January 20, 2019

Let’s Wildly Speculate About Why PwC Is Shopping Its Government Services Practice

pwc culture

This Reuters story reports that PwC is looking to sell its government services, perhaps “to pursue the growing business of auditing government agencies.” The story says that Morgan Stanley is running the sale and private equity firms Veritas and Madison Dearborn Partners are two potential buyers. None of the firms mentioned commented for the Reuters story.

As for the work that PwC might be pursuing, there’s a new big fish:

One of biggest audits in history, the audit of the U.S. Department of Defense, kicked off this month and is due at the end of the government’s 2018 fiscal year.

According to Pentagon records, PWC, one of world’s largest auditing companies, has been contracted to provide “audit-readiness” services to the department.

“The Department is engaging auditors to perform over 24 individual financial statement audits of its largest components, as well as a Department-wide consolidated audit to summarize all results and conclusions on a DoD-wide basis,” a Pentagon spokesman said.

Gad. The Defense Department has something in the ballpark of $2.4 trillion in assets and is one of the most iconic organizations of any kind. So, indulge me while I speculate a bit.

Although PwC is fully committed to expanding its lucrative advisory business, the DoD is the type of crown jewel audit client the firm craves. By spinning off the government consulting arm, the firm would be able to pitch its services “With the full commitment to the integrity of the process” something-something. I’m sure the exact language on the RFP PowerPoint is being agonized over right this second.

But don’t think for a second that PwC is having a come-to-Jesus moment over independence. If they secure the audit, after a year two on the job, some slick client service partners will start pointing out the most Byzantine areas of DoD’s sprawling bureaucracy, and how the firm can help make them more efficient. Since the average DoD contract is worth something in the neighborhood of eleventy billion dollars, PwC should be able to rebuild its government consulting practice in about six months.

I’m sure someone at PwC has already thought this through. If not, you can thank me later, Tim.

[Reuters]

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