Philadelphia enlisting mega-consultant McKinsey in quest for Amazon HQ2

Consulting giant McKinsey & Co. has helped top CEOs revamp their corporations and heads of state overhaul their economies.

Now it's being called on to support Philadelphia in its quest to lure Amazon's planned second headquarters to the city.

The executive committee of the Philadelphia Industrial Development Corp., a city-affiliated nonprofit, was scheduled to vote in a closed session Tuesday on a contract with the New York-based firm "to assist with the next phase" in the city's bid for Amazon.com Inc.'s new corporate campus, according to a meeting agenda.

The move comes as Philadelphia enters a new phase in its efforts to be chosen by Amazon as the site for the new central office, nicknamed "HQ2," to support growth beyond what its native Seattle can accommodate. The city earlier this month was named among the 20 sites to make it through the e-commerce behemoth's first stage of vetting for the new complex, where it plans to invest $5 billion and employ as many as 50,000 people.

Philadelphia's economic development officials are apparently calculating that the $1 million-or-so a month charged by consulting firms such as McKinsey, Bain & Co. and Boston Consulting Group, collectively known at the "Big Three," would be money well-spent, said Paul N. Friga, a former consultant with the firm and an author of the book The McKinsey Mind.

McKinsey's corporate clients in recent years have included Time Inc., Yahoo.com, and Germany's Deutsche Bahn rail network, according to published reports. Earlier this month, Lebanon's trade minister told Bloomberg News that it would hire the company to help retool the Middle Eastern nation's economy.

"It could be a great return on investment," Friga, now a strategy and entrepreneurship professor at the University of North Carolina at Chapel Hill's Kenan-Flagler Business School, said of the Philadelphia contract. "If you have a good argument, finding the data to convincingly tell that story might be even better than just throwing additional incentive money."

PIDC spokeswoman Jessica Calter declined to share details on where the money to pay McKinsey was coming from or any other aspects of the city's current work on its bid to Amazon. The agency's financial contribution to the city's initial response to Amazon's early September request for proposals from potential HQ2 suitors came from a pot of city cash that it manages as a revolving fund by investing in economic development initiatives.

As a nongovernmental nonprofit, the PIDC's executive board meets in closed session and does not publicly share its agendas. The agenda for Tuesday's meeting, which includes the McKinsey contract vote, was accessible for a short time late last week — apparently in error — on the public website of the PIDC-affiliated Philadelphia Authority for Industrial Development.

"McKinsey will provide project management support, including conducting research and analysis, supporting development of key message points and positioning, and securing data from third parties as needed," reads the resolution.

McKinsey spokesman DJ Carella declined to address questions about the resolution or acknowledge any work for the city, citing company policy.

McKinsey also had a contract worth at least $1 million to work on Virginia's proposal in support of three of the state's separate first-round  HQ2 bids, said Virginia Beach Mayor Will Sessoms, whose city filed one of those bids, in remarks published by the Virginian-Pilot newspaper in September.

Suzanne W. Clark, a spokeswoman for the Virginia Economic Development Partnership, declined in a statement Monday to discuss whether McKinsey has continued helping the state with the bid from municipalities outside Washington, D.C., that Amazon placed on its 20-site shortlist released Jan. 18.

Maya Design Inc., a subsidiary of fellow "Big Three" member Boston Consulting Group, meanwhile, aided Pittsburgh with its successful first-round bid under a deal that the Tribune-Review newspaper reported was worth as much as $248,000.

For its first-round proposal, Philadelphia relied on in-house labor at the PIDC and the city Commerce Department, while also spending $160,000 from the PIDC's economic development fund and other nongovernmental sources on outside help from local companies such as the Skai Blue Media public relations firm and data mappers Azavea.

The city is presumably now turning to the likes of McKinsey out of a recognition that the company's data-wrangling prowess and broad economic expertise will help it compete on a national level, said Christopher McKenna, author of The World's Newest Profession: Management Consulting in the Twentieth Century.

"It's just like the way you use local bankers for a local deal, but you use international bankers for an international deal," said McKenna, a business strategy and history specialist at Oxford University in England. "You need to beat out cities across the United States, so you want somebody who can speak to the whole United States."