Review of Force Majeure Policies and Procedures

The objective of our review was to determine (1) vendor compliance with contract force majeure provisions and (2) the adequacy of coal contract terms and conditions related to force majeure events. In summary, we found: No documented instances in which (1) a vendor did not provide formal notification of a force majeure event and (2) the force majeure justification was not in accordance with the force majeure contract language.Standard contract language exists for the development of a contract force majeure clause; however, the force majeure clause is often modified either in initial contract negotiations or subsequent contract supplements. This variation could result in increased cost to TVA. Most of the force majeure events were not verified. In addition, we also found (1) no policies and/or procedures specifically governing how to manage force majeure events, (2) no central repository for documenting force majeure events declared and the impact resulting from these force majeure events, and (3) limited and/or inconsistent documentation pertaining to force majeure events and Fuel Supply actions. Management agreed with our findings and recommendations and is taking or plans to take corrective action.