Independent Examination of Cost Proposal for Coal Combustion Residual Program Management Services

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for coal combustion residual (CCR) program management services. Our examination objective was to determine if the company's cost proposal was fairly stated for a planned 20-year contract. In our opinion, the company's cost proposal was overstated. Specifically, we found the company's proposed: Gallatin Fossil Plant (GAF) project for $364.1 million included (1) craft labor rates not compliant with TVA's Project Labor Agreement (PLA), (2) overstated markup rates, and <br> (3) excessive fee. Alternate GAF proposal for $361.5 million included overstated escalation on TVA's heavy equipment, in addition to the same overstated costs in the company's $364.1 million GAF proposal. Contract rate attachments included (1) overstated and incorrect labor and labor markup rates, (2) overstated equipment rates, and (3) overstated time and material (T&M) rates. We estimated TVA could avoid either (1) $20.1 million on the proposed $364.1 million GAF project or (2) $28.6 million on the alternate proposed $361.5 million GAF project by negotiating appropriate reductions to the proposals. In addition, we suggest TVA negotiate to revise the company's rate attachments to (1) comply with the PLA and (2) appropriately reduce the labor markup rates, equipment rates, and T&M rates. (Summary Only)