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 a 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's proposed costs for a Cumberland Fossil Plant project included overstated (1) overhead/general and administrative rates, (2) equipment costs, (3) labor burden rates, and (4) temporary living allowance costs. In addition, the company's Cumberland Fossil Plant proposal included (1) a fee rate that exceeded the maximum allowable fee rate in TVA's request for proposal and (2) understated bond costs.</li> The company's proposed rate attachments included (1) noncraft wage ranges that did not reflect the company's current wage ranges, (2) incorrect and missing labor billing rates, (3) excessive time and material rates, and (4) excessive equipment rental rates.</li>We estimated TVA could avoid $5.57 million on the planned $50 million contract by (1) negotiating appropriate reductions to the company's proposed overhead/general and administrative rates, equipment costs, labor burden rates, and temporary living allowance costs; (2) limiting the company's fee rate to the request for proposal's maximum allowable rate; and (3) negotiating appropriate revisions to the company's bond costs to reflect its actual bond costs. 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)