Editor's note: This story was updated to include additional comments regarding McKinsey & Co.'s selection and comment from Travis County.

The city of Austin and others involved in local homelessness response are readying to spend up to $2 million on a comprehensive review of their services and overall strategy.

The overview

Consultants with Washington, D.C.-based McKinsey & Co. are lined up to take an in-depth look into the "effectiveness of the strategies, programs and services" related to homelessness in the Austin area. The review would cover the work of Austin, Travis County, Central Health—the county hospital district for low-income residents—and Integral Care—the local mental health and intellectual disability authority.

McKinsey would evaluate:
  • The effectiveness of each entity's homeless strategy work
  • Their spending on homeless services, including third-party contracts
  • How the partner entities work together on combating homelessness
Consultants would then compile a report on their findings, including recommendations for improvements across the Central Texas homelessness response system.

The details

Austin officials on Jan. 16 said they believe the third-party review will result in better coordination between those involved and eventually enhance services on the ground.

“This is about defining lanes," interim City Manager Jesús Garza said. "We have an orchestra that’s been tuning its instruments for about five years, and we don’t have a conductor. And I think part of it is to get a conductor to harmonize all the different things that are happening in this space to ... ensure these resources are getting the most effective use of those public dollars to end homelessness, and to make it brief and rare."

The plan could move forward in January following initial City Council votes on Jan. 18 to negotiate a contract with McKinsey and related agreements with each local entity.

McKinsey consultants could then begin their review in March and wrap up by late April.

An outline of the proposed review is available here.

The cost

The entire process would carry a $2 million price tag split between the participants.

As a focal point for local homelessness response, Austin would cover the majority with an estimated $1 million pulled from the city's American Rescue Plan Act federal relief funds. Austin officials dedicated a large share of the city's ARPA dollars to tackling homelessness in 2021.

As laid out, the remainder would be covered with $400,000 from both Travis County and Central Health as well as $200,000 from Integral Care—if each decides to participate.

The city chose McKinsey to take on the work without going through a public bidding and selection, based on state provisions that allow exemptions from competitive bidding for specific services.

An unofficial bidding process determined the firm was most qualified for the job, according to city staff.

"An informal request for qualifications process was used and 2 responses were received. The responses were evaluated based on company qualifications & experience, key personnel qualifications & experience, and company References & Past Performance," Kimberly Moore, a spokesperson for Austin's Financial Services Department, said in an email.

The arrangement would be McKinsey's second multimillion-dollar consulting job for Austin in recent months. Its pro bono assessment of the city's development processes was followed by a $2.5 million agreement to oversee proposed fixes in that area.

Put in perspective

The move to bring on McKinsey comes soon after Austin reorganized its own work with homelessness under a new, standalone office in late 2023. Mayor Kirk Watson also said last fall that he supported launching a review of the city's homeless services and spending as a matter of routine given its significance.

Travis County commissioners voted Jan. 16 to continue negotiations with Austin over the homeless strategy review but said multiple options for action should be brought back for their consideration before any spending is approved.

“Travis County shares the City of Austin’s goals to audit their homelessness strategies. Based on the court's direction, it is clear they would like to continue negotiations regarding the proposed interlocal agreement (ILA) and get a clear understanding from the City of Austin what the intentions, goals, and final outcomes will be of the proposed the ILA," county spokesperson Hector Nieto said in a statement.

Travis County typically doesn't directly manage homelessness response, although it does support some nonprofit work in the sector and is backing a local initiative to build hundreds of new permanent supportive housing units using over $100 million of its one-time ARPA allocation.

Central Health board Chair Ann Kitchen, a former City Council member, said the county hospital district supports the independent review. The district also proposed changing the scope of the process related to its operations to limit McKinsey's evaluations of its strategy and services.

“Central Health, Integral Care, and the city and county work together now to help vulnerable residents, including those without stable housing, get the care, services and support they need to heal and be healthy. This review offers information and an opportunity for us all to collaborate most effectively and leverage the community’s collective investment in our work," Kitchen said in a statement.

A portion of Central Health's direct health care efforts are focused on the unhoused community, according to recent district reports, including outreach and lowered service costs for those experiencing homelessness. Central Health also established its Medical Respite Program to help those clients recover from illness, and plans are in place to launch a high-risk care clinic in the mid-2020s.

An Integral Care spokesperson deferred to the city for comment on the plan Jan. 16.

The mental health authority has many contracts with the city related to housing and homelessness.