Review of Contractor's Management of Subcontractors

We reviewed the design of a TVA contractor's process for administering subcontracted work for the Watts Bar Nuclear Plant Unit 2 construction project. Specifically, we reviewed the contractor's (1) invoice review process, (2) process for scheduling work, and (3) process for ensuring subcontractor work meets the contractor's specifications. In addition, we made inquiries regarding concerns raised about the management of measuring and testing equipment (M&TE). Although we performed interviews and reviewed documentation to determine how the contractor schedules subcontracted work, we did not test the effectiveness of this scheduling. Our audit determined the design of the invoice review process was sufficient to achieve the desired results, and we found nothing to indicate the contractor's process for ensuring subcontractor compliance with contractor specifications was ineffective. However, we determined (1) invoices were not being approved by the engineering or construction manager as required by the subcontract administration procedure; (2) verification of the qualifications of certain key subcontractor personnel was not performed; (3) subcontractor invoices were not compared to the contractor's invoice concurrence forms to ensure TVA reimbursed the contractor accurately; and (4) shortages of measuring and testing equipment caused work inefficiencies and were identified as a potential cause of future work inefficiencies and/or delays. In addition, we identified one instance where travel time and mileage for a subcontract employee to travel to the job site to prevent their badge from expiring was billed to TVA. TVA management agreed with our recommendations and will ensure the contractor (1) amends the Subcontract Administration Procedure to provide review and approval authority to the Project Director or his designee for subcontractor invoices, (2) reinforces their process related to delegation for subcontract invoice approvals by reviewing subcontract invoice approval authorization letters to verify they are current, and (3) transfers the responsibility for M&TE from Unit 2 to Unit 1. In addition, TVA management agreed to evaluate the conditions surrounding termination of badges for subcontractors on a case-by-case basis to determine the most cost-efficient arrangement and will begin adding subcontractor invoices to the list of randomly reviewed billing data. TVA management agreed with our recommendations and will ensure the contractor (1) amends the Subcontract Administration Procedure to provide review and approval authority to the project director or designees for subcontractor invoices received, (2) reinforces its process related to delegation for subcontract invoice approvals by reviewing subcontract invoice approval authorization letters to verify these are current, and (3) transfers the responsibility for M&TE from Unit 2 to Unit 1. In addition, TVA management agreed to evaluate the conditions surrounding termination of badges for subcontractors on a case-by-case basis to determine the most cost-efficient arrangement and will begin adding subcontractor invoices to the list of randomly reviewed billing data. Summary Only