Contract for Engineering Services

We audited $61.92 million in costs billed to TVA by a contractor, under two contracts for performing engineering services between October 2004 and December 2008 and found TVA had been overbilled $683,122 as follows:TVA was overbilled $70,838 because labor costs were billed using hourly billing rates instead of cost reimbursable payment terms as required by the contracts.TVA was billed $558,463 in ineligible and excessive temporary living costs because (1) short-term daily travel rates were paid to employees instead of (lower) long-term temporary living allowances, and (2) unauthorized local mileage costs were paid to personnel receiving temporary living allowances.TVA was overbilled an estimated $40,034 in travel costs due to (1) overstated mileage reimbursement rates, (2) meal costs for unidentified personnel, (3) unallowable rental car expenses, and (4) daily travel costs in excess of daily limits.TVA was overbilled $13,787 because (1) an ineligible markup was added to certain subcontractor costs, and (2) an incorrect billing rate for other direct costs was used.The contractor (via a response submitted by an outside law firm) generally disagreed with most of the audit findings and stated its billings to TVA were correct, fair, reasonable, and in accordance with the plain language of the contracts, the contract manager's interpretation of ambiguous language and/or based upon the parties' pattern and practice of contract performance under both contracts. However, in our opinion, the contractor's comments did not provide additional evidence or documentation to support its claims that TVA had been billed in accordance with the terms of the subject contracts. Accordingly, we recommended TVA management take action to recover $683,122 of overbilled and excessive costs from the contractor. Summary Only