Proposal for Coal Combustion Product Handling and Maintenance

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for handling and maintenance of coal combustion products. Our examination objective was to determine if the company's cost proposal was fairly stated for a planned <br> $100 million contract. In our opinion, the company's cost proposal contained overstated time and material (T&M) and fixed unit rates as follows:The proposed T&M rates included: (1) markups on third-party equipment rentals not provided for in the draft contract; (2) overstated hourly, daily, and weekly equipment rental rates; (3) overstated hourly craft and noncraft labor rates and noncraft labor classifications for labor costs that are typically recovered through the company's overhead markup rate; and (4) markups on subcontract costs not provided for in the draft contract.The proposed fixed unit rates included overstated equipment, overstated labor, and markups not provided for in the draft contract.We estimated TVA could avoid about $8.934 million on the $100 million contract by negotiating the appropriate reductions to the company's proposed T&M and fixed unit rates.(Summary Only)