By Chip Cutter

Some of the biggest U.S. consulting firms have offered billions in additional cuts to their contracts after the Trump administration told firms that they needed to pony up deeper price concessions -- or face consequences.

Seven of the 10 largest consulting firms to the government have now offered up to $20 billion in savings by proposing to either terminate existing contracts or reduce the scope of their work within federal agencies, according to a person familiar with the negotiations. Some firms are now proposing to offer credits toward their work or artificial-intelligence services free of charge.

For weeks, officials within the General Services Administration, which helps oversee procurement for the federal government, have pushed companies including Accenture, Booz Allen Hamilton, Deloitte, IBM and others to justify their work with the government and to propose substantial cost savings. While companies met a deadline last month to identify potential cuts to existing projects, administration officials later told firms that they were unimpressed with the size and scope of the reductions proposed.

"Faulty reasoning, financial obfuscations and gamesmanship" within the consulting proposals were called out in a letter to executives earlier this month sent by Josh Gruenbaum, the GSA's procurement chief who is overseeing the review of contractors.

If firms didn't offer more meaningful cost savings, Gruenbaum's letter noted, contracts could be terminated and put up for new bids to competitors. The Financial Times earlier reported on the letter to executives.

Earlier proposed cuts were smaller, but some firms are now offering more substantial savings.

"There were several firms that really leaned in and we were inspired by their second responses," Gruenbaum said in a statement to The Wall Street Journal. Gruenbaum, a former director at private-equity firm KKR, added that the cuts are necessary to "get the nation's fiscal house in order."

Booz Allen Hamilton and Guidehouse, among others, have offered substantial savings as part of a second round of negotiations with the government, according to a person familiar with the proposals.

Booz Allen, which generates nearly all of its $11 billion in annual revenue from contracts tied to the U.S. government, previously told the Journal that the firm had proposed more than $1 billion in savings related to its own projects. A spokeswoman for Guidehouse didn't immediately comment.

At least two firms offered 7% to 10% discounts on their labor costs within existing contracts, while others provided credit proposals of $100 million toward their work. At least one company offered free deployment of AI agents within the government to make it easier for federal agencies to work together.

The Trump administration has been cracking down on the consulting industry more broadly, with the Department of Government Efficiency regularly announcing new cancellations of consulting contracts. The Department of Defense earlier this month also said it planned to cut $5.1 billion in consulting contracts, impacting firms including Accenture, Deloitte and Booz Allen.

"These contracts represent non-essential spending on third party consultants to perform services more efficiently performed by the highly skilled members of our DoD workforce using existing resources," a memo from Defense Secretary Pete Hegseth said.

Accenture and Deloitte didn't immediately comment. A Booz Allen spokesman said the company is "working productively with the GSA to accelerate outcomes-based contracting and technology innovation for the benefit of the American taxpayer."

Deloitte earlier this month said it planned to lay off U.S. workers in its consulting business after the federal government demanded it find ways to shrink the cost of projects it is working on. Accenture CEO Julie Sweet also told investors last month that, as the government works to streamline spending, "many new procurement actions have slowed, which is negatively impacting our sales and revenue."

The GSA's discussions with consulting firms are continuing, according to a person familiar with the discussions, with more meetings with firms scheduled later this week. Gruenbaum, in his statement to the Journal, said the firms provide value to federal agencies, but that the government must change how it does business and "we will do it in partnership with the private sector."

Write to Chip Cutter at chip.cutter@wsj.com

(END) Dow Jones Newswires

April 22, 2025 17:06 ET (21:06 GMT)

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