At the request of the Tennessee Valley Authority’s (TVA) Supply Chain, we examined the cost proposal submitted by a company for engineering and construction services in connection with the validation phase of TVA’s Small Modular Reactor and Clinch River Nuclear project. Our examination objective was to determine if the company’s cost proposal was fairly stated for a contract with expenditures up to $25 million.
In our opinion, the company’s cost proposal was overstated. Specifically, the proposed hourly indirect cost recovery rates for the company’s overhead costs and technology costs were overstated compared to recent actual costs. We estimated TVA could avoid approximately $749,000 over the potential $25 million contract by negotiating reduced hourly indirect cost recovery rates to more accurately reflect the company’s recent actual costs. In addition, we also noted some opportunities to clarify the draft contract language.
