Barnard Construction Company, Inc. – Contract No. 13159

We performed an audit of costs billed to the Tennessee Valley Authority (TVA) by Barnard Construction Company, Inc., (Barnard) to provide TVA support in connection with its coal combustion residual conversion program, activities or projects, and/or waste-water treatment, dewatering, and landfill projects under Contract No. 13159. The contract provided for TVA to compensate Barnard for work on either a cost-reimbursable, target cost estimate, time and materials, fixed price, or fixed unit rate basis. Our audit objectives were to determine (1) if the costs billed to TVA were in accordance with the contract’s terms and (2) the reasonableness of TVA’s process for evaluating and awarding fixed price or fixed unit rate tasks issued under the contract. Our audit scope included about $140.6 million in costs paid by TVA from January 1, 2021, through July 27, 2023, for purchase orders with initial payments after January 1, 2021. This included approximately $83.7 million for fixed price projects, $23.2 million for fixed unit rate projects, and $33.7 million for cost reimbursable projects. In summary, we determined Barnard generally billed cost-reimbursable projects in accordance with the contract, except (1) Barnard billed salaried personnel at an average rate for each labor category instead of actual salaries, and (2) the fee structure agreed upon in the work releases and paid by TVA did not meet the intent of the fee structure provided for in the contract. In addition, we determined there were opportunities to strengthen TVA’s process for evaluating and awarding fixed price and fixed unit rate tasks that were issued when TVA received limited or no competition.