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, $45 million contract.In our opinion, the company's cost proposal was overstated. Specifically, we found the (1) proposed costs for the request for proposal's (RFP) example projects contained math errors, were not priced in accordance with the RFP requirements, and overstated travel expenses; (2) proposed total labor markup rate, for recovery of the company's indirect costs, was overstated compared to recent actual costs; (3) proposal did not include reduced labor markup rates for employees working in the field and nonbenefited workers; and <br> (4) proposed maximum wage rates were overstated.We estimated TVA could avoid about $3.08 million over the planned $45 million contract by (1) ensuring the company's project estimates and invoices are reviewed for accuracy and comply with contract pricing criteria, (2) negotiating a reduced total labor markup rate based on the company's recent actual costs, (3) including labor markup rates for employees performing work in the field and nonbenefited workers, and (4) requiring the company to revise its wage range maximums.(Summary Only)