Case Studies

There’s opportunity for recovery and process improvements within many different contract areas of your business. These case studies illustrate the actual benefits Connolly delivers to its clients.

Scrap value analysis results in recoveries of over $800,000

Audit:  Cost plus contract for manufacture of welded steel structures

Discovery:  Scrap related recoveries and costs were incorrectly assessed in actual cost calculations

Focus:  Reviewed all aspects of the terms and conditions of this multi-year agreement and analyzed each element of cost roll-ups

What We Did:  A diagnostic review of the contractor’s plant operations revealed a significant amount of scrap generation. Upon further investigation, it was revealed that scrap was recovered and sold, but not credited back to our client. Labor burden rates – spread across all aspects of contractor work – included labor to collect and process this scrap to the recovery point. Overcharges occurred in material and labor invoicing.

Value:  Connolly quantified all aspects of scrap related labor cost and scrap recovery revenue. Our analysis resulted in overpayment claims that exceeded $800,000 of recovery opportunity.

Recommendation:  Connolly recommended a schedule of scrap recovery quantities and values should be provided to the client by the supplier on a monthly basis and the supplier’s schedule should be reconciled against the client’s manufacturing logs to ensure accuracy. We also recommended that the material purchase price be adjusted monthly to reflect the resulting scrap recovery value and overpayment amounts should be credited back to the client. Additionally, labor burden rates should be adjusted to correlate with the scrap recovery amounts.