Federal Reports

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)

The OIG performed procedures which were requested and agreed to by Tennessee Valley Authority (TVA) management solely to assist management in determining the validity of the Winning Performance (WP) payout awards for the fiscal year (FY) ended September 30, 2015. TVA management is responsible for the WP payout award data. In summary, we found the FY 2015 WP goals for the enterprise-wide and Strategic Business Unit (SBU) measures were properly approved. Two scorecard adjustment change forms for FY 2015 were approved on February 4, 2015; one change form was approved on March 2, 2015; and one change form was approved on June 24, 2015. The change forms affected seven scorecards and seven measures and/or payout percentages. The FY 2015 goals (i.e., target) for the corporate multiplier measures were properly approved. The actual year-to-date results for the SBU scorecard measures agreed with the respective supporting documentation, without exception. The actual year-to-date results for the enterprise-wide scorecard measures agreed with the underlying support, without exception. The actual year-to-date results for the corporate multiplier measures agreed with the underlying support, without exception. The FY 2015 WP payout percentages provided by the Benchmarking and Performance Analysis organization on November 4, 2015, were mathematically accurate and agreed with OIG calculations.