Gov. Sarah Huckabee Sanders’ administration has awarded an up to $5.5 million contract for a consultant to help the state’s 15 executive branch agencies become more efficient and improve services to Washington, D.C.based McKinsey & Co.

The contract will begin Feb. 19 and continue until Feb. 18, 2027, “unless earlier terminated or cancelled in accordance with the Contract or some other writing agreed to and signed by the parties,” according to a copy of the contract. The contract may be extended or renewed by the parties in writing, but the total possible term of the contract may be no longer than seven consecutive years, unless otherwise provided by state law.

The contract with McKinsey & Co. is milestone-based and not to exceed $5.5 million, said Department of Transformation and Shared Services Chief of Staff Alex Johnston. For example, the deadlines for a final revised performance evaluation system and for a final revised pay structure system is June 1.

“McKinsey and Company was awarded the contract because they presented the best proposal at the best value to the state,” the Department of Transformation and Shared Services said Thursday in a written statement.

In its proposal, McKinsey & Co. estimated Arkansas’ transformation could deliver at least $500 million

in “annual efficiencies” and 10% to 30% “effectiveness improvements across government processes and services,” based on its experience in other states and an analysis of Arkansas’ data.

The Legislative Council’s Performance Evaluation and Expenditure Review Subcommittee on Tuesday will consider the transformation department’s request for $4.2 million in state restricted reserve funds to help pay the consultant, and the Review Subcommittee will consider reviewing the contract Tuesday. Transformation department funds will cover the other $1.3 million of the consultant’s tab, based on the contract.

The consultant will conduct efficiency reviews on organizational strategic alignment, personnel, procurement, real estate, vehicle fleet management and information technology, state Department of Transformation and Shared Services Secretary Leslie Fisken said in a letter dated Jan. 30 to Department of Finance and Administration Secretary Jim Hudson seeking the $4.2 million in state restricted reserve funds.

“This review will be used to modernize and update both internal and external processes to provide the most efficient operations, eliminate cumbersome processes and, where applicable, better utilize technological resources,” she said.

The state Department of Transformation and Shared Services awarded the contract to McKinsey & Co. after issuing a request for proposals for “strategic management consultant services” on Dec. 18 and receiving eight proposals by the Jan. 16 deadline for prospective consultants to submit proposals.

The transformation department issued the request for proposal after the state’s “pro-bono services” agreement with The Boston Consulting Group, which started Oct. 2 and ended Dec. 15.

Under the pro bono services agreement, The Boston Consulting Group agreed to work closely with the Department of Commerce and Department of Transformation and Shared Services “to assess how well Arkansas state agencies are operating effectively,” including identifying “opportunities to streamline the government in order to enable the government to serve Arkansas Stronger.”

Last month, Fisken said “Our team will review every bid that comes in, so we are not favoring one over the other” when asked whether The Boston Consulting Group is the favorite to receive the strategic management consulting contract through the department’s request for proposals.

The consultants’ proposals were evaluated based on a maximum of 700 points awarded for the technical proposal and a maximum of 300 points for the proposal’s cost, and the state awarded 100 points to prospective contractors that don’t have current contracts with the state totaling more than $10 million.

McKinsey & Co.’s proposal A received the highest score of 1,000 points from the state’s evaluation team among the eight proposals submitted, and The Boston Consulting Group received the second-highest score of 820.70 points, according to state Department of Transformation and Shared Services’ records.

Guidehouse’s proposal received 614 points, Weaver and Tidwell’s proposal received 571 points, and Slalom Inc.’s proposal received 455.57 points, the transformation department’s records show. McKinsey & Co’s proposal B, Public Works LLC’s proposal and Hopeful Health’s proposal were disqualified.

McKinsey & Co.’s proposal A was the lowest cost proposal at $5.5 million. Guidehouse’s proposal cost $9.7 million, Weaver and Tidwell’s cost $11.3 million, The Boston Consulting Group’s proposal cost $12.5 million and Slalom Inc’ s proposal cost $29.8 million.

McKinsey & Co., Public Works LLC, The Boston Consulting Group, and Weaver and Tidwell each received 100 points for having fewer than $10 million in contracts with the state of Arkansas, Johnston said.

Besides Fisken and Hudterest son, the evaluation team also included Department of Commerce Secretary Hugh McDonald, Department of Human Services Secretary Kristin Putnam and Department of Inspector General Secretary Allison Bragg, according to Johnston.

In its proposal A, McKinsey & Co. wrote that “We believe that Arkansas’ transformation could deliver at least $500 [million] + in annual efficiencies and 10-30% effectiveness improvements across government processes and services, based on our experience in other states and an ‘outside-in’ analysis of Arkansas’s data.”

To support the state Department of Transformation and Shared Services “in the delivery of such a bold transformation,” the company said it will partner with the department through a 12-month period of strategic planning across statewide executive branch agencies, and analysis of the department’s “identified cross-cutting excellence initiatives (personnel, procurement, real estate, fleet and IT)” and provide targeted ongoing coaching and support to senior leaders, according to McKinsey & Co.

“We are committed to delivering a tailored ‘Arkansas Answer’ to realize Governor Sanders’ vision for this project,” McKinsey & Co. said in its proposal A.

Collaborating with the transformation department and broader state staff, “we will adopt a true enterprise approach that spans all 15 departments,” McKinsey & Co. said.

“Our approach will be informed by McKinsey’s unmatched experience delivering transformational change and sustained impact across every industry, including state government.”

An integrated cross-agency and cross-functional perspective will be built and tailored to Arkansas’ unique aspirations and context, McKinsey & Co. said in its proposal.

“We will then not only identify the greatest opportunity for improvements, but we will chart a practical path to impact while building the staff capabilities to make the journey,” McKinsey & Co. said in its proposal. “In doing so, we will also help move the state government toward a renewed culture of performance, accountability and continuous improvement. Throughout, Governor Sanders’ clear compass will steer the project: better government services at less cost for all the citizens and communities of Arkansas.”

There are 22,677 executive branch employees with an average salary of $50,623 a year, based on information from the transformation department.

Last month, Fisken said she doesn’t expect the department to propose a substantial overhaul of the state’s pay plan until the 2025 regular session. This year, the Legislature is scheduled to meet in a fiscal session starting April 10.

In March, Sanders said she wouldn’t support a broadbased pay plan increase in state government’s employee classification and compensation bill with a total price tag of $80 million that doesn’t consider the strategic needs in education, public safety, health care and corrections. Instead, the governor directed the state Department of Transformation and Shared Services to review and rework the existing classification and compensation structure of the state.

State government last overhauled its pay plan in 2017. That plan was projected to cover 25,000 full-time state workers and cost about $57 million to implement in fiscal 2018, including about $24 million from general revenue, with the remainder coming from other revenue sources.

In June, Sanders authorized merit pay raises for what she called exceptional employees in the state’s executive branch agencies in a move that the transformation department said meant about 5,760 of the state’s more than 22,000 executive branch employees received merit raises, effective July 9, with a total cost of $16.3 million, including $6 million in state general revenue.

Sanders’ plan led to some state employees grumbling to state lawmakers about the merit raises authorized by the governor. In June, the Legislative Council’s Personnel Subcommittee co-chair Rep. Mark Berry, R-Ozark, told fellow lawmakers: “I guarantee that the governor wants this [performance evaluation] process fixed.”

The Legislative Council’s Personnel Subcommittee on Wednesday will consider reviewing the transformation department’s proposed policies and procedures regarding the executive branch’s performance pay system for the current fiscal year 2024 that ends June 30.

The Sanders administration’s aim to make the 15 executive branch departments more efficient and improve services comes 4½ years after then-Gov. Asa Hutchinson, a Republican, signed a 2,047-page bill into law that implemented his plan to reduce the number of state agencies reporting to him from 42 to 15, effective July 1, 2019.

Hutchinson’s restructuring of the executive branch agencies was the most sweeping reorganization of state government since then-Democratic Gov. Dale Bumpers led an effort to reduce the number of agencies reporting to him from 60 to 13 in 1971.