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> $50 million contract.In our opinion, the company's cost proposal was overstated. Specifically, we found the company proposed:Unit rates for a Bull Run Fossil Plant (BRF) project included overstated (1) equipment costs, (2) material costs, (3) indirect costs, and (4) labor costs. In addition, the BRF proposal contained various calculation errors that understated some of the company's costs.</li> Costs for a Cumberland Fossil Plant (CUF) project included (1) overstated subcontractor costs, (2) a fee rate that exceeded the maximum allowable fee rate in TVA's request for proposal, and (3) understated labor costs.</li>Costs for a Paradise Fossil Plant (PAF) project included (1) overstated noncraft labor costs; (2) overstated labor burden markup rates (payroll taxes, insurance, and fringe benefits); and (3) excessive fee.</li>Rate attachments (1) included incorrect craft labor rates, (2) did not include some of the craft labor classifications the company used in the BRF proposal, (3) included noncraft wage ranges that did not reflect the company's current wage ranges, and (4) did not include an information technology markup rate that the company included in its proposals for the PAF and CUF projects.</li>We estimated TVA could avoid about $17.63 million on the planned $50 million contract by negotiating appropriate reductions to (1) unit rates in the BRF proposal; <br> (2) subcontractor, fee, and labor costs in the CUF proposal; and (3) labor costs, labor burden markup rates, and fee in the PAF proposal. In addition, we suggest TVA negotiate revisions to the company's contract rate attachments to correct errors and more accurately reflect the company's actual wage ranges.(Summary Only)