Proposal for Construction and Modification Services

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a contractor for construction and modification services. Our examination objective was to determine if the contractor's cost proposal was fairly stated for a planned $100 million contract. In our opinion, the cost proposal (1) overstated the rates in the equipment rate schedule, (2) understated the overhead and general and administrative (G&A) rates in the labor markup rate schedule, (3) overstated subcontractor costs in the coal plant's baseline project price, and (4) overstated the minimum and maximum non-manual wage rates. We estimated TVA could achieve a net savings of about $2.96 million on the planned $100 million contract by reducing the equipment rates, increasing the labor markups, and ensuring an indirect cost markup is not applied to subcontractor costs. In addition, we found the contract's compensation terms and related attachments were inconsistent with the methodology TVA intends to use to compensate the contractor.(Summary Only)