We performed an audit of the costs billed to the Tennessee Valley Authority (TVA) by Burns & McDonnell Engineering Company, Inc (B&M) under Contract No. 15388 for engineering services. Our audit objectives were to determine if (1) costs were billed in accordance with the contract terms, (2) the reasonableness of TVA’s process for evaluating and awarding proposed fixed price tasks issued under the contract, and (3) tasks were issued using the most cost-efficient pricing methodology. Our audit scope included about $20.12 million in costs paid by TVA under Contract No. 15388 between September 25, 2020, and December 31, 2023. This included approximately $19.97 million for fixed price projects and $156,136 for cost-reimbursable projects. Our audit primarily focused on fixed price projects under the contract. In summary, we determined:
- B&M did not provide credits to TVA for unearned fee, resulting in an overbilling of $16,854.
- TVA did not evaluate fee for all tasks greater than $50,000 as required by the contract.
- There were inconsistent guidelines regarding when competition was required and, as a result, TVA routinely direct-assigned fixed price tasks to B&M. Without adequate competition between the contract partners on fixed price tasks, TVA is less able to ensure it is paying a fair fixed price amount.
- The use of fixed price compensation terms for tasks caused TVA to pay at least $644,550 more than it would have if the tasks had been issued under cost‑reimbursable payment terms. Additionally, we estimated TVA could potentially avoid up to $2.52 million in future costs by issuing tasks under cost-reimbursable payment terms for the remaining contract spend.
