Land Clearing and Restoration Services Contract

We reviewed $14.2 million of costs billed to TVA by a contractor for providing right-of-way clearing and restoration services and found:TVA had been overbilled $81,533 including (a) $38,796 in unallowable miscellaneous material costs, (b) $34,776 in duplicate billings for initial clearing costs, and (c) $7,961 in unsupported labor costs. Additionally, we found the contractor had underbilled TVA $5,776 due to various invoicing errors. The contractor agreed with our finding regarding unsupported labor costs and provided explanations for why it believed the remaining items were billed correctly. TVA management agreed with the findings regarding unallowable material costs, unsupported labor costs, and underbilled costs and stated they are conducting a review of the $34,776 in suspected duplicate billings for initial clearing services. Prior to award of the contract, Procurement's contract manager had requested the contractor to change its proposed billing rates to "TVA Valley-wide" rates. That action, which the contractor agreed to, caused TVA's costs to increase $522,212 because most of the rates that had been proposed by the contractor were lower than TVA Valley-wide rates. Procurement informed us that TVA had deployed a strategy to negotiate consistent pricing among all suppliers and that would be more favorable to TVA. Procurement further stated that although some of the prices were higher than the contractor's initial offer, lower prices were achieved in four areas (line items) where TVA expected the majority of the expenditures to take place; however, since the actual quantities of work performed under the various line items were other than anticipated, the resulting charges increased TVA's total cost by approximately 3.7 percent. Procurement plans to use this experience in some lessons-learned sessions. Summary Only