Trans Ash, Inc. - Contract No. 10059

As part of our annual audit plan, we audited costs billed to the Tennessee Valley Authority (TVA) by Trans Ash, Inc. (Trans Ash) for construction support services provided under Contract No. 10059. The contract provided that one or more compensation methods may be utilized to complete the work-cost reimbursable, target cost estimate, or fixed price. Our audit objectives were to determine if (1) costs were billed in accordance with the terms and conditions of the contract and (2) tasks were issued using the most cost efficient pricing methodology. Our audit scope included about $34.4 million in costs billed to TVA from May 20, 2015, through November 30, 2018. This included $20.9 million for cost reimbursable projects and $13.5 million for fixed price projects.In summary, we determined:Trans Ash overbilled TVA $1,592,128 on cost reimbursable projects, including (1) $1,312,051 in unapproved subcontractor costs, (2) $32,895 in ineligible fees associated with subcontractor costs, (3) $156,403 in labor and related costs, (4) $42,929 resulting from the use of lump sum pricing when the purchase order provided for a cost reimbursable compensation methodology, (5) $42,000 in temporary living costs, and (6) $5,850 in equipment costs.Trans Ash billed TVA for construction equipment rented from TVA's Equipment Support Services (ESS) group using the Trans Ash equipment rental rates included in the contract's rate schedule instead of billing TVA for the equipment rentals as a direct pass through cost, as required by the contract's terms and conditions. However, due to the process used by TVA to bill Trans Ash for ESS equipment rented, we could not determine the cost impact, if any, of Trans Ash billing ESS equipment using the contract's equipment rental rate schedule.The use of fixed price or unit rate payment terms on projects caused TVA to pay at least $1.6 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 Trans Ash were not provided for in the contract's terms and conditions.We also noted several opportunities to improve contract administration by TVA. Specifically, we determined TVA paid an additional $137,190 in noncraft labor costs due to conflicting contract language. In addition, we found (1) TVA could not locate any of the exhibits to the contract, (2) Trans Ash did not submit an electronic billing file to the TVA Office of Inspector General (OIG) in the format and frequency provided for in the contract's terms, and (3) the contract's Order of Precedence clause included inconsistent guidance on which documents took precedence in the event of a conflict.(Summary Only)