Independent Examination of Cost Proposal for Engineering Services

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for engineering, design, and construction support services. Our examination objective was to determine if the company's cost proposal was fairly stated for a planned 5-year, $20.5 million contract. In our opinion, the company's cost proposal was overstated. Specifically, we found the proposed total labor markup rate, for recovery of the company's indirect costs, was overstated compared to recent actual costs. In addition, we found the company's proposed costs for the request for proposal's (RFP) example projects contained a cost markup not provided for by the RFP's draft contract. We estimated TVA could avoid about $2.24 million over the planned $20.5 million contract by negotiating a reduced total labor markup rate to more accurately reflect the company's recent actual costs. (Summary Only)