At the request of the Tennessee Valley Authority’s (TVA) Supply Chain, we examined the cost proposal submitted by a contractor for engineering 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 cost proposal was fairly stated for a planned $25 million contract.
In our opinion, the cost proposal was overstated. Specifically, the proposed labor markup and other direct cost rates were overstated compared to recent actual costs. Additionally, (1) the proposed maximum wage ranges were not reflective of contractor’s actual wage ranges and (2) to the draft contract should be revised to clarify language regarding fee and long-term travel. We suggest TVA management (1) negotiate reduced labor markup and other direct cost rates to more accurately reflect the contractor’s recent actual costs, (2) negotiate revisions to the proposed wage ranges to more accurately reflect contractor’s actual wage ranges, and (3) revise the draft contract to clarify TVA’s intent regarding fee and long-term travel.
