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, $10 million contract.In our opinion, the company's cost proposal was overstated. Specifically, we found: The company's proposed labor markup rates, for recovery of its indirect costs, were overstated compared to recent actual costs. We estimated TVA could save about $167,000 over the planned $10 million contract spend by negotiating reduced labor markup rates to more accurately reflect the company's recent actual costs. In addition, we suggest TVA negotiate the removal of the company's proposed rate for work performed at TVA facilities since the company (1) does not normally calculate a rate for field employees and (2) does not anticipate using any field employees. The company's proposed performance fee was overstated based on the request for proposal's (RFP) fee limits. During our examination, TVA successfully negotiated the fee percentage to comply with the RFP's fee limits. We estimated TVA's actions could save about $371,000 over the planned $10 million contract.The company's proposed labor rate ranges were not reflective of the actual salary costs for the company's employees.(Summary Only)