July 12, 2024

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McKinsey & Company selected over experienced, less costly firms for study

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The Kansas Department of Commerce disregarded bids from experienced and less expensive companies to create an economic development strategy for the State of Kansas, selecting McKinsey & Company instead.

McKinsey submitted the second-highest bid of the four firms from which Commerce requested cost proposals and is being paid at least $860,000 according to documents obtained through a Kansas Open Records Request. The winning bid was $324,000 more than the lowest bid from Ernst & Young of $536,000. McKinsey was awarded the contract ahead of firms with experience in the state, including one from the Institute for Policy & Social Research (ISPR) at the University of Kansas; Commerce eliminated ISPR in the initial review and didn’t request a bid from them.  It is worth noting that ISPR developed the 1986 Redwood-Krider report, which the Secretary of Commerce David Toland has said on multiple occasions he hoped the new study would emulate its impact.

The Sentinel asked Toland’s office asked why McKinsey was chosen over firms that were less expensive and with experience in the state. They declined to comment and referred us to the Department of Administration.

But at a recent joint House and Senate Commerce Committee hearing, Toland told legislators that all the respondents were considered.

“We evaluated the nine respondents on a number of things including price as well as their experience working with states that are similar to Kansas.”

Toland said that while McKinsey & Company was the second-highest bid, the global consulting firm was a better fit.

“They were found to be perfectly aligned with what we needed to do here and we’ve been extremely pleased with the work that was done.”

Toland still won’t say what he means by ‘what we needed to do here.’

The Sentinel reviewed the proposals submitted and found many similarities in terms of experience and deliverables. But while many proposals emphasized their work done around Kansas or for the state, McKinsey referenced economic development done for the states of Florida and New Jersey.

McKinsey has been under increased scrutiny for how the mega consulting firm nicknamed “the Firm” operates. An Atlantic article digs into the history of management consultants and the wider impact, notably on hourly workers, the company has had over the decades. In July of 2019 the New York Times reported on McKinsey’s work to help drug companies increase opioid sales.

In November 2019, the Sentinel spoke with lawmakers who participated in invitation-only McKinsey-led workshops as part of the economic development contract. Feedback consistently noted that McKinsey was relaying information that the Kansans already knew.

As Senator Caryn Tyson said in November, “It is issues that we have been working on that we didn’t need a consulting company to tell us.”

Kansas State Senator Richard Hilderbrand (R-District 13) also expressed concern about McKinsey’s approach.

“It appeared that the presentation, it had some pretty good data. It appeared to gear everything toward government picking winners and losers. That they need to spend more on incentives and target the incentives on these different areas.”

Senators Tyson and Hilderbrand were not invited by Commerce and McKinsey to attend sessions held in their districts; they both attended as guests of other invitees.

The McKinsey & Company contract ended on December 31, 2019. The company’s report on economic development is expected soon, but the report will not answer questions as to why firms with Kansas firms or proven experience in the state were not chosen.

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