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> $25 million contract.In our opinion, the company's cost proposal was overstated. Specifically, we found the company's proposed costs for a Cumberland Fossil Plant (CUF) project and proposed unit rates for a Bull Run Fossil Plant (BRF) project included overstated (1) material costs, (2) general and administrative (G&A) rates, (3) labor costs, (4) equipment costs, and (5) temporary living allowance (TLA) costs. In addition, the company included a fee rate for the CUF project that exceeded the maximum allowable fee rate in TVA's request for proposal. We also found the company's proposed rate attachments included (1) incorrect craft labor rates, (2) incorrect application of the markup rates, and (3) noncraft wage ranges that did not reflect the company's current wage ranges. In addition, the company's proposal did not include (1) separate labor rate attachments for nonmanual employees who receive union benefits and (2) three noncraft labor categories that were included in the CUF and BRF proposals.We estimated TVA could avoid about $1.66 million on the planned $25 million contract by (1) negotiating appropriate reductions to material costs, G&A rates, labor costs, equipment costs, and TLA costs; (2) limiting the company's fee rate on the CUF project to the RFP's maximum allowable rate; and (3) negotiating appropriate reductions to unit rates in the BRF 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 and costs.(Summary Only)