DOD's Three-Act Play for Consulting
- Kennedy Editorial
- Sep 16
- 3 min read
By Tom Rodenhauser, Managing Partner, Kennedy Intelligence I Consulting Industry’s Strategic Insights Partner I Host and Editor of Consultants Talk podcast
The Department of Defense's announcement that it intends to cut $5.1b in federal consulting contracts could prove catastrophic, not only for the targeted firms (Accenture, Deloitte, Booz Allen), but the overall consulting industry.
How valid are DOD's claims of fraud and abuse? It's true that since 2017 (yes, during the first Trump administration), federal spending has helped fuel consulting growth for the aforementioned firms and others. And as I've said before, it's not just the public sector, but other client industries -- manufacturing and healthcare come to mind -- where consultants follow government money at the behest of clients.
For many federal agencies, spending on consulting has often been a necessity to supplement government workers. The effect was magnified during Covid as consultancies became the arms and legs of the federal government.
Is the DOD really hell-bent on amputating these appendages? Or is this a theater production that plays out in three acts:
Act 1: The announcement is another negotiating ploy to seek even greater discounts and value-based pricing with firms. Faced with demoralizing financial consequences should the cuts become reality, firms have no option but to agree to revised contracts that will be trumpeted for their cost-savings. Expected timing: ~6 months.
Act 2: While negotiating new contracts, the DOD seeks out non-traditional consulting tech providers, whether they be Musk minions or other entities that offer pure tech with a smidge of advisory. These companies promise to fill the void with automation tools and AI-generated solutions -- not so dissimilar from what the traditional consultants would be doing. Expected timing: ~6-18 months.
Act 3: The chaos caused by Acts 1 and 2 leads to a change in the political order with the 2026 midterm elections. A subsequent retrenchment occurs that elevates some of the current consulting providers to address disrupted services. Expected timing: ~18-36 months.
The consultancies will do everything they can to get some level of business reinstated in Act 1. The idea behind Act 2 is that big tech can remake the government -- with minimal involvement of the current consultants. It's more hypothetical at this point, though the last several months have proven that virtually anything is on the table.
Of course, Act 3 bets that some level of status quo will present itself after systems seize up and the political climate shifts. It's not a reversion to the old ways, but some hybrid whereby the consulting firms doing government work aren't viewed as villains.
For all the bluster and potential pain caused by illogical decisions, this playbill DOD's Three-Act Play for Consulting offers the best ending.
About the Author: Tom Rodenhauser has been tracking the global consulting industry for more than 30 years. Kennedy Intelligence helps leaders adapt to changing landscapes and position their firms for success. Reach out to discuss:
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Note: This article is for educational and informational purposes only and does not constitute investment, tax, or legal advice. The views and opinions expressed in this article are those of the author and do not represent the views of any affiliate organization. Any opinions or views expressed are as of the date written and are subject to change without notice and may be updated or modified at any time.
