Thalle Construction Company, Inc. - Contract No. 10061

As part of our annual audit plan, we performed an audit of costs billed to the Tennessee Valley Authority (TVA) by Thalle Construction Company, Inc. (Thalle) for construction and modification services for civil projects and coal combustion product management under Contract No. 10061. The contract provided for TVA to compensate Thalle for work on either a cost reimbursable, target cost estimate (TCE), or fixed price basis. Our audit objectives were to determine if (1) costs were billed in compliance with the terms and conditions of the contract and (2) tasks were issued using the most cost efficient pricing methodology. Our scope included about $16.2 million in costs billed to TVA from May 20, 2015, through December 20, 2018. This included about $14.7 million for fixed price projects, $1.3 million for TCE projects, and $186,000 for cost reimbursable projects. In summary, we determined:Thalle overbilled TVA $78,414 on a TCE project, including (1) $24,716 for ineligible costs billed and (2) $53,698 in overstated TCE cost savings.Thalle overbilled TVA $70,751 in equipment costs on cost reimbursable projects, including (1) $54,755 in overbilled TVA Equipment Support Services equipment rental costs and (2) $15,996 in overbilled costs for Thalle owned equipment.The use of fixed price or unit rate payment terms on projects caused TVA to pay at least $2.1 million more than it would have if cost reimbursable payment terms had been used for those projects. Additionally, we determined the unit rate payment terms used by TVA to compensate Thalle were not provided for in the contract's terms and conditions.We also noted several opportunities to improve contract administration by TVA.(Summary Only)