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 (CCR) 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 included overstated (1) material costs, (2) bond costs, (3) equipment costs, and (4) labor burden rates. In addition, the company included a fee rate that exceeded the maximum allowable fee rate in TVA's request for proposal (RFP).</li>The company's proposed rate attachments included (1) incorrect labor billing rates, (2) noncraft wage ranges that did not reflect the company's current wage ranges, and <br> (3) fee on cost reimbursable work that exceeded the maximum allowable fee in TVA's RFP. In addition, the company's proposed methodology for recovering overhead and general and administrative (G&A) costs differed from the RFP's draft contract terms.</li>We estimated TVA could avoid $1.96 million on the planned $25 million contract by (1) negotiating appropriate reductions to material costs, bond costs, equipment costs, and labor burden rates; and (2) limiting the company's fee rate to the RFP's maximum allowable rates. In addition, we suggest TVA (1) negotiate revisions to the company's contract rate attachments to correct errors and more accurately reflect the company's actual wage ranges and costs, (2) negotiate a reduction to the company's proposed fee for cost reimbursable work to the maximum allowable fee rate in TVA's RFP, and (3) modify the contract terms to reflect the company's intended methodology for recovering overhead and G&A costs.(Summary Only)