Proposal for Civil Projects and Coal Combustion Residual Program Management Work

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for civil projects and coal combustion residual program management work at TVA's steam electric power plants. Our examination objective was to determine if the company's cost proposal was fairly stated for a planned <br> $100 million contract.In our opinion, the company's cost proposal was overstated as follows:The company's proposal for a Cumberland Fossil Plant project included overstated (1) equipment costs, (2) overhead markup rates, and (3) material costs. In addition, the company's proposed fee rate exceeded the maximum allowable fee rate in TVA's request for proposal (RFP).Proposed time and material (T&M) rates were not supported by the company's actual costs.The company did not comply with the RFP requirements regarding cost reimbursable work.We estimated TVA could avoid about $11.1 million on the planned $100 million contract by (1) negotiating the appropriate reductions to the company's proposed equipment costs, material costs, and overhead rate, and (2) limiting the company's fee rate to the RFP's maximum allowable rate. In addition, we suggest TVA negotiate revisions to the company's T&M rates to more accurately reflect its actual costs and require compliance with the RFP's cost reimbursable provisions.(Summary Only)