I used to work in state government. There was no "gradually switch them out" - we got the D-team as soon as the sale closed and the project started.
This was very odd to us, since our names wouldn't mean a thing to anyone on the client's end, but we chalked it up to red tape. Your explanation finally makes sense of it.
At most, it gets the A-team's PE stamps, so they're at least professionally liable for the quality of work, but first project coordination/ outline meeting & final review are all they usually do. Occasionally take a call from a VIP.
And when the project freezes indefinitely, so do the payouts.
I asked why they were doing it, but no one gave me a straight answer. I mean, I get for them it was Tuesday, but when a major contractor starts asking you to brush right up against the line of equivocating, I can't justify moving forward without some serious explanations and levels of frankness I don't think many recruiters are comfortable with..
After my first successful project for them, their biggest client started demanding that I be assigned to their next big project (or one of the external contractors). We both ended up taking jobs elsewhere, and that client quit using the developer.
And the client? They were a full-on shovel-ware developer that barely cared about game quality. They just needed a game that would run reliably enough that Nintendo would approve it. So to be fired as a developer by that company was really embarrassing...
Occasionally we’d get someone good but as soon as the consulting company figured out that they were good, they’d get rotated off our project and replaced with someone mediocre. They also never gave us any warning when they were going to switch someone.
Because what I've seen happen is a large company uses its size to negotiate really the cheapest prices, and the only way the consulting company can make profit is by hiring the cheapest people, and even with that, the margins are thin at best. So obviously, they don't exactly get the best.
The worst part is that all these D-tier, fresh out of school guys gain experience and some may even get good at their job. Unsurprisingly, these people start asking for raises and promotions, and the consulting companies tries to charge their customer more, I mean, we are talking quality now.
But the big company financial department doesn't like it, so they make a new call for cheap contracts, get a new round of incompetents, etc...
In the end, everyone loses. The consulting company makes little profit, sometimes even losses and the big company always get shit service, which usually costs them more than what they save. As for the employees, the work conditions are often terrible and they usually quit at the first occasion. But the financial department is happy, they have a lower number in the "expense" column.
Once the contract was won, we'd sub-contract to a local (to the region) contracting agency, who would in turn essentially do the equivalent of a craigslist search for a body, that we would interview to ensure that they could be taught, and then we'd take 30-60 days to teach them our product - depending on the initiative and experience of the candidate, the customer (who remember, was paying us $500k/year for an application engineer) - might get a recent-high school graduate that was making $30k/year and had never even heard of our technology a week prior.
This created a lot of internal pressure to use contract resources as much as possible.
I have trouble feeling sorry for the consulting company in that situation. If the budget your client offers is insufficient for the job, demand more or turn it down. Don't lie that you can do it and then bait-and-switch.