ML19341A539
| ML19341A539 | |
| Person / Time | |
|---|---|
| Issue date: | 07/29/1976 |
| From: | Mctiernan T NRC OFFICE OF INSPECTOR & AUDITOR (OIA) |
| To: | Gilinsky V, Mason J, Rowden M NRC COMMISSION (OCM) |
| Shared Package | |
| ML19341A503 | List:
|
| References | |
| FOIA-80-516 NUDOCS 8101260329 | |
| Download: ML19341A539 (31) | |
Text
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REFoaT To THE coredecescoR1 un r
s R2V02W OF IV MC/2RDA 7
RELA 700NS DM COMDUCT OF REACTOR SAFETV RESEARCH 1
JULY 1976 i
\\f OFFICE OFINSPECTOR & AUDITOR U.S. Il!UCLEAR REGULATORY COMMISSION I
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. UNITED STATES l[gb k-NUCLEAR REGULATORY COMMISSION j
. WASHINGTON, D. C. 20555 1*.
JUL.2 9197s s., n.,, e / :
MEMORANDUM FOR:
Chairman Rowden
-Commissioner Mason
((
. Commissioner Gilinsky V
Commissioner Kennedy FROM:
Thomas J. McTiernan, Director Office of Inspector and Auditor
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SUBJECT:
NRC-ERDA RELATIONS IN RESEARCH ACTIVITIES As a part of our ongoing audit of Nuclear Regulatory Researc'h activities, we reviewed certain aspacts of the Reactor Safety Research programs.
The review was performed during the period October:1975 through June
.1976. A copy of the audit report is attached.
The purpose of the review was to assess whether the working relationship between'NRC and ERDA, for conducting research programs at ERDA facilities, afforded NRC the degree of control necessary to ensure effective program results.
In a letter to Senator Ribicoff, Chairman, Senate Government L
Operations Committee on February 24, 1975, Chairman Anders made a-commitment to review management arrangements with ERDA to ensure clean
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lines of authority and responsibility for program direction and fiscal accountability. We believe' our report will be helpful in this assessment.
4 Relationship to GA0 Audits Although the scope of the review touched upo'n those areas covered by the GA0 report on " Development of Interagency Relationships in the Regulation i
of Nuclear Materials and Facilities," it differs from the GA0 review.
The GA0 review consisted of a theoretical analysis of the interagency relationship that has evolved between NRC and ERDA in relation to the criteria set forth in the Energy Reorganization Act of 1974 for operation of NRC programs at ERDA facilities.
Our review, which included the above analysis, was directed to ascertain how in practice NRC and-ERDA interact on a day-to-day basis to further NRC's research objectives.
This was accomplished through voluminous file reviews and extended discussions, both formal and informal, with ranking and other NRC personnel most knowledgeable with NRC-ERDA relations.
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9 Currently, GA0 is conducting a review of the Plenum Fill Experiment (PFE),. in an effort to identify the reasons for the cost overruns and schedule delays.
Part of this review will include an analysis of the PFE within the context of the interagency relationship between NRC and ERDA for conduct of NRC programs at ERDA facilities. Although this GA0
[i review, with respect to PFE, will be much broader than the OIA review, we believe that their findings, conclusions, and recommendations on the working relationship between NRC and ERDA will be similar to ours.
4 Summary of Findings Our review showed that NRC and ERDA need to improve procedures for conducting their research programs which require ERDA to construct large experimental facilities for NRC's use.
In order for this to be accomplished, a clearer and more stable definition of program responsibili. ties should be agreed upon between NRC and ERDA that establishes, among other things, lines of authority, responsibility, and accountability for program management.
In particular, the working relationship should provide for rapid and direct program direction by NRC to ERDA laboratories in matters in which NRC has primary responsibility, such as conceptual design, test planning, and test operations.
Our review covered four research projects (LOFT, PFE, PBF, and Semiscale). These projects represent about 65 percent of NRC's Fiscal Year 1976 cost of light water reactor safety research.
The audit sets forth certain factual findings indicative of the problems that have arisen, which include difficulties NRC had in the following:
effecting a procurement hold; resolving legal and funding problems; obtaining information on PFE; and communicating with ERDA contractors.
The audit recognizes, of course, that these projects were initiated by~
AEC and were inherited by NRC when the regulatory side of AEC was established as a separate agency.
It also recognizes that there are other NRC research projects in which ERDA has not had a major program responsibility, i.e., design and construction, that have been working well.
For example, although our reviews showed that problems had been experienced with LOFT and PFE, the relationship with ERDA on PBF and Semiscale is working fairly well since they are both out of the design i
. and construction phase and ERDA has no major program responsibility.
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Nevertheless, NRC-ERDA relations have had over a year to develop and, unless.the concerns and problems reflected in the report are confronted, precedents could be established which may be difficult to reverse. The audit concludes that the problems set forth in this report are repre-sentative of the problems NRC could expect to encounter in any major research program conducted by ERDA in which ERDA undertakes and has the f
e program responsibility for design and construction.
v In so concluding, it is recognized, of course, that in the past such matters as the lack of adequate design criteria and the need to change the scope of research projects created problems in project management.
The audit also concludes that, as was stated by the officials most knowledgeable in these matters, the NRC-ERDA confirmatory research arrangement as intended by the Energy Reorganization Act of 1974 is still preferable at this point to other possible alternatives such as:
arrange with ERDA for NRC to contract directly with the laboratories for some types of research; contracting research only with private contractors; proposing legislation to transfer to NRC, ERDA facilities which are dedicated to doing NRC research; and NRC budgeting funds to build new research facilities.
Recommendation The report recommends that NRC continue to negotiate with ERDA to:
further clarify each agency's responsibility; simplify the organizational working arrangement; and
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ensure NRC direct access to ERDA laboratories.
Agency Conments The Executive Director for Operations agreed with the findings, con-clusions, and recomendations of the report (see Appendix III) and informed us that he has directed a letter to ERDA proposing the formation of a joint task force to look into the NRC-ERDA working arrangement for conducting NRC research projects.
ERDA has informally agreed to this.
The task force would:
to 1.
Look at' the labs where interrelationships are working and find the reasons behind the success (i.e., compare this to areas experiencing difficulties);
2.
Look at the procedures involved for implementing research projects
~(not the status of programs);
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Highlight these areas where there are procedural or management problems that need resolution; Make joint recommendations for improvements.
4.
01A believes that, if the task force is implemented and NRC and ERDA make a good faith effort to adhere to the intent of the Energy Reorgani-zation. Act of 1974, a satisfactory working relationship could result.
0IA plans to follow up on this matter upon completion of the task force report and after a reasonable period of time for its implementation has transpired.
Attachments:
As Stated cc: 1.ee V. Gossick Heads of Offices i
Contact:
G. Messenger, OIA l
B. Rosensteel, 0IA 402-7856 l
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9 TABLE OF CONTENTS PAGE
-INTRODUCTION 1
SCOPE OF REVIEW l
LEGISLATIVE BASIS FOR NRC PROGRAMS 2
w NRC AND ERDA MANAGEMENT OF REACTOR SAFETY RESEARCH 3
FINDINGS 5-NRC AND ERDA NEED TO IMPROVE PROCEDURES FOR CONDUCTING RESEARCH PROGRAMS 5
AGREEMENTS NEED TO BETTER CLARIFY EACH AGENCY'S PROGRAM RESPONSIBILITIES 6
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LOFT Memorandum Lacks Clarity and Specificity 6
LOFT Agreement Contains Contradictory Provisions 9
Funding Arrangements Not Clear 9
Review Responsibility Not Spelled Out Under the LOFT Agreement 12 NRC NEEDS A MORE DIRECT WORKING RELATIONSHIP WITH ERDA LABORATORIES 13 The LOFT Agreement Generally Did Not Permit hRC Direct Working Relationship With ERDA Labs 13 Complex Working Arrangement With ERDA Makes NRC Control of Research Projects Difficult 14 NRC's Difficulty in Effecting a Procurement Hold 16 NRC's Difficulty in Resolving Legal and Funding "atters 18 NRC's Difficulty in Obtaining Information on PFE 20 D
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. PAG 8 EFFORTS'TO IMPROVE RELATIONS WITH ERDA HAVE BEEN MADE BUT FURTHER IMPROVEMENTS ARE NEEDED
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' CONCLUSION 24 w.
RECOMMENDATION 24
- AGENCY COMMENTS 24 APPENDIX I - LOFT MEMORANDUM 0F UNDERSTANDING
' APPENDIX II - ORGANIZATIONAL ARRANGEMENT FOR CONDUCT OF RESEARCH AT ERDA FACILITIES APPENDIX III - LETTER FROM EDO DATED JULY 29, 1976 i
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OIA REPORT 0_1 REVIEW 0F NRC-ERDA RELATIONS IN CONDUCT OF REACTOR SAFETY RESEARCH j
INTRODUCTION NRC policies and programs are directed toward-ensuring that the planned
- and actual growth of nuclear power facilities occur with adequate assurance of public safety.
This objective is accomplished through licensing the industry and by conducting reactor safety research which is carried out by NRC's Office of Nuclear Regulatory Research (RES).
The overall objective of the reactor safety research program.is the development of analytical methods to determine the safety of commercial nuclear power reactors. The safety of commercial reactors is necessary in accomplishing the national goal of self sufficiency in energy.
RES is operating with a planned $106.7 million budget in Fiscal Year 1976._ Of the total budget, $88.3 million is directed towards Reactor Safety Research of which approximately $79.0 million is allocated to the Light Nater Reactor (LWR) Safety Research Program. Most of the LWR safety research' program is conducted through interagency agreements with the Energy Research and Development Administration (ERDA) for research at its national laboratories.
The research programs sponsored by RES span the entire spectrum of the licensing and enforcement responsibilities of the Commission, and provide the information base for:
More systematic and comprehensive licensing policies and programs; Improved methods and procedures for licensing review, inspection and enforcement; and Improved regulations and guides.
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SCOPE OF REVIEW Our review, performed from October 1975 through June 1976, was directed towards determining whether the working relationship between NRC and ERDA for conducting NRC programs at ERDA facilities afforded NRC the degree of control necessary to ensure responsible program management over NRC monies and projects and objectives and responsibilities of both NRC and ERDA were adequately _ defined.
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9 During our review we looked at pertinent documents and records, and had discussions with knowledgeable NRC officials in Reactor Safety Research and those most familiar with NRC-ERDA relations in this field. More
.specifically, our attention was directed to a review ~of:
I The Energy Reorganization Act of 1974 and its legislative history, j
to ascertain Congressional' intent concerning ERDA's role in furthering NRC's research objectives; i
The Memorandum of Understanding on LOFT and its impact on LOFT and j
other similar research projects; and Research projects which are-a combination of both facility and experiment where ERDA has a clear responsibility for the design and construction of the research facility.
Presently, there are four such projects. The following table shows the NRC costs for these projects for Fiscal Year 1976.
NRC COSTS FOR FISCAL YEAR 1976 (Includes Transition Quarter) i Project
($ in millions)
Loss of Fluid Test (LOFT) 529.6 j
Power Burst Facility (PBF) 14.1 Semiscale 4.7 j
Plenum Fill Experiment (PFE) 3.9 I
TOTAL
$52.3 These four projects were initiated by AEC and inherited by NRC when the regulatory side of AEC was established as a separate agency. They 1
represent about 65% of the total cost of $79 million allocated to light water reactor safety research.
In addition, the NRC budget for Fis al Year 1977 contains funds to support the completion of a detailed con-ceptual design for a three-dimensional core flow distribution test facility.
Should a current feasibility study dictate such a facility be developed, ERDA would be responsible for funding the facility design, construction, and check-out. The projected cost for the new facility is approximately $100 million.
LEGISLATIVE BASIS FOR NRC PROGRAMS The Energy Reorganization Act of.1974 replaced the Atomic Energy Com-mission (AEC) with two new agencies - the Energy Research and Development 4
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Administration (ERDA) to carry out research and development on all forms of' energy and the Nuclear Regulatory Commission (NRC) to regulate all civilian nuclear activities in the interest of public health and safety.
In establishing the NRC as a separate agency, Congress recognized the need to provide it with the independent capability for developing and analyzing information related to reactor safety, safeguards, and environmental protection in suppcrt of its licensing and related regulatory functions.
Section 205 of the Energy Reorganization Act of 1974 established within NRC, the Office of Nuclear Regulatory Research (RES) to conduct and support confirmatory research to fulfill the needs and purposes of the Commission.
RES is responsible for recommending, engaging in, and contracting for research activities that are necessary for the effective performance of the Commission's licensing and regulatory process.
Although NRC can contract with ERDA for the performance of safety research, Congress intendri that RES would provide NRC with an in-house capability to independentiy confirm the safety and security of commercial reactors and other nuclear facilities subject to licensing and inspection by the Commission. According to Senate Report 93-980, of the Government Operations Committee, dated June 27, 1974, the establishment of NRC:
...will, for the first time, give the Federal regulators of the nuclear power industry an in-house research capability that is independent of the Federal policies and programs which promote the development of the industry."
All of the'AEC's research facilities were transferred to ERDA by Section 104 of the Act.
Concerning their role, Senate Report 93-980 states:
"the Committee intends that those facilities now used primarily for performing regulatory research
...should be operated by ERDA primarily for NRC managed research.
These facilities are designed to test for potential defects in light water reactors
- the most common commercial reactor being licensed and inspected by the Regulatory Division of the AEC.
They will have little use in ERDA's reactor development programs..."
NRC AND ERDA MANAGEMENT OF REACTOR SAFETY RESEARCH The Energy Reorganization Act of 1974 requires ERDA to cooperate with and support the NRC, by furnishing necessary research services to NRC on a reimbursable basis to enable the Commission to carry out its con-firmatory assessment responsibilities.
In recognition of this require-I
_4 ment, NRC and ERDA have developed a working arrangement for operation of NRC programs in ERDA facilities.
Individual memoranda of understanding are to be prepared between NRC and ERDA for NRC's use of rest; arch facilities at ERDA laboratories. These memoranda will be supplemented, as needed, by staff level agreements concerning such areas as funding o
procedures, legal matters, administrative procedures, etc, On August 8, 1975, NRC and ERDA consumated a tiemorandum of Understanding establishing a formal working relationship for construction and operation of LOFT.
The LOFT memorandum specified broad principles and general working relationships between NRC and ERDA fcr the conduct of LOFT.
The memo-
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randuu gives NRC the responsibility for program direction of the analytical and experimental programs at LOFT, while ERDA is given overall responsi-bility for cor,struction and management of contractor operations. But, these legislative imposed responsibilities have not been defined as to the specific authority to be prescribed to each agency's function.
One of the major points of contention in the management arrangement discussions for the conduct of NRC research at the ERDA facilities was the degree to which NRC would have control over its programs.
It was eventually agreed that ERDA would have management authority for com-pletion of facility fabrication and be responsible for funding it and any major modifications to it and for management of ;ontractor operations.
NRC would have management responsibility for the experimental and analytical program. Under this arrangement, NRC would be responsible for establishing the functional requirements to conceptualize the design of the research facility to accommodate its experimental and analytical programs. NRC would provide funds to support completion of a detailed conceptual design.
ERDA assumes responsibility and funding for the preliminary and detailed design, facility construction an'd facility check-out. During the design, physical construction, and check-out period, NRC is responsi-ble for reviewing the design, planning in detail the experimental program, and designing and developing the instrumentation for the facility.
At the time of facility turnover, if the preoperational test demonstrates that the facility will perform to the specifications set forth by NRC, NRC would assume responsibility for program direction while ERDA manages the operation of the facility.
Since the LOFT Memorandum of Understanding (see Appendix I) will serve as the model after which future memoranda of understanding are to be patterned, it is, in effect, the basic document defining the responsi-bilities, roles, and operating procedures for carrying out NRC research at the ERDA laboratories.
It also contains the management organizational arrangement (see Appendix II) for NRC programs where ERDA is responsible for the design and construction of the research facility to be used by NRC.
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- FINDINGS NRC AND ERDA NEED TO IMPROVE PROCEDURES FOR CONDUCTING RESEARCH PROGRAMS Our review showed that NRC and ERDA need to improve procedures for conducting research programs which require ERDA to construct large experimental facilities for NRC's use. Also, our review showed that there is a need to improve NRC's working relationship with ERDA. We found that:
Agreements need to better clarify each agency's program responsi-bilities; NRC needs a more direct working relationship with ERDA. laboratories; and Efforts to improve relations with ERDA have been made but further improvements are needed.
In addition, clear lines of authority, responsibility, and account-ability for program management need to be established.
Further, the working relationship should provide for NRC to maintain a capability to predict, review, assess, and maintain project costs and performarce j
experience.
In reaching these findings, we recognized that:
These projects were initiated by AEC and were inherited by NRC when the regulatory side of AEC was established as a separate agency; There are other NRC research projects in which ERDA has not had a major program responsibility, i.e., design and cnnstruction, that 1
have been working well; and In the past such matters as the lack of adequate design criteria and the need to change the scope of research projects created
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problems in project management.
f;evertheless, f!RC-ERDA relations have had over a year to develop and, unless the concerns and problems expressed herein are confronted, precedents could be established which may be difficult to reverse.
We believe that the problems set forth below are representative of those f;RC could expect to encounter on any major research program conducted by ERDA in which ERDA undertakes and has the responsibility for design and construction.
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. AGREEMENTS NEED TO BETTER CLARIFY EACH AGENCY'S PROGRAM RESPONSIBILITIES Our review showed that NRC and ERDA have differences of opinion as to each other's program responsibilities. He noted that efforts have Seen made by NRC and ERDA to establish procedures to govern interagency activities but have not been' completely successful in eliminating differences. We believe that in ordes to lessen differences of opinion between NRC and ERDA the agreements need to be:ter clarify each agency's program responsibility.
LOFT Memorandum Lacks Clarity and Specificity Our review showed that, while the LOFT agreement was meant to set the pattern for all working relationships with ERDA, it d J not clearly define each agency's control or responsibility over research programs.
In negotiating the LOFT Memorandum of Understanding, the major point of disagreement was the degree to which NRC would have control over its programs.
It was agreed that (1) ERDA has management authority for completion of LOFT and management of contractor operations; while (2) NRC has management responsibility for the experimental and analytical research programs. This basically is consistent with the legislative intent of the '74 Act.
But the agreement lacks further clarification as to the extent of authority to be exercised by either agency in carrying out their legislatively imposed responsibilities.
The absence of clari-fication results in differences of opinion as to the degree of control to be exercised by each agency.
l For example, we found that on April 4, 1975, the ERDA Richland Operations Office had taken action to preclude NRC from direct communications with the contractor, thereby reducing NRC's ability to provide program direction rapidly and directly to the contractor.
This impacts upon NRC's ability to manage its projects to assure desired results.
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The action by the Richland Operations Office was confirmed in a letter to the ERDA Reactor Safety Research Coordination Group (RSRC) on the i
management of the Plenum Fill Experiment (PFE) program.
The letter stated:
"it is imperative that, if we are to be responsible for the management of the contractor's day-to-day activities on this program, we must have sufficient authority to do so and NRC/ERDA Headquarters com-munications must not be so handled as to dilute or negate that authnrity."
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, Richland, therefore, established the following communication channels:
No formal communications from ERDA/NRC Headquarters will be addressed to the contractor; Information copies of NRC correspondence to ERDA/HQ may be sent to Richland Operations Office but not to the contractor.
The Richland Project Engineer will determine which items may be given as advance
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information to the contractor; and The Contractor will be permitted to provide information copy coverage to ERDA/HQ and NRC of technical and programmatic documentation provided to the Richland Operations Office.
We also noted that on May 25, 1976, the ERDA Idaho Operations Office initiated action to climinate NRC's direct contact with the contractor on all current NRC reactor research programs (LOFT, PBF, Semiscale) and to all proposed new NRC reactor research projects and programs.
This action was contained in two letters to the contractor from the ERDA Idaho Operations Office Manager.
The letters stated in part:
"The ID (Idaho Operations Office) staff has been directed to begin daily contacts with contractor program groups and make themselves readily available to discuss any and all matters related to the programs.
This will mitigate the need for direct *** (contractor),
HQ, and NRC contacts."
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" Basic to lines of communication arising out of a Government contract is that the contracting officer and his duly authorized representatives are the only ones authorized to provide approval and direction to the contractor."
"***The contractor should direct to ID its correspondence regarding technical and program direction as well as information related to conduct of programs within'the contract scope; the addressee will be the ID lianager***.
Official correspondence outside this contractually established method should be curtailed.
Copies to several members of the ID staff, ERDA Headquarters staff, and NRC are unnecessary.***"
"***The ID staff, by technical analysis, telephone exchanges and official correspondence, if necessary, will be responsible to assure that proper coordination is W
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. effected with HQ and NRC.
ID will then respond to 'its contractor with information copies to HQ and NRC as appropriate. This information copy, by its content and date, will assure the HQ and NRC staffs that the matter has been properly o
and promptly acted upon.
I wish to note here that ERDA is obligated to perform certain reactor 1
safety and other research work for NRC, and that NRC provides its requirements to ERDA; these requirements will be communicated to *** (the contractor) by ID.***"
"It is anticipated that all HQ-originated corre-spondence also will be addressed to ID.
Copies of correspondence and verbal communications received by the contractor from sources other than ID will not be considered official guidance from the contracting officer or a duly authorized representative unless and until a further written contract admini-stration-delegation is provided to you."
"Similarly, other direct contacts by *** (contractor) through telephone or personal visits to HQ and NRC, at contractor initiative, would not appear necessary except unless invited or approved by ID counterparts, which can be done on an informal basis."
The contractor acted on the letters by issuing implementing instructions to his personnel to eliminate direct contact with NRC.
The instructions in part stated:
"All correspondence relative to any and all ***
(contractor) programs is to be addressed to ***
(the Operations Office) ***.
There shall be no carbon copies of any communication between *** (the contractor) and ERDA-Headquarters except those internally to *** (the contractor).
No outgoing ohone calls except to ERDA-Operations Office counterpart will be originated by ***
(contractor) personnel.
Incoming phone calls will be received and subject matter discussed and noted.
No commitments, no agreements, and the response must be through the I
ERDA-Operations Office. *** Visits to the site on the part of NRC, ERDA, or anyone else shall be only on invitation of ERDA."
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On June 18, 1976, a message was sent to RES from ERDA Idaho Operations Office, which in effect rescinded the May 25 communications, giving NRC access to the contractor to provide technical program direction. However, information as to scope, schedule, and cost must still be processed through ERDA.
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We also noted that GAO in its report, " Development of Interagency Relationships in the Regulation of Nuclear Materials and Facilities" indicated that the LOFT agreement lacked clarity.
The report showed that ERDA remains responsible for some functions under the agreement which impacts on NRC's ability to manage its LOFT research projects.
LOFT Agreement Contains Contradictory Provisions Under the LOFT agreement [see paragraphs 2 (b), (c), and (d)] NRC has responsibility for formulation of research programs with the ERDA contractor to include the scope, scheduling, and funding, and the quantitative and qualitative aspects of research projects.
However, NRC is required to submit to ERDA each planned progr6m and ERDA will then (1) determine whether the resources are adequate to carry out the program within the defined scope and schedule; (2) assure it has adequate resources to carry out its responsibility; and (3) assure that work for NRC does not encumber requirements for ERDA programs. This arrangement makes NRC's programs subject to ERDA's approval in terms of scheduling and resources available. A substantial change in any of these could affect the program direction of NRC's research efforts.
Funding Arrangements Not Clear (Note a)
We found that the agreements were not clear as to funding responsi-bilities.
For example, neither the LOFT memorandum nor the PFE draft memorandum cover obligational authority. A lack of specifics concerning these matters presents problems.
For example, in the case of the PFE project:
Richland Operations Office takes the position that they will not 1
fund preoperational testing; NRC does not have the funds for such testing; and RSRC (ERDA) has submitted a budget which shows that ERDA will fund preoperational testing, design, and construction through Fiscal Year 1979.
Note a: An NRC-ERDA agreement on Funding Responsibilities was agreed to by the NRC and ERDA Controllers on June 11, 1976.
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. In addition, we noted that the ERDA Assistant Administrator for Admini-stration, iri a January 21, 1976 letter to the NRC Executive Director for Operations, stated that:
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...'ERDA funding for PFE will be concluded with the funding levels presently reflected in the j
FY '77 Budget to Congress."
Of course the PFE Project has been terminated and funding is not cur-rently a problem, but the question as to which agency would fund costs above the FY '77 budget request had not been resolved.
To illustrate the difficulties NRC had with ERDA due to the funding responsibilities not being clearly set forth in the case of PFE, the chrono 1cgy of correspondence follows:
February 10, 1976 - NRC to ERDA "We understand your budget request for FY 1977 contains funds to be obligated S e design, construction, and facility turnover activities for the PFE.
We would expect that any additional outlays in these areas would be borne by ERDA, since our budget projections do not include the assumption of any PFE construction costs."
February 24, 1976 - ERDA to NRC t
"...We are not in control pf the requirements and
-j design for this facility and cannot accept an open-ended funding liability.
NRC should plan on providing any funds required above the levels authorized and appropriated for ERDA in our 1977
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budget."
On March 9,1976, the Director, Nuclear Regulatory Research, summarized in an Information Report (SECY 76-137) to the NRC Commissioners, the effects of the ERDA decision that ERDA funding for design and con-struction for PFE will be concluded with the funding levels reflected in the FY '77 Budget to Congress.
The Director stated:
"ERDA's budget request for FY 1977 is $5.5M.
If no further ERDA funds are provided for design and construction, NRC's budget would have to be augmented by approximately $7M in FY 1978 and perhaps up to
$5M in FY 1979 depending on thc schedule and cost estimates of the new 1/3 scale facility."
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, Another example which illustrates the lack of funding and obligational responsibility for the PFE project concerns the replacement for boilers which were lost in a train accident. The correspondence on this matter follows:
January 9, 1976_- RL to RSRC "If we are to obtain replacement boilers for those recently damaged in transit at minimum cost and no schedule impact...will require additional FY 1976 obligational authority from either ERDA or NRC in the amount of $504,000."
"It should also be emphasized that... additional FY 1976 obligational authority in the amount of a
$1.352'million will be needed if the schedule and estimate provided in our October 17, 1975 memorandum is to be met...
A similar shortage of obligational authority also exists in the mini - 1976 budget period."
January 9, 1976 - ERDA Office of the Controller to'RL "ERDA FY 1976 obligational authority should not be used to procure PFE boilers since ERDA is not authorized to fund PFE this year.
If procurement is to be made in FY 1976, NRC obligational autnority should be obtained."
January 9, 1976 - ERDA Nuclear Energy Branch to R5RC-
"...the contractor and RL identified a need for approximately $2.8 million in additional obligational authority in FY 1976 for PFE.
Because of rumors we had heard from NRC and RSRC that the ERDA Controller had agreed to provide this obligational authority, we asked the Assistant Controller for Budget if he was aware of such a commitment.
We received a direct response to our inquiry from the ERDA Controller that he has not made such a commitment to provide additional obligational authority in FY 1976 for PFE."
January 19, 1976 - RSRC to ERDA Headquarters The January 13-14, 1976 meetings between NRC and RSRC concluded:
...that a funding problem exists for FY 1976 I
, (including mini-year) witn respect to obligational authority.
Neither organization has a solution at the present time.
RSRC has contacted the RL Controller's Office to obtain specific information to permit a valid assessment of the situation; l
however, final resolution must be achieved with the assistance and agreement of both the NRC and ERDA Controller."
In summary, a funding problem truly exists; however, the exact magnitude is not currently defined.
NRC acknowledges the problem but notes that they have no additional funds.
The ERDA Controller's Office, likewise acknowledges l
but notes no funds."
Review Responsibility Not Spelled Out Under the LOFT Agreement Our review of the LOFT memorandum disclosed there is no provision for NRC to review the contractor's performance on the research project.
In addition, there was no provision in the agreement for ERDA to conduct such reviews. We believe that it is important for NRC to have authority to review program results to assure value received for money spent.
This is important when there is not a one-to-one relationship between NRC and the contractor and problems can not be readily solved because of the many tiers of ERDA's management organization.
We believe that the difficulties with the LOFT and PFE projects can be attributed, in part, to the ERDA Operations Office not performing effective reviews of contractor performance.
Although not included in the agreements, but under current delegations of authority, the ERDA Operations Office should conduct reviews to assure that contractor resources are utilized in the most efficient manner and that assigned NRC funds are used in a manner consistent with approved objectives, schedules, and cost estimates.
We noted, however, that the NRC/ERDA Task Force appointed to investi-gate the PFE overrun and schedule delay, identified the following factors as contributing, in part, to the mismanagement of the PFE project:
the Richland Operations Office has not managed or controlled the program to date;
. the Richland Operations Office did not properly evaluate the, contractors cost estimate; the contractor omitted $2.8 million from their April 1975 cost estimate; and the contractor initiated a $2 million redesign without approval.
3 In commenting on the serious LOFT management problems and continued announced cost overruns, the Director, Division of Facilities and Construction Management, within ERDA, stated in a letter to the ERDA Assistant Administrator for Administration on February 3,1976, that:
"*** regular management audits of general performance and progress on corrective actions are necessary to protect against the procrastination and short-term
' showcase' dedication to improvement that has occurred in the past."
NRC NEEDS A MORE DIRECT WORKING RELATIONSHIP WITH ERDA LABORATORIES Although paragraph 8 of the LOFT agreement required ERDA to provide for direct NRC personnel access to the ERDA facilities to enable NRC to fulfill their experimental program responsibilities, we found that the working arrangement under the agreement generally did not permit NRC to have direct working relationship with ERDA laboratories. We also found that the actual working organizational arrangement for LOFT and PFE l
research projects were so complex as to inhibit effective management of these projects. We believe that NRC and ERDA should devote sufficient effort to simplifying the organizational arrangement.
The LOFT Agreement Generally Did Not Permit NRC Direct Working Relationship With ERDA Labs Our review of the LOFT agreement and discussions with NRC personnel indicated that NRC accepted the workinc arrangement with ERDA without requiring direct working relationship with the labs, except in the initial formulation of the program.
We noted that NRC presented two alternatives to ERDA for working arrangements to be entered into, one of which would have permitted NRC to contract directly for the performance of its research with the ERDA labs.
However, these were not acceptable to ERDA.
ERDA responded with a third alternative which did not permit NRC direct working relationship with the labs. This alternative w:s eventually agreed upon by ERDA and NRC.
D We noted that a report to the Commissioners (SECY 75-66) on the manage-ment agreement for conducting URC's LOFT research recognized the fol-lowing shortcomings in the working arrangement which NRC entered into:
separates responsibility for budgeting and managing the work; diffusion of responsibilities could result in two agency hierarchies having to decide issues on a compromise basis; and NRC technical decisions are subject to ERDA approval (could create alossofindependence).
We noted that NRC contracts with ERDA for completion of the LOFT research facility and for performance of the LOFT experimental program defined by NRC. The same working arrangement applies to NRC's research programs (PFE, PBr, and Semiscale) at the various ERDA laboratories.
ERDA budgets directis for the fabrication of the facility and NRC budgets for the performance of the research. The ERDA Operations Office acts as the contracting agent to which the contractor (ERDA Laboratory) is accountable and ERDA Headquarters is responsible to NRC for the performance of the work. Appendix II shows the organizational arrangement agreed to by ERDA and NRC.
This agreement with ERDA does not provide a clear line of authority for control of NRC's research projects.
Further, one NRC Project flanager told us that:
"NRC has no direct control over the expenditure of funds since the operation offices are accountable to ERDA for their performance and not to NRC."
i We found that the approach taken by RES has been to staff research programs with a few highly qualified managers who provide the necessary initial technical guidance to the contractors.
The contractor is responsible for the product and has the authority to organize and direct the work.
If RES desires to effect a change in the program schedule, scope, or in dollar amount involving work performed at the ERDA laboratories, RES must work through the ERDA/RSRC Group.
Complex Working Arrangement With ERDA Makes NRC Control of Research Projects Difficult The working arrangement between NRC and ERDA is so complex that it creates difficulties in communicating and coordinating research projects in an effective and efficient manner. The organizational arrangement O
e 9
. consists of two agencies with varied interests and includes multiple tiers' of authority and responsibility.
fRC at various times needs to deal directly with ERDA Headquarters, ERDA Operations Offices, ERDA Reactor Safety Research Coordination Group (RSRC), and the contractors operating the ERDA Laboratories.
=
We found that due to this arrangement,t1RC cannot provide program direction rapidly and directly to the ERDA lab'ratories which are o
performing the work but must process any planned or corrective action related to work scope through these tiers of organizational structure.
In discussing the working arrangement, an NRC official told us that all items now must go through RSRC which results in delays, confusion, and bureaucratic red tape.
We were also told by an NRC Project Manager in relation to the complexity of the organizational arrangement that:
"The project management patterns that exist...make clear communications next to impossible.
There are too many organizations, each with their own interest, in the management pr.ocess providing too many checks and balances. Management responsibility is diffuse which increases the potentiality of problems.
It requires the activity of all four entities within the management system to effect a course of action."
An flRC official told us'that:
"The problems with the PFE dan be attributed to the management system surrounding the project. For that matter, for any projects where ERDA has direct involvement through the budget process and a clear cut responsibility for design and construction, problems can be expected because ERDA attempts to assert their independence. The management system which has evolved around these construction projects is not amenable to good management techniques."
We noted that a study conducted by the University of California also concluded that NRC's working arrangement with ERDA was complex and not workable.
The University of California, a contractor at the ERDA Los Alamos Scientific Laboratory, was appointed by the Director of NRC's Office of Nuclear Regulatory Research to make a technical management review of the thermal fuels behavior program at the Power Burst Facility.
The study, forwarded to RES on June 30, 1975, s'tated, in relation to the complexity of the organizational arrangement and the ability of NRC to provide program direction:
O gamg mg v 3 J w e M e m A A u _n
4... multiple interfaces whi.ch exist between the funding agency (NRC) and the contractor conducting the experiments *** 1ead to difficulties and frustrations. While we cannot identify specific schedule slippage or cost escalations due to this situation, we believe it does affect *** (the contractor) performance. For example, the long time spent in solving the nuclear oscillation question for the reactor, namely one year, appears to be a typical result of the different agencies being responsible for different aspects of the program without anyone having direct "go, no-go" re,ponsibility for the whole program and facility.
In making this observation, the Task Force is aware of the nature of the interagency relations and the-lack of a formal agreement between ERDA and NRC.
Nonetheless, it seems highly desireable to expend maximum efforts to simpiify the reporting channels.
He see no reason why technical program information and direction should be channeled through ERDA offices either at the Washington or Idaho level."
Our review of NRC's working arrangement with ERDA showed that it was so complex that NRC had difficulties in:
effecting a procurement hold; resolving legal and funding problems; and obtaining information on PFE.
NRC's Didficulty in Effecting a Procurement Hold We found that NRC had difficulty in in'tiating a PFE procurement hold because of the organizational arrangement.
NRC attempted to place a procurement hold on approximately $800,000 worth of materials for the PFE until analysis could be made of the serious technical problems and reasons for the significant cost escalation experienced. A total of 139 days elapsed between NRC's original request for procurement holds and the time the contractor implemented.these holds.
In the meantime, the incurred costs were charged to NRC.
A chronology of events follows:
August 21, 1975 NRC requested ERDA Operations Office at Richland (RL) to place a procurement hold on all material items dependent on com-pletion of the PFE test bed design and stress analysis.
August 29, 1975 RL did not implement the procurement hold as requested but responded to NRC that it had initiated a review of the situation.
v -
September 5, 1975 RL directed the contractor to take no specific action relative to the PFE procurement hold indicating that further guidance would be provided.
September S, 1975 ERDA Reactor Safety Research Coordination Group (RSRC) instructed RL to place pro-curement holds on all materials and equip-ment which might be affected by ongoing design and stress analysis and that a listing of these be provided to ERDA Headquarters and NRC by September 30, 1975.
RSRC further stated that if RL agrees, ERDA Headquarters' concurrence would be required on all procurement release decisions.
September 11, 1975 RL directed the contrcctor to hold pro-curement of only those items to be de-livered after FY 1976, although NRC had requested a hold on all materials without regard to fiscal years.
September 17, 1975 RL informed RSRC that they did not concur with the procedure which required ERDA Headquarters' concurrence on procurement release decisions.
RL further stated that: " responsibility for releasing procurement holds must be retained by this office if we are to continue to execute cur normal function of construction management for projects at this site."
October 1, 1975 NRC requested RL to initiate procure-ment holds as called for in the RSRC position stated on September 5, 1975.
October 31, 1975 The contractor's Project Manager, in PFE review meeting held in Richland, stated that procurement holds had not been implemented because RL had not officially directed the contractor to do so.
November 21, 1975 RL, in a PFE meeting, told the contractor that future procurements would require RL approval.
. January 7, 1976 RL formally directed the contractor to implement the requested procurement hold and advised the contractor that no new procurements shall be initiated without RL approval.
The contractor initiated holds on all subject materials as directed.
f NRC's Difficulty in Resolving I
Legal and Funding Matters We found that the untimely resolution of legal and funding problems associated with damaged equipment occurred because of the complex organizational working arrangement with ERDA.
3 PFE equipment worth $703,000 was damaged beyond repair in a train derailment on November 7, 1975.
Because of the management and funding arrangement, NRC could not unilaterally resolve the legal and funding problems associct2d with the accident since it lacked jurisdiction over the incident, and it could not direct the PFE contractor without the concurrence of both RSRC and RL.
According to an NRC Project Manager, the action by the ERDA Controller to refuse Richland obligational authority raised a fundamental problem.
ERDA Richland Operations Office needed obligational authority to procure replacement equipment for those damaged in shipment if their schedule and October cost estimate for the PFE was to be met.
Fortunately, program redirection temporarily alleviated the need to replace the j
damaged equipment.
However, the action taken by the ERDA Controller demonstrates the need to clarify how funding is to be obligated.
Further, the untimely reso'lution of this matter and the inability of NRC to work directly with the contractor could in the future bring about an increase in project cost and result in a schedule delay.
A chronol 6gy of events follow:
November 7, 1975 Equipment worth $703,000 was signi-ficantly damaged in a train derailment while in transit to the contractor.
The equipment consisted of two boilers and auxiliary equipment.
November 8, 1975 -
At least fifteen communications regarding to the accident or the destroyed equipment January 28, 1976 were transmitted among the following organizations:
HRC, ERDA Headquarters, RSRC, RL, and the contractor.
At the end of this period, some of the unresolved problems which remained were:
O 1
q Liability had not been placed; flo claims for damage had been filed; 1
ERDA Headquarters would not grant RL the obligational authority to replace the damaged equipment, thereby losing a salvage offer. Meanwhile, replacement cost was increasing at the rate of approximately 1% per month; and RL would not be able to replace the equipc.ent in time to keep the project's start-of-testing date from slipping.
January 29, 1976 Because of the inability to establish attendant responsibilities to address the handling of the accident and replacement l
costs for the damaged equipment,flRC re-quested RSRC assistance in initiating an i
agreement in principle to clearly address the following items and to determine the i
responsibilities of each group involved.
fleed for an overall plan. The plan would include conducting a complete investigation of the accident, deter-mining the liable party; and Need for replacement of equipment.
l The destroyed equipment needs to be j
replaced at no cost to NRC, on a schedule which would not defer the planned start-of-testing in 1978.
February 6, 1976 RL was reviewing flRC's January 29, 1976, request. While awaiting ERDA Headquarters' guidance, RL:
Placed a hold on any replacement of damaged equipment; j
Directed the contractor to dispose of l
damaged equipment; and Arranged to file a claim against the Union Pacific Railroad.
9
, February 20, 1976 ERDA Headquarters informed,NRC that it would assume overall responsibility for handling the train accident problem.
June 14, 1976 Contractor filed claim effective 2/11/76, but NRC received information copy of the letter 5/24/76.
NRC has not as yet re-ceived sufficient details concerning status of litigation.
NRC's Difficulty in Obtaining Information on PFE The present organizational working arrangement with ERDA makes it difficult for NRC to obtain information.
For example, we found one case, which may be an isolated incident., where an NRC sponsored consulting firm experienced the following difficulty in obtaining the necessary technical information on PFE for its study from ERDA.
The elapsed time between the initial request for the information and the final approval by ERDA for access to the contractor was over four months.
September 4, 1975 A consulting firm contacted the contractor requesting technical information to be used in an NRC sponsored study of the PFE project.
September 4, 1975 The contractor notified RL of this contact.
September 10, 1975 RL notified RSRC of this contact and re-L quested procedural guidance for handling such requests that come to-the contractor outside official channels.
Se;'tember 23, 1975 RSRC notified RL that NRC intended to use various consultants on the project who would require specific information.
RSRC also stated that NRC would be advising their consultants that future requests for information would be handled by the RL Contracting Officer.
(NRC did not consider this arrangement to be the most satisfactory because it believed technical matters should be addressed to the contractor directly).
D**}D
- }D'9'}g' o.Ju,2 kift3 J o o Ju
-21 January 8, 1976 RSRC directed RL to arrange for the con-sultants to have direct telephone access to the contractor on technical matters.
January 12, 1976 RL notified RSRC that the consultants would have direct telephone access to the contractor.
RL requested that the con-sultants be cautioned to restrict discussions to technical matters.
EFFORTS TO IMPROVE RELATIONS WITH ERDA HAVE BEEN MADE BUT FURTHER IMPROVE!1ENTS ARE NEEDED We found that although much effort has been made by NRC, and that some progress has been made, the working relationship with ERDA needs to be improved. We noted that even with the Comission focusing top-management attention on the working arrangement with ERDA that improvements are still needed. We believe that the course of action agreed to by NRC and ERDA--at the joint ERDA/NRC program review meeting held in December 1975--to work more closely in planning their respective programs and budgets; and to determine the appropriate assignment of funding re-sponsibilities is a step in the right direction although not sufficient to regulate the conduct of business between the two agencies.
We noted that NRC and ERDA have made the following efforts to improve the working relationship:
On August 8, 1975, NRC and ERDA approved a Memorandum of Under-standing which contains broad principles and a general working relationship on the operation of NRC's LOFT Program.
In December 1975, at the joint ERDA/NRC program review meeting to discuss the working relationship between the two agencies and attendant problems, NRC and ERDA abandoned further efforts in developing a detailed agreement on LOFT due to their inability to agree on detailed operating procedures. However, NRC and ERDA did agree to work out informal staff level agreements where such are proved necessary to facilitate the conduct of business between the two agencies.
Following is a list of action items resulting from the ERDA/NRC meeting and the status as of June 14, 1976:
o I
,g
' Action Items Status To finalize the baseline design of the Finalized April 30, 1976 LOFT facility to ensure more accurate i
planning and a more precise allocation j
of funding requirements.
]
To develop and implement a joint Finalfzed April 30, 1976 program to deal with system and re-qualification problems resulting from operation of the LOFT facility.
To develop and implement a budget cycle /
Finalized June 11, 1976 planning process to ensure that each agency considers the needs of the others and that sufficient lead-time is available to ensure availability of resources.
To coordinate financial management Being Finalized and work order procedures with field offices and to implement same.
To determine assignment of funding Bping Finalized responsibilities for NRC dedicated facilities.
To finalize interagency agreements Agreements for PBF and for PFE, PBF, and technical technical assistance assistance.
resolved except for funding questions.
PFE open.
In April 1976, a joint NRC/ERDA project review meeting was held to discuss NRC safety research being conducted and planned in ERDA facilities.
The purpose of the meeting was to:
1.
provide the status of major NRC/ERDA projects; 2.
identify significant problems, concerns, or issues; 3.
explain the steps being taken to resolve these problems; and 4.
give a prognosis for success in each case.
As a result of this meeting, the following problem areas were identified as having a low or ancertain prognosis for success:
w
-2'3-PFE establish project requirements and technical scope; upgrade Richland/ Pacific fiorthwest Laboratory technical capability; clarify NRC/ERDA funding responsibilities; and realign NRC/ERDA/ Pacific Northwest Laboratory organizations and responsibilities.
LOFT identify work scope to complete; obtain FY '76 and '76T overrun funding; improve control systems and reporting; establish cost and schedule to complete; and perform safety reviews and authorize operations.
It was further stated at this meeting and so indicated in a letter from the ERDA Deputy Administrator to the NRC Executive Director for Operations on May 13, 1976, in reference to project funding that:
"If ERDA is to budget for,NRC projects, it was agreed that each proposal would have to be examined at the outset in terms of project requirements, concepts, estimates, and the roles of NRC Headquarters and the ERDA Field Operations Office.
Changing of project and facility requirements require close control by NRC and ERDA in order to provide for sound budgeting, efficient project execution and to avoid placing ERDA in an open-ended funding position."
During the week of June 7 through June 10, 1976, the Director of Reactor Safety Research visited the Idaho Operations Office to resolve the action taken by Idaho to preclude NRC from providing program direction directly to the contractor on NRC programs.
Although the action taken by the Idaho Operations Office was in violation of the LOFT interagency agreement, we were informed l
I l '
l by EDO on July 27,1976, that (1) RES was at first not successful l
in their endeavor to correct this situation; (2) these problems.
i
'have now been essentially resolved; and (3) revised instructions have been issued to the contractor.
CONCLUSION We believe that NRC and ERDA need to improve procedures for conducting l
research programs which require ERDA to construct large experimental j
facilities for NRC's use. We believe there is a need for a clear and comprehensive statement of program responsibilities and a need for NRC to be able to provide program direction rapidly and directly to the ERDA laboratories.
t
. We believe that NRC.and ERDA need to further define staff level pro-cedures to facilitate the conduct of business between the two agencies and to improve the overall working relationship. We also believe that, as was stated by officials most knowledgeable'with these matters, the NRC-ERDA confirmatory research arrangement as intended by the Energy Reorganization Act of 1974 is still preferable at this point to other possible al.ternatives such as:
arrange with ERDA for NRC'to contract directly with the laboratories for some types of research; contracting research only with private contractors when preferabia; proposing legislation to transfer to NRC, ERDA facilities which are dedicated to doing NRC research; and NRC budgeting funds to build new research facilities.
l s
RECOMMENDATION We recommend that NRC continue to negotiate with ERDA to:
further clarify each agency's responsibility; simplify the organizational working arrangement; and ensure NRC direct access to ERDA laboratories.
AGENCY COMMENTS The Executive Director for Operations agreed with our findings, conclusions,.
and recommendations (see Appendix III) and informed us that he has directed a letter to ERDA proposing the formation of a joint task force i
l i.
L
.- to look into the NRC-ERDA working arrangement for conducting NRC research-projects.
ERDA has informally agreed to do this.
The task force would:
1.
look at the labs where interrelationships are working and find the reasons behind the success (i.e.., compare this to. areas experiencing difficulties);
2.
look at the procedures involved for implementing research projects (not the status of programs);
3.
highlight those areas where there are procedural'or management problems that need resolution; and 4.
.make joint recommendations for improvements.
OIA believes that, if the task force is implemented and NRC and ERDA make a good faith effort to adhere to the intent of the Energy Reorgani-zation Act of 1974, a. satisfactory working relationship could result.
0IA plans to follow up on this matter upon completion of the task force report and after a reasonable period of time for its implementation has transpired.
e 9 +
APPE:. DIX 1 I.
i MEf.iORANDUM OF UNDERSTANDING e
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