ML20036D669

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Forwards Ofc of Insp General Special Evaluation Entitled, Better Definition & Planning Needed to Guide NRC Transition to Risk-Informed,Performance-Based Regulatory Sys
ML20036D669
Person / Time
Issue date: 10/04/1996
From: Barchi T
NRC OFFICE OF THE INSPECTOR GENERAL (OIG)
To: Taylor J
NRC OFFICE OF THE EXECUTIVE DIRECTOR FOR OPERATIONS (EDO)
Shared Package
ML20036D670 List:
References
NUDOCS 9610220179
Download: ML20036D669 (1)
v • d • e


Text

{{#Wiki_filter:_ fl Icf UNITED STATES y g NUCLEAR REGULATORY COMMISSION '[ WASHINGTON, D.C. 20555-0001 /

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October 4,1996 OFFICE OF THE INSPECTOR GENERAL MEMORANDUM TO: James M. Taylor Executive Director for Operations ~ $h - b rN_ 3-FROM: Thomas J. chi Assistant Inspector General for Audits

SUBJECT:

BETTER DEFINITION AND PLANNING NEEDED TO GUIDE NRC'S TRANSITION TO A RISK-INFORMED, PERFORMANCE-BASED REGULATORY SYSTEM Attached is the Of5ce of the Inspector General's special evaluation entitled, "Better Definition and Planning Needed to Guide NRC's Transition to a Risk-Informed, Performance-Based Regulatory System." Since this report contains no recommendations, we did not provide a draft for agency comment.

Attachment:

As stated \\ U fP g <,,_ e f4 rm / c Gw;/a v 9610220179 961004 CF SUBJ O&M-GREPTS GEN CF

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OFFICE OF THE INSPECTOR GENERAL U.S. NUCLEAR REGULATORY COMMISSION BETTER DEFINITION AND PLANNING NEEDED TO GUIDE NRC'S TRANSITION TO A RISK-INFORMED, PERFORMANCE-BASED REGULATORY SYSTEM OIG/96E-18 October 4,1996 b SPECIALEVALLATION REPORT t /gREGy g Ab s$ o ? g F E o,[-4 h ' g #g g m o %*o

cc: H. Thompson, OEDO J. Milhoan, OEDO J. Blaha, OEDO J. Hoyle, SECY K. Cyr, OGC D. Rathbun, OCA R. Scroggins, OC P. Norry, ADM G. Cranford, IRM R. Bangart, OSP F. Miraglia, NRR E. Jordan, AEOD D. Morrison, RES C. Paperiello, NMSS J. Funches, ICC W. Beecher, OPA H. Miller, RI S. Ebneter, RII A. Beach, RIII L. Callan, RJV OPA-RI OPA-RII OPA-RIII J OPA-RIV I OPA-RIV-FO f I ( L

I NRC's Transition to a Risk-Informed, Performance-Based Regulatory System REPORT SYNOPSIS The Nuclear Regulatory Commission (NRC) is shifting its regulations for nuclear power reactors to a more risk-informed and performance-based approach. The Chairman has noted this approach will allow the targeting of NRC and industry resources or. those aspects of nuclear operation diat have the greatest safety significance and will tend to relieve regulatorv arden as a result. One of the agency's most signi6 cant effons toward developing risk-informed, performance-based regulations is the recently iniplemented Maintanance Rule (10 CFR 50.65). The OfTice of the Inspector General (OIG) e J the agency's efforts to shift to risk-informed and performance-based negu!uions, using the recently implemented Maintenance Rule as the primary examp'e of that effort. Through imnlementation of the Maintenance Rule ad other pilot projects being undertaken as part of the PRA Implementation plan, NRC is developing an understanding of how a risk-informed, performance-based regulatory system will function. In order to facilitate the transition to this new regulatory system, we believe the agency needs to defir.e performance-based regulation and describe how the agency plans to implement it. Although NRC is in the process of developing final enforcement guidance for the Maintenance Rule, the agency also needs to address the broader issue of how performance-based regulation will affect the citing of viciations and the use of enforcement. In addition, we believe the transition to a risk-informed, performance-based system would benefit from the development of a comprehensive strategy for implementing these regulatory changes including specific objectives and a means to measure progress toward meeting those objectives. I OlG/94f,1tf page I I

NRC's Transition to a Risk-Informed, Performance-Based Regulatory System TABLE OF CONTENTS REPORT SYNOPSIS i INTRODUCTION I BACKGROUND 1 EVALUATION RESULTS 3 DEFINING PEIU'ORMANCE-BASED REGULATION AND ITS Em: CTS ON ENTORCEMENT 4 DEVELOPING A COMPRElIENSIVE STRATEGY FOR DIE TRANSITION TO PERFORMANCE-BASED REGULATION . 6 CONCLUSIONS 7 MATTERS FOR CONSIDERATION 7 APPENDICES I Objectives, Scope, and Methodology 11 U.S. NRC Functional Organization Chan Ill Major Contributors To This Report IV Glossary: Office of the Inspector General Products

1 G NRC's Transition to a Risk-informed, Performance-Based Regulatory System INTRODUCTION The Nuclear Regulatory Commission (NRC) is shifting its regulations for nuclear power reactors to a more risk-informed and performance oased approach. The Chairman has noted this approach will allow the targeting of NRC and industry resources on those aspects of nuclear operations that have the greatest safety significance and will tend to relieve regulatory burden as a result. One of the agency's most significant efforts toward developing risk-informed, performance-based regulations is the recently implemented Maintenance Rule (10 CFR 50.65). Under the Maintenance Rule, licensees use insights from probabilistic risk assessments (PRA)' and other operational insights (risk-informed) in setting maintenance performance goals (performance-based), for the plant's systems, stmetures and components that are reviewed and then monitored by NRC to ensure that the plant operates reliably and safely. In the 1997 Energy and Water Development Appropriadons Act, the Senate Committee on Energy and Water encouraged the NRC to continue its movement toward replacing unnecessary, prescriptive regulatory requirements and guidance with performance-based regulation. The Committee stated that a performance-based regulatory approach can substantially improve the regulatory process and result in a more effective use of both NRC and licensee resources. In addition, the Nuclear Energy Institute (NEI), the industry's trade association, endorses the shift to moi. risk-informed and performance-based regulation. The Office of the Inspector General (OIG) evaluated the agency's efforts.; shift to risk-informed and performance-based regulations, using the recently implemented Maintenance Rule as the primary example of that effort. Appendix I contains additional information regarding our objectives, scope, and methodology. BALKGROUND NRC has been working for many years to transition from deterministic, co m pliance-oriented regulation toward risk-inform ed, performan ce-based regulation 'PRA is an analytical process that estimates the potential risk to public health and safety of different plant operating conditions using the operational and maintenance practices of a plant. OIC/96f 18 Page1

NRC's Transition to a Risk-informed, Performance-Based Regulatory System while maintaining acceptable levels of safety in the nuclear power industry. f Rewarding superior licensee operating practices is one result of the movement to performance-based requirements. During the 1980's, NRC initiated the Marginal-E to-Safety program to make regulatory requirements more ef6cient by eliminating E, those with marginal impact on safety. As pan of this program, Appendix J to 10 CFR 50 was revised to provide a performance-based option for leakage-rate testing of containments of certain nuclear power plants. The revision reduced prescriptive requirements contained in the existing regulation and allowed test intervals to be based on system and component performance. Industry representatives estimate that savings from the changes to Appendix J will exceed one billion dollars over the next 15 to 20 years with no reduction in plant safety. In 1993, NRC formed the Regulatory Review Group (RRG) to review power reactor regulations and assess the feasibility of substituting performance-based requirements and guidance for prescriptive requirements and guidance. The RRG suggested using more performance-based and risk-based approaches in certain regulatory areas. After the RRG report was released, NRC issued a policy statement on the use of PRA on August 16,1995. The policy statement described NRC's intent to increase the use of PRA in all regulatory matters with the intent of reducing unnecessary conservatism and, where appropriate, to support proposed additional regulatory requirements. I In 1094, the Of5ce of Nuclear Reactor Regulation (NRR), along with other h%C program offices, established the "PRA Implementation Plan" which described g various efforts to apply PRA information to regulations and identified who was E responsible for completing the objectives of the plan. The agency, in cooperation with members of the industry, established a number of pilot projects to assist in the use of PRA to modify regulatory requirements based on risk insights. These pilot programs include inservice testing and inspection, operability of motor-operated valves, graded quality assurance, and the Maintenance Rule. Work under the plan has also recently included efforts to develop performance-based methods for the pilot projects. The Maintenance Rule, which was implemented on July 10, 1996, represent:, a departure from the agency's customary, process-oriented way of regulating licensees. The rule allows licensees to set reliability and availability criteria for safety-related, and certain non-safety-related, plant structures, systems, and components. The licensee is then required to establish and maintain a maintenance omiur in rm2 I

NRC's Transition to a Risk-informed, Performance-Based Regulatory System program that will ensure those criteria are met. Through its inspection program, NRC then monitors the effectiveness of the licensees' maintenance programs. This allows NRC to focus on the performance nf licensees' maintenance programs, rather than adherence to prescriptive regulatory requirements. However, the Maintenance Rule does not remove any requirements licensees had to nuet prior to the rule's implementation. The implementation of the Maintenance Rule was also somewhat different in that the industry panicipated actively in the development of the regulatory guidance that would be used by NRC in implementing the rule. Between September 1994 and Mar:h 1995, NRC performed a series of nine pilot site visits to provide early feedback to the industry and to verify the adequacy of NRC's Maintenance Rule inspection program. Over the next two years, the agency will be conducting baseline inspections at every plant to evaluate the maintenance programs licensees have put in place. During that time, NRC will modify the inspection and enforcement aspects of the program as necessary before publishing the enforcement policy in final form. NRC's policy of enforcement and its consistency in application is key to the success of the Maintenance Rule. To ensure that consistency, NRC formed an enforcement panel of NRR and Office of Enforcement (OE) personnel who will review all proposed enforcement actions resulting from Maintenance Rule inspections. Current NRC enforcement guidance precludes a licensee from being cited for more than one violation for an infraction that may fall under both the Maintenance Rule and other NRC regulations, such as 10 CFR 50 Appendix B,2 EVALUATION RESULTS Through implementation of the Maintenance Rule and other pilot projects being undertaken as pan of the PRA Implementation plan, NRC is developing an understanding of how a risk-informed, performance-based regulatory system will function. In order to facilitate the transition to this new regulatory system, we 2 Appendix B to 10 CFR 50 requires licensees to have in place a quality assurance program that provides adequate confidence that a structure, system, or component will perform satisfactorily in service. OlG/961118 Page 3

I NRC's Transition to a Risk-informed. Performance-Based Regulatory System believe the agency needs to denne performance-based regulation and describe how h the agency plans to implement it. Although NRC is in the process of developing final enforcement guidance for the Maintenance Rule, the agency also needs to address the broader issue of how performance-based regulation will affect the citing of violations and the use of enforcement. In addition, we believe the transition to a risk-informed, performance-based system would benent from the development of a comprehensive strategy for implementing these regulatory changes including specine objectives and a means to measure progress toward meeting those objectives. DEFINING PERFORMANCE-BASED REGULATION AND ITS EFFECTS ON ENFORCEMENT While the agency has stated its objectives for the use of PRA in a risk-informed environment, NRC has not denned what it means by " performance-based regulation," and has not determined what its related goals are. This has resulted in differences in perceptions among NRC staff, and between NRC and the g industry, regarding how performance-based regulation differs from the current, E, process-oriented systern. For example, NRC managers we interviewed described the conDict that exists between the recent emphasis on strict compliance with l regulatory requirements that may not be safety signi6 cant and the focus on safety signi6 cant systems emphasized in performance-based regulation. gl 5 In addition, we found that agency staff and industry representatives have different understandings of what performance-based regulation means in regard to violations and enforcement. Representatives of the industry told us that if, under the lll Maintenance Rule, they could still get Appendix B violations even though they were meeting their performance goals, then the rule was not truly performance-based. These licensees believe that without relief from less safety significant Appendix B violations, the Maintenance Rule will be just another layer of gl requirements to be met that increases their costs. NEI representatives stated that E4 this " layering" of regulations could have a chilling effect on licensees' willingness to embrace the Maintenance Rule. One licensee we interviewed also noted there would be no ince tive to take advantage of performance-based regulations if there was no relief from Appendix B violations. OlG previously reported' that some Ii ' " Factors Contributing to inconsistency in the Operating Reactor Inspection Program" OlG/95A-04, December 27,1995. onc miais r. 4 I'

) NRC's Transition to a Risk-Informed. Performance-Based Regulatory System inspectors use Appendix B as " catch-all" criteria to be used when there is nothing else to cite against. Licensees stated that they expect little overall benefit from the Maintenance Rule unless NRC provides some form of enforcement reliefin less safety-significant areas. In contrast, NRC staff generally do not see the Maintenance Rule as a vehicle for regulatory relief. Many staff members pointed out the current enforcement guidance for the rule states that the rule does not supersede other requirements, specifically referring to Appendix B. We posed a hypothetical example to the staff in which a licensee, who was meeting overall performance criteria for I maintaining and operating diesel generators under the rule, missed a step in a required maintenance procedure. In the example, the error was identified and corrective action taken. In response to this example, most NRC stafT we spoke l with would still cite the licensees for an Ap~.ix B, quality assurance violation, despite the fact that the incident did not affect meeting the overall performance goal for diesel generator availability. Many stated that to cite a licensee in such a case would not be in accordance with the intent of performance-based regulation. However, NRC managers we spoke with, who were responsible for developing the I Maintenance Rule program, felt that one of the rule's primary purposes was to allow NRC to regulate balance-of-plant

  • areas that had not been previously subject to NRC review; they did not view the rule as a " defense" against other l

requirements. I Recent events at the Millstone nuclear power station have caused NRC to refocus s its emphasis on ensuring licensees strictly comply with regulatory requirements, such as adhering to the Final Safety Analysis Report (FSAR), for all nuclear I power plants. However, industry representatives we spoke with are concerned that this re-emphasis on compliance threatens the viability of the effort to develop risk-informed, performance-based regulation. NRC managers also saw the reaction l to the events at Millstone as keeping the agency's emphasis on compliance. We b-bve this attitude may inhibit the implementation of such a fundamental change I as tue move to more performance-based regulation, particularly if there is not a clear understanding of the direction of that change. 2 k[. E

  • " Balance-of-plant" refers to all nuclear plant systems except the Reactor Protection System, D

Control Rod Drive and Reactor Coolant System. For example, the turbine, generator and primary feedwater systems are all considered part of the balance-of-plant. OlG/%r-1N Page 5 I

i NRC's Transition to a Risk-tr formed, Performance-Based Regulatory System It has been shown that for an organization to successfully make a fundamental change to how it operates, a shared understanding among those involved in implementation regarding the direction and appropriateness of that move is necessary. For example, we found that Transport Canada Aviation (TCA), a regulatory organization with a public safety mandate similar to NRC's, went from a system known as Regulation by Directive to a performance-orient :d system of regulation. TCA did not have a policy statement when it first bega', its transition to a performance-oriented system, but found it necessary to have top-down guidance, in the form of a policy statement, to make the process function as intended. TCA found that such a statement helped motivate staff to make the change, ensured support by managers, and eliminated disagreement and in-fighting over the direction the agency was taking. In contrast, while NRC has instmeted staff and management in Maintenance Rule implementation, the agency has not developed a shared understanding among NRC staff regarding what performance-based regulation means or how it affects overall enforcement policy. DEVELOPING A COMPREllENSIVE STRATEGY FOR THE TRANSITION TO PERFORMANCE-BASED REGULATION In order to ensure that NRC's move toward performance-based regulation is done in a consistent manner, the agency needs a comprehensive, integrated strategy for achieving that goal and a means to measure its progress toward that goal. While the staff responsible for the PRA Implementation Plan have begun to develop concepts of how selected regulatory requirements could be more performance-based, there are areas where performance-based methods are being used which do not fall under the plan. All regulatory areas should b captured under a broader strategy. For example, a rule for steam generator degradation and a revision to l Appendix R, fire protection requirements may become performance-based, but these efforts are not included in the PRA Implementation Plan. Several senior NRC managers told us that more clearly articulated objectives for performance-based regulation and an understanding of how NRC will meet those objectives would facilitate the move to performance-based regulation. In addition, a comprehensive strategy for making regulatory requirements more performance-based should include a means for measuring progress toward l achieving the program goals the agency establishes. Recently, significant emphasis has been put on establishing performance measures for government programs by the Government Performance and Results Act (GPRA). GPRA requires Federal OlGS6FA N Page 6 I

1 NRC's Transition to a Risk-informed, Performance-Based Regulatory System agencies to establish performance goals to be measured on an annual basis. The establishment of measurable performance goals is designed to improve the efficiency and effectiveness of Federal programs and to spur better pedormance. Developing performance measures will meet the objectives of GPRA and increue the chances for a successful transition to a risk-informed, performance-based regulatory system. CONCLUSIONS NRC has expressed its intent to move to a more risk-informed, performance-based regulatory system and has a number of effons underway to incorporate risk insights and pedormance-based methods into its regulatory system. To that end, the agency needs to define what a performance-based system is and how it will affect the citing of violations and the use of enforcement actions. We believe this is of particular concern due to the significantly different perceptions that the agency and the industry have of performance-based regulation and enforcement. In addition, to ensure that regulatory chtnges are made in an effective and efficient manr.er, NRC should develop a comprehensive, integrated strategy for how its risk-informed and performance-bnsed efrons will be accomplished. This strategy should include a means for measuring progress towards meeting the objectives of that strategy. MATTERS FOR CONSIDERATION To facilitate its m'vement toward a risk-informed, performance-based regulatory system in a conmtent and comprehensive manner, NRC should consider: 1) Developing a conceptual framework for what performance-based regulation is and how it affects enforcement, and communicate this information publicly, for instance, through a policy statement; OlG.9(.l> 3 N Page 7

NRC's Transition to a Risk-Informed, Performance-Based Regulatory System 2) Designing a strategy for implementing that conceptual framework, which includes establishing goals, and designating senior managers responsible for seeing that the goals are met; and 3) Establishing performance measures to evaluate progress toward meeting those goals. l I I I I< I I I Il Il OlG.96FA N page g I

Appendix 1 NRC's Transition to a Risk-infermed, Performance-Based Regulatory System OBJECTIVES, SCOPE, AND METIIODOLOGY The objective of this work was to evaluate the agency's efforts to move toward a risk-informed, performance-based regulatory system using the Maintenance Rule as the primary example of that effort. We interviewed senior NRC managers in the Office of Nuclear Reactor Regulation (NRR), the Office of Enforcement (OE) and managers and inspectors in Regions II and III. We also interviewed representatives of the Nuclear Energy Institute (NEI), the nuclear energy industry's Washington-based trade association. In <ddition, we spoke with representatives from the Federal Aviation Administration, Transport Canada Aviation, and licensees who operate three nuclear power plants. We also reviewed documentation relating to risk-informed, performance-based regulation and the Maintenance Rule obtained from both NRC and the industry. We conducted our audit work from June through August 1996. C 7 l OlG/96F-IN Page 1 of1 P 4

Appendix 11 NRC's Transition to a Risk informed. Performance-Based Regulatory System i U.S. NRC FUNCTIONAL ORGANIZATION CIIART NRC Commissioners I Executive Director for Operations Ass 6esant ter e l l Ofnce for Ammtymns and Rwalusilen I)epues Emeruserellorecer fur IkpW) E.aeculpe Derener 8er e OperWW Dass hacesor himaerests biety, hurieur kenner kegubetson, blegeanres & Operatoms Eupport kegmalOperwuus & Research OfRee d Of5ce d l l l l l I**h"'I the Casareber Orke d Ofnce d Otrate of Ofr.ce r g,,,,,,,, f Sasse rregresne Enforcenwas Owustees* Adnunsaerusasen h W em OfDce of Enanil Bussnem and Ove kqghta I Orne d Ormed Ornce of huclear hucteur kegatener) kesearch g,,w am ggw l Meierhal breey and Afeguards Wegmuwt O!Tues ,.g_, Regean it Ainema kegnan til t hgo kegean IV lbllan Arves ?.=4med OlG/96FA N Pate 1 of I

s Appendix ill NRC's Transition to a Risk-informed, Performance-Based Regulatory System MAJOR CONTRIBUTORS TO TIIIS REPORT f William D. McDowell Team Leader [ Lindley R. Higgins Senior Management Analyst i Roben W. Moody { Auditor { l { { n { OlG96F 18 Pate I of I e H

App:ndix IV NRC's Transition to a Risk-informed, Performance-Based Regulatory System GLOSS.ARY: OFFICE OF THE INSPECTOR GENERAL PRODUCTS INVESTIGATIVE 1. INVESTIGA TIVE REPORT-WHITE COVER An investigative Report documents pertinent facts of a case and describes available evidence relevant to allegations against individuals, including aspects of an allegation not substantiated. Investigative reports do not recommend disciplinary action against individual employees. Investigative reports are sensitive documents and contain information subject to the Privacy Act restrictions. Reports are given to officials and managers who have a need to know in order to properly determi.. whether administrative action is warranted. The agency is expected to advise the OlG within 90 days of receiving the investigative report as to what disciplinary or other action has been taken in response to investigstive report findings. 2. EVENTINQUIRY - GREEN COVER The Event inquiry is an investigative product that documents the examination of events or agency actions that do not focus specifically on individual misconduct. These reports identify institutional weaknesses that led to or allowed a problem to occur. The agency is requested to advise the OlG of managerial initiatives taken in response to issues identified in these reports but tracking its recommendations is not required. 3. MANA GEMENT IMPLICA TIONS REPORT (MIR) - MEMORANDUM MIRs provide a " ROOT CAUSE" analysis sufficient for managers to facili+3te correction of problems and to avoid similar issues in the future. Agency tracking of recommendations is not required. AUDIT 4. AUDIT REPORT-BLUE COVER An Audit Report is the documentation of the review, recommendations, and findings resulting from an objective assessment of a program, function, or activity. Audits follow a defined procedure that allows for agency review and comment on draf: audit reports. The audit results are also reported in the OlG's " Semiannual Report" to the Congress. Tracking of audit report recommendations and agency response is required. 5. SPECIAL EVALUA TION REPORT-BURGUNDY COVER A Special Evaluation Report documents the results of short-term, limited assessments. It provides an initial, quick response to a question or issue, and data to determine whether an in-depth independent audit should be planned. Agency tracking of recommendations is not required. REGULATORY 6. REGULA TORY COMMENTARY - BROWN COVER Regulatory Commentary is the review of existing and proposed legislation, regulations, and policies so as to assist the agency in preventing and detecting fraud, waste, and abuse in programs and operations. Commentaries cite the IG Act as authority for the review, state the specific law, regulation or policy examined, pertinent background information considered and identifies OlG concerns, observations, and objections. Significant observations regarding action or inaction by the agency are reported in the OlG Semiannual Report to Congrers. Each report indicates whether a response is required. OlG/96LIN Page1 ort

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