Enhancing Productivity in the US Federal Government
An Opportunity for Transformation
The US federal government has faced questions about its productivity for decades. Since the New Deal expanded the government’s reach, successive administrations—from Nixon’s focus on productivity in the 1970s to Reagan’s executive orders in the 1980s and Clinton’s government reform efforts in the 1990s—have sought to make the federal workforce more efficient.
Today, these discussions are more urgent than ever. With the national debt soaring past $36 trillion, the federal government is under pressure to redefine its role and operations. New initiatives, including the Trump administration’s Department of Government Efficiency and directives from the Office of Management and Budget (OMB) and Office of Personnel Management (OPM), are pushing agencies toward major reorganizations and workforce reductions by the end of fiscal year 2025.
Our research indicates that the potential savings from improved government productivity could reach up to $1 trillion—around 15% of the $6.8 trillion FY2024 federal budget. However, realizing these savings will demand tough, responsible decisions. As poet Robert Frost said, “The only way out is through.” Systematic, analytical approaches will be crucial to achieving real, lasting improvements without weakening essential government services.
The Scale of the Opportunity
Measuring public sector productivity is difficult due to the lack of direct economic output data. However, by combining McKinsey research with US Government Accountability Office (GAO) estimates, we project a potential productivity gain of $1 trillion. This figure breaks down into:
- $233 billion to $521 billion from addressing fraud, waste, and abuse
- $400 billion to $450 billion from improving service delivery efficiency
Because of the size of the opportunity, simple cost-cutting won’t be enough. Without structural change, spending tends to creep back, and essential services may degrade. Moreover, 80% of government change efforts fail to achieve their goals.
Addressing Fraud, Waste, and Abuse
In 2024 alone, improper payments from Medicare and Medicaid totaled roughly $85 billion, and pandemic-era programs like the Economic Injury Disaster Loan distributed over $200 billion in fraudulent claims. Despite longstanding efforts, government agencies still struggle more than private organizations to control fraud, mainly due to skill gaps, leadership inertia, and inconsistent execution.
Proven strategies from the private sector—such as real-time customer verification, cross-agency data sharing, risk-based audits, and probabilistic fraud detection—can make a huge difference. For instance, the National Association of State Workforce Agencies’ unemployment insurance integrity center has helped prevent approximately $5 billion in fraud by pooling and analyzing shared fraud data across states.
However, meaningful fraud mitigation requires serious investment. Even with returns as high as 100-to-1, deploying modern systems and building skilled fraud prevention teams will likely demand hundreds of millions of dollars in upfront funding.
Improving Mission Delivery Productivity
Improving government services without raising costs requires focusing on outcomes and mission delivery. This starts with achieving “radical financial transparency”—understanding exactly how resources tie to mission results, rather than relying on historical budgets.
Agencies should baseline their missions and then align resources—government workers, contractors, fixed and variable costs—to those missions. This allows leaders to spot misalignments, cut unnecessary spending, and set benchmarks for future productivity gains.
Redesign efforts should continue by asking critical mission-first questions, such as: What outcomes are required? What’s the most efficient delivery method—physical, digital, or hybrid? Successful overhauls depend on pulling five key levers: enhancing processes, optimizing organizational structures, smarter sourcing, demand management, and digital automation.
Five Levers for Transformation
1. Process Redesign (Zero-Based Thinking)
Rather than tweaking outdated systems, agencies should rebuild processes from scratch to eliminate bottlenecks, redundancies, and inefficiencies. For example, the State Department’s fully online passport renewal system now saves citizens and staff time. Similarly, a state unemployment agency reduced a backlog of over a million cases by redesigning its processes and boosting staff capabilities.
2. Organizational Optimization
True transformation requires more than reorganizing reporting lines. Agencies should:
- Clarify future missions
- Eliminate duplicative functions
- Flatten management structures
- Incorporate automation and AI
- Create flexible workforce plans that adapt to evolving needs
3. Smarter Sourcing
The federal government spends over $750 billion annually on contracts. Strategic category management—centralizing procurement for common goods and services—could reduce costs by up to 30%, especially when combined with IT modernization and advanced spend analytics using AI.
4. Demand Management and Asset Optimization
Beyond operational budgets, agencies can optimize government-owned assets, including real estate, equipment, and infrastructure. Historical examples, such as the 1990 Base Realignment and Closure Act, show how selling, consolidating, or reimagining government property can generate billions in savings.
5. Digitizing and Automating Core Technology
A McKinsey review of 95 federal IT modernization projects showed 72% exceeded budgets or deadlines. Large projects did even worse, mainly because of poor planning, lack of collaboration between IT and business units, and weak project oversight.
A better approach emphasizes product management models, user-driven development, accountable leadership, and business-driven procurement. One state’s modernization of its enterprise resource planning platform saved $100 million and halved procurement timelines by following this strategy.
The Road Ahead
Government productivity will likely remain a contentious topic for generations. While no solution is perfect, systematic and mission-focused transformations like those outlined here can help the US federal government become more efficient, improve citizen trust, and enhance the work environment for civil servants.
The moment for action is now—and bold, disciplined execution can deliver real, lasting change.
The views and opinions expressed in this article are solely those of the authors and do not necessarily reflect those of Bespoke Business Development. They are intended to encourage discussion and reflection, rather than serve as legal, financial, accounting, tax, or professional advice.
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