated. Agencies select the excessively expensive McKinsey because they are essentially buying social capital.

Edit: there’s actually over 13k vendors listed under IT services [2]

[1]https://www.gsa.gov/technology/technology-purchasing-program...

[2] https://www.gsaelibrary.gsa.gov/ElibMain/scheduleSummary.do?...

[ramblenode]

I was also wondering this. There seems like a pretty good case for the headline, but the more interesting question from the article is whether funding the GSA through some alternative (appropriations) would save the government money compared to the IFF. Which may come down to the kind of behavior the IFF incentivizes, whether it be corruption or self-serving yet legal optimizations. The information you provided about the base rate would have benefited the article by giving some idea of the scale on which the GSA operates.

[GlenTheMachine]

This is actually quite a good question, and I don't understand why you're being given such grief for it. But I also might have an answer. TL;DR: the government isn't paying McKinsey for services rendered. It's paying for bureaucratic capital, which is a Veblen good.

There is a confluence of two dynamics going on here. The first is that once a contractor is listed on the GSA schedule, you don't have to justify their price. The process of getting listed on the GSA Schedule is supposed to mean that the government has already vetted the goods being offered and the price they're being offered for. No further competition is needed. You can simply place an order for the goods or service listed and like magic it sails through the government procurement process.

So the next question is, if contractor A and contractor B are both listed on the GSA Schedule as providing a given service, and contractor A is twice as expensive as contractor B, why would any rational individual choose contractor A? And the answer is, in this case, you aren't paying for the advice. You're paying for the social capital needed to make the advice stick. If all you wanted was the advice, you could certainly go to contractor B and pay them twice minimum wage to get a 23-year year old college graduate to give you advice. But that advice would not carry the weight you need to get upper management to take it as gospel, because you clearly didn't pay enough money for that. Nobody cares if you pay $50,000 to get consultant advice and then ignore what they told you.

So what you do instead is pick the name with the most cachet out of the entire list, given that you don't have to justify the price on a cost-benefit curve any more since it's already been GSA approved, knowing full well that they'll give you identical advice but now with a million-dollar price tag attached... and that fact will carry enough weight to get the changes they recommend all the way up to your agency director, who'll either sign off or have to take an incredible amount of public heat explaining why he/she didn't take the advice his/her own agency spent millions of dollars to get.

Basically, a straightforward application of the Washington Post rule.