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> $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 (1) misapplication of overhead/general and administrative (G&A) markup rates, (2) a fee rate that exceeded the maximum allowable fee rate in TVA's request for proposal (RFP), and (3) overstated material, equipment, travel, labor and labor burden costs. We also found the company's proposed rate attachments included (1) incorrect craft labor rates, (2) noncraft wage ranges that did not reflect the company's current wage ranges, (3) incorrect noncraft billing rates, (4) a contractor owned equipment rate schedule containing equipment that the company anticipates will be leased or rented from third parties, and (5) fee on cost reimbursable work that exceeded the maximum allowable fee rate in TVA's RFP. We estimated TVA could avoid about $4.7 million on the planned $50 million contract by (1) limiting the company's application of overhead/G&A to total direct costs, (2) limiting the company's fee rate to the RFP's maximum allowable rate, and (3) negotiating appropriate cost reductions to the company's proposed material, equipment, travel, labor, and labor burden costs. In addition, we suggest TVA negotiate (1) revisions to the company's contract rate attachments to correct errors and more accurately reflect the company's actual wage ranges and equipment usage, and (2) a reduction to the company's proposed fee for cost reimbursable work to the maximum allowable fee rate in TVA's RFP.(Summary Only)