ML20116D831

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Memorandum Supporting Continued Counsel Representation of Applicant,In Response to Question in ASLB 850418 Order.No Impropriety Found in Continued Representation by Newman & Law Firm.Notice of Appearance & Certificate of Svc Encl
ML20116D831
Person / Time
Site: South Texas  STP Nuclear Operating Company icon.png
Issue date: 04/25/1985
From: William Allen
COVINGTON & BURLING, HOUSTON LIGHTING & POWER CO.
To:
Atomic Safety and Licensing Board Panel
Shared Package
ML20116D817 List:
References
OL, NUDOCS 8504300063
Download: ML20116D831 (72)


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DOCKETED USNRC UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION BEFORE THE ATOMIC SAFETY AND LICENSING BOARD CFFICE OF SECRETAR ~

00CXEilNG & SERVICf BRANCH In the Matter of )

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HOUSTON LIGHTING & POWER ) Docket Nos. 50-498 OL COMPANY, et al., ) 50-499 OL

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(South Texas Project, )

Units 1 and 2) )

APPLICANTS' MEMORANDUM CONCERNING COUNSEL'S CONTINUED REPRESENTATION OF APPLICANTS The Board in its order of April 18, 1985, has asked the parties to be prepared at the prehearing conference on April 30 to address three questions, including this one: "The propriety of continued representation of a party by an attor-ney who may have participated other than as counsel in factual matters potentially at issue before an adjudicatory tribunal."

In posing that question, the Board cited Rule 3.7 of the new ABA Model Rules of Professional Conduct. The Board also said that the parties may deal with this and other procedural questions in their written responses to the Citizens Concerned About Nuclear Power's motion to reopen the Phase I record.

The response of the applicants to the quoted question follows.

The short of their response is that the material cited by CCANP for its several assertions concerning the participation of Houston Lighting & Power Company's counsel in 8504300063 850425 PDR ADOCK 05000498 PDR, o

a the decision to replace Brown & Root does not justify the Board's suggestion that counsel may have participated in any matters "othe than as counsel"; and that, even were there more of a basis for the suggestion than there is, there would be no even arguable impropriety in counsel's continued repre-sentation of the applicants.

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I 3 I. COUNSEL DID NOT PLAY ANY NON-LAWYER'S ROLE IN THE DECISION TO REPLACE BROWN & ROOT AND DID NOT MANIPULATE THE TIMING OF THE DECISION OR ITS ANNOUNCEMENT f

j CCANP's Assertions. CCANP refers to applicants' counsel on several pages of its motion. (Motion 4, 5, 6, 10, 43, 46-47, 47.) There is less to these repeated references than meets the eye. CCANP provides citations for only the first two references, which are at page 4. All the others are embellishments on or reiterations of these first two.

At page 4, CCANP says that, "[f] rom exhibits and testimony in [a Texas Public Utilities Commission rate pro-ceeding involving HL&P), it also appears that counsel for i Applicants participated in manipulating the replacement

! decision and announcement of that decision to the ASLB with an eye toward minimizing its effects on the ASLB's proceeding."

i For that proposition, CCANP cites its Exhibit A, which is a few pages of the transcript of the cross-examination of

( Mr. Jerome Goldberg, a vice president of HL&P, during the i

l Texas proceeding, "especially at 1358-60." Further down on l page 4, CCANP says that " counsel apparently recognized that

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such a decision [to replace B&R] might dramatically alter the Board's view of the Applicants' carefully constructed and prefiled case," citing its Exhibit A at 1359.

CCANP's Source. On the three pages of the Texas transcript that CCANP cites, Mr. Goldberg is being questioned about a draft report, dated September 8, 1981, concerning the i- possible replacement of Brown & Root as the architect-engineer I

and construction manager of the South Texas Project. That draft was written by Jack R. Newman, Esq., the lead counsel for the applicants in this proceeding. He advised Mr. Gold-berg and George Oprea, executive vice president of HL&P, in the evaluation of possible replacements. The draft report was Exhibit OPC-25 in the Texas proceeding. (See CCANP Ex. A,

p. 1355.) But, though CCANP appends 41 such exhibits to its motion, and though the author of the motion cross-examined Mr. Goldberg on the document at the cited transcript pages, and though a footnote to one section of the draft report is I

apparently the main basis of its assertions concerning coun-sel, CCANP does not proffer to this Board the draft report 1

itself. Appended to this memorandum are both the draft of i

l September 8 and the final version of the report dated Septem-t.

ber 14, 1981, entitled " South Texas Project Report on Con-i tractor Replacement." The draft was the basis of a meeting i that Messrs. Goldberg, Oprea, and Newman had with HL&P's chief l

executive officer, Don Jordan, concerning the replacement of f

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, B&R. The final version was prepared after Mr. Jordan had decided that HL&P management would recommend to its board and its partner _s in the project the choice of Bechtel Power Com-pany to replace B&R as A-E and construction manager.

CCANP's Reasoning. As we have just said, CCANP apparently bases most of its assertions about applicants' counsel on a footnote to one section of the draft report that

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was partially quoted to Mr. Goldberg at page 1358 of the Texas transcript and then misparaphrased in further questioning of him at page 1359. The footnote and the whole of the text that is its context read as follows in both the September 8 draft and the final September 14 report (pp. 17-18 and pp. 16-17, respectively):

"VII. Licensing and Other Internal Considerations Replacement of a contractor for architect-engineering and construction management is unprecedented in NRC experience. It is unclear whether a construction permit amend-ment will be required. If an amendment is required, there may be a need for a prior notice and hearing.*/ The process of imple-menting the decision to replace Brown & Root in A-E and construction management functions may be heavily influenced by licensing matters. We have informed two key officials in the NRC Staff regarding our consideration of releasing Brown & Root from all A-E and construction management functions. It is

"*/ Whether or not an amendment is needed, the replacement of B&R will undoubtedly have to be considered in the current operating license hearing and complications may thus arise as to the timing of the takeover of responsibilities by the new contractor."

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. necessary, however, to have more definitive discussions with the NRC Staff and,. espe-cially, its legal arm to determine the nature of any licensing hurdles. An early decision is, therefore, very important; until the action is taken, we are effectively precluded

-from meaningful discussions with the NRC Staff, and cannot complete plans for the changeover.

"In addition, word is leaking through several sources that this change is being contemplated. This, of course, could intro-r

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duce a good deal of instability in STP activities. A decision at an early.date is also important so that Brown & Root can be approached in a way conducive to gaining its t cooperation in an orderly transition. All L proposals stressed the importance of this cooperation."

The report thus calls for the earliest possible decision so that the applicants can learn what the reaction of the NRC and its staff will be. There could be no meaningful H discussions with the staff on that subject until the replace-ment decision was made. Two NRC officials had been notified that the applicants were considering releasing B&R from its architect-engineer and construction management responsibili-ties. But obviously not much more could be said or done until the decision was. final and a replacement was chosen. Further-more,.there had already been leaks, and these were highly detrimental to the continuing orderly conduct of work at the STP. This advice to speed the decision was written in draft form on September 8 and in final form on September 14. The

- decision was announccd on September 24, immediately upon the execution of a letter of intent with Bechtel.

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. . The source on which CCANP relies (but that it withholds from the Board) thus gives not the slightest reason for believing that Mr. Newman " participated in manipulating the replacement decision and the announcement of that deci-sion" (p. 4) or that he "tried to orche' strate the replacement to have the minimum impact" on this case (p. 43) or "deliber-ately manipulat [ed]" the removal of B&R to minimize its impact on Phase I of this proceeding (p. 45) or " manipulated this proceeding precisely to avoid major scrutiny of this issue" .

(p. 47). The decision was made and announced just about as soon as it could have been. And this was entirely consistent with the applicants' interest in timely discussions with the NRC staff to ensure that any regulatory approval required to allow the replacement contractor to assume its responsibili-ties would be forthcoming as soon as possible.

The only conceivable justification for the asser-I tions quoted from the CCANP motion is an utter misunder-l l standing of the relevant section of the report and the foot-note. As cross-examiner of Mr. Goldberg, the author of the CCANP motion at one point paraphrased the footnote in a way that indicates just such a misunderstanding. After referring to the footnote, the cross-examiner asked, "Why did the L current NRC operating licensing hearing have to be considered i

in replacing Brown & Root and why would that complicate the l

timing of the replacement?" (CCANP Ex. A p. 1359.) That i

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, .. completely misstates what the footnote was about. The insis-

-tent message of this section of the report was that the replacement l decision should be made and announced promptly.

The' report, in text and footnote, also considered what might follow the announcement. Far more than the usual uncertain-ties surrounded this question because there was no NRC pre-One f cedent for replacing a project's architect-engineer.

possibility was that an amendment to the applicants' existing f-construction permit might be required, and that might entail -l notice and a further hearing. The report also noted that, short of that, .the speed with which the decision to replace B&R could be carried out would be influenced by "the nature of any licensing hurdles." The footnote said that, apart from all else, the replacement of B&R would have to be considered in this operating license hearing. It went on to say that implementation of the decision to substitute a new architect-engineer for B&R (the " takeover of responsibilities by the new contractor") could be complicated by such proceedings as might be necessary before this Board once the decision had been made. That is plain enough on the words of the footnote

! alone. It is unmistakable when the footnote is read in the context of a paragraph urging a prompt decision on the re-placement contractor so that this Board -- and, indeed, all elements of the NRC with an interest -- could initiate what-ever regulatory review might be required before the new contractor could take over from Brown & Root. In these

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, circumstances, the innuendo that an effort was being made to

" hide the ball" from the Board (CCANP Motion 43) is without the slightest support. It is at odds.with the manifest interest of the applicants in getting on with whatever agency review there was to be as quickly as possible. It is at odds with what the applicants did in pursuit of that interest. The

replacement announcement was made at a time when the Board's Phase I hearing record was very much open; it was not to be l

closed until nine months later, in June 1982.

There is also a suggestion in the CCANP motion, echoed in the Board's order of April 18, that Mr. Newman was engaged in something other than lawyering when he advised Messrs. Goldberg and Oprea (joined with them, if you will) in the evaluation of the possible B&R replacements for the benefit of HL&P's chief executive. There is no substance to this suggestion. The sophistication of the would-be replace-ment contractors concerning the Commission's licensing re-quirements was an important consideration in evaluating them.

l As tF oard can see from the form Request for Proposal a .ied to both the September 8 draft report and the Septem-I ber 14 final report, companies that wanted to be considered as replacements for B&R were asked a number of questions calcu-lated to test their NRC licensing sophistication. No one was better able to make an assessment of this aspect of their responses than Mr. Newman, counsel for the applicants through-out these proceedings. Less important but also a matter for a

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. lawyer was understanding and evaluating the commercial, non-technical aspects of what the contractors proposed. There was nothingfin the least unusual in Mr. Newman's playing the role he played in the replacement process. That he wrote the first draft of the evaluation report was also quite natural.

The lawyer counseling businessmen and engineers in any en-deavor in which thoughts are she. red almost invariably is chosen or volunteers to commit the thoughts to paper. The lawyer's primary professional skill, after all, is that of communicating through the written word.

Thus, there is nothing in what Mr. Newman did or said about the replacement of B&R, as fairly portrayed in CCANP's source, that indicates that "he participated other than as counsel" in the events leading to the replacement of Brown & Root. Nothing therefore calls into quc,stion the propriety of continued representation of the applicants in this proceeding by him and his firm.

II. IN ANY EVENT, THERE IS NO IMPROPRIETY IN THE CONTINUED REPRESENTATION OF THE APPLICANTS BY MR. NEWMAN AND HIS LAW FIRM The rule against a lawyer's testifying as a witness and acting as advocate in the same trial is of long-standing, though the basis of it is uncertain. Whatever its rationale, the rule is a rule for trials -- particularly jury trials --

and only by exterision, if at all, a rule for administrative i hearings. Under the present Code of Profesgional Responsibil-ity applicable to Mr. Newman and other, members'6f his firm as , p L *

. lawyers practicing in the District of Columbia, the rule is to be invoked to require a lawyer who has undertaken a represen-tation in contemplated or pending litigation "to withdraw from the conduct of the trial" and his firm also to cease the trial representation if the " lawyer learns or it is obvious that he or a lawyer in his firm ought to be called as a witness on behalf of his client," DR 5-lO2(A); or if the " lawyer learns or it is obvious that he or a lawyer in his firm may be called as a witness other than on behalf of his client" but in that case only when "it is apparent that his testimony is or may be prejudicial to his client," DR 5-lO2(B). Under the ABA's proposed new Model Rule 3.7, cited by the Board in its order, the rule has a somewhat different shape. In general, under Model Rule 3.7(a), it applies only when "the lawyer is likely

  • to be a necessary witness," and it applies only to the wit-

.- ness / lawyer himself and not his firm unless the lawyer's t,estimony would give rise to a conflict of interest between the lawyer and the client.

I i Rule 3.7 provides:

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"(a) A lawyer shall not act as kdvocate I at a trial in which the lawyer is likely to be a necessary witness except where:

i (1) the testimony relates to an l uncontested issue; i

(2) the testimony relates to the nature and value of legal services rendered in the case; or (3) disqualification of the lawyer would work substantial hardship on the (q ' client.

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, "(b) A lawyer may act as advocate in a trial in which another lawyer in the lawyer's firm is likely to be called as a witness

' unless precluded from doing so by Rule 1.7 or Rule 1.9. 2 Rules 1.7 and 1.9, referred to in Rule 3.7, are the basic rules governing conflicts of interests, and each provides that a client may consent to a representation despite a conflict.

The applicants have no intention to call Mr. Newman as a watness on their behalf. bhere is no reason for him to think that he ought to be called as a witness, and it cer-tainly is not obvious tha't he ought to be called. In terms of the new Model Rule, whatever his knowledge of the contractor replacement process, the knowledge is matched by others, and he is not therefore a "necessary" witness. It is, moreover, far from apparent that Mr. Newman's testimony would be preju-dicial to this client if he were to be called otherwise than on behalf of his client. Quite the contrary.

The lack of support for CCANP's assertions demon-strates that nothing was amiss in the timing of the decision 1 A committee of the District of Columbia Bar considering what, if any, changes should be made in the Model Rules to be recommended by the Bar for adoption by the D.C. Court of Appeals will recommend amending Rule 3.7(b) to say what its drafters almost certainly meant to say:

"(b) A lawyer may not act as advocate

! in a trial in which another lawyer in the lawyer's firm is likely to be called as a witness if the other lawyer would be pre-cluded from acting as advocate in the trial by Rule 1.7 or Rule 1.9."

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. to replace B&R and its announcement, so that there is no occa-sion for questioning Mr. Newman or anyone else about the replacement l process. Beyond that, the fact that Mr. Newman acquired knowledge of the replacement process as a result of his being called upon to aid in the evaluatiore of the would-be replacement contractors does not at all make it improper for him to continue as counsel. In Galarowicz v. Ward, 119 Utah 1

611, 620, 230 P.2d 576, 580 (1951), decided under Canon 19, the lawyer-witness provision of the old Canons of Ethics, thef court said that the purpose of that canon was not "to prevent industrious counsel from investigating causes entrusted to him. There surely should be no great harm in a lawyer knowing something about the aubject matter of his lawsuit or concernA ing which he is questioning a witness."2 That may be all that needs saying, but to nail the point down we offer these further considerations.

A. The Lawyer-Witness Rule Has Only Limited Applicability to Administrative Licensing Proceedings.

The starting point for any analysis of the possible disqualification of an attorney on account of his being a witness is what the Legal Ethics Committee of the D.C. Bar has referred to as "the strong societal interest that exists in 8 Galarowicz v. Ward is cited in a reporter's footnote to DR 5-102(B) that quotes its statement that old Canon 19 "was not designed to permit a lawyer to call opposing counsel as a witness and thereby disqualify him as counsel." 119 Utah at l

o20, 250 P.2d at 580.

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Y allowing clients to choose their own advocates -- an interest that . . . has const.itutional underpinnings." Opinion No. 44, Jan. 24, 1978. In an administrative licensing proceeding such as this one, that interest is especially strong. The complex-ity of many such proceedings (of which this one is typical) can make a party's advocate irreplaceable or virtually so once the proceeding is in mid-course. Any lawyer with any signifi-cant amount of administrative experience is acquainted with cases in which an advocate has testified to some factual matter within his knowledge or to a policy position without a question being raised as to his dual role.

The leading decision in an administrative proceeding in which the question was raised is that of the Federal Commu-nications Commission's Review Board in Miller Broadcasting, Inc., 56 P.&F. Radio Reg. 2d 602 (1984). The Board there reviewed an administrative law judge's ruling that, because a lawyer for an applicant for a broadcast license was an essen ,

tial witness, he and his firm must be disqualified as counsel.

Although it did not in the least doubt the ALJ's finding that the lawyer was an essential witness, it reversed his ruling.

It began its analysis, as we have indicated that analysis should begin, "with the bedrock proposition that a litigant should be able to select the counsel of his choice in the absence of compelling countervailing considerations." Id.

at 603. It thought the principle "particularly applicable" in a broadcast licensing proceeding, where "an applicant . . .

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. should be free to decide whether, in its particular case, particular counsel is to its advantage." Id. at 604.

It then noted that in Opinion No. 44 (which dealt with and approved a lawyer acting as trial counsel for his law firm, members of which would be witnesses) the Legal Ethics Committee of the D.C. Bar had concluded that, under at least one justification for the lawyer-witness rule -- the concern that a lawyer for a party may be more easily impeached for interest than some other witness - "the client is the benefi.-

ciary of this protection, [and] we believe that the client can properly waive it."' In the Miller Broadcasting case -- as in this case -- the lawyer / witness's client, fully advised, wanted him to continue the representation. The Review Board agreed further with the Legal Ethics Committee that certain other justifications sometimes offered for the lawyer-witness rule were of little weight: the possibility that opposing counsel would not be unsparing in cross-examination of a brother or sister at the bar and the fear of an appearance of impropriety in the dual role. Finally, the Review Board noted 8

The disqualification of a litigant's law firm under the California version of the lawyer-witness rule, Supreme Court Rule 2-111(A)(4), affirmed by a closely divided state supreme court, Comden v. Superior Court, 20 Cal.3d 906, 576 P.2d 971, 145 Cal. Rep. 9 (1978), led to an amendment of the rule. See Brown & Brown, Disqualification of the Testifying Advocate: A Firm Rule?, 57 N.C.L. Rev. 597 (1979). The amended Rule 2-111(A)(4) provides that a lawyer who knows or should know that he ought to be called as a witness for his client may continue the trial representation if he has the client's informed written consent.

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two further justifications to which the Legal Ethics Committee did give weight -- the awkwardness of a lawyer's examining himself andl"the danger that the trier of fact, especially if it is a jury, may give weight to statements by the advocate-witness that are in reality mere argument." Id. But, the Board held, there need be no awkwardness in the case at hand l because another lawyer in the lawyer-witness's firm could 4

examine him. And, as for the remaining consideration, "the trier of fact here is not a jury but an experienced ALJ who i

can separate argument from evidence." Id.

'l And so it is in this case. Even if Mr. Newman were called as a witness -- and, we repeat, there is no occasion for his being called and no intention on the applicants' part to call him -- he could be examined in the usual way by another lawyer in his firm. And this hearing is before an expert body that is well equipped to separate argument from evidence.

B. The Uncertainty As to the Rationale of tb3 Rule Has Caused It to Be Narrowly Construed and Applied Even With Respect to Courtroom Trials. .

The literal terms of DR 5-lOl(B) and DR 5-102 are sweeping, but discomfort with the results a literal reading produces has caused the D.C. Bar's Legal Ethics Committee, the counterpart ABA committee and some courts on occasion to back away from the full implications of a literal reading. Thus, as we have seen, the local bar committee has approved in Opinion No. 44 a law firm's employment of one of its own

  • . lawyers to represent it even though members of the firm would inevitably testify in litigation to which the firm was a party; more;recently, in Opinion No. 125, April 26, 1983, it has allowed a lawyer to represent at trial two defendant-witness colleagues in a law firm, while recognizing that literally the rule would forbid that trial representation.

See also, e.g., ABA Formal Opinion No. 339, Jan. 31, 1975; Bottaro v. Hatton Associates, 680 F.2d 895 (2d Cir. 1982).

Perhaps the most discerning commentary on the lawyer-witness rule is that of Professor Arnold Enker in The Rationale of the Rule That Forbids a Lawyer To Be Advocate and Estness in the Same Case, 1977 Am. B. Found. Res. J. 455.

Professor Enker concludes that the only legitimate justifica-tion for the rule is the final justification dealt with by the FCC Review Board in Miller Broadcasting -- the interest in keeping separate the role of a witness, sworn to tell the truth, and that of the advocate, free, and indeed profession-ally obliged, to advance all substantial arguments that support his client's case without regard to his belief or disbelief in any of them. An Ethical Consideration in the present Code puts it this way: "The roles of an advocate and of a witness are inconsistent; the function of an advocate is to advance or argue the cause of another while that of a witness is to state facts objectively." EC-5-9.

When speaking of the dual-role justification for the lawyer-witness rule, Professor Enker, like virtually every

f other commentator, places the rule in the context of a jury trial. See id. at 464. As the FCC Review Board found, the dual-role justification for the rule carries far less weight in the context of an administrative proceeding than in the jury trial for which it was primarily written.

In light of the uncertain rationale for the lawyer-witness rule" and the unwillingness of ethics committees and courts to give the present disciplinary rules their full literal rein, it is understandable that the new ABA Model s

Rules (not yet adopted in the District of Columbia), to which the Board referred, have pared down the applicability of the lawyer-witness rule. (Pp. 10-11, supra.) The proposed Rule 3.7(a) makes it explicit that the lawyer may not act as advocate in a trial'only if he is likely to be "a necessary witness."5 It is as clear as can be that Mr. Newman is not a "necessary witness." It is clear, furthermore, that, whatever the tenor of his testimony -- and there is not the slightest The skeptical views of commentators are indicated by the very titles of their works: Brown & Brown, Disqualification of the Testifying Advocate--A Firm Rule?, 57 N.C.L. Rev. 597 (1979); Note, The Advocate-Witness Rule: If Z, Then X. But Why?, 52 N.Y.U.L. Rev. 1365 (1977); Comment, The Rule Prohib-iting an Attorney from Testifying at a Client's Trial: An Ethical Paradox, 45 U. Cin. L. Rev. 268 (1976).

  • Furthermore, under Model Rule 3.7, the lawyer's disquali-fication as advocate if he is a necessary witness does not extend to his firm. The firm is disqualified only where the lawyer's testimony will yield a conflict of interests, as defined in other provisions of the Model Rules, and those provisions, Rules 1.7 and 1.9, allow the client to consent to the represer. cation despite the conflict.

. indication that it would be adverse to the interests of the applicants -- the applicants would consent to (more than that, would urge as strongly as they could) the continued represen-tation of their interests by Mr. Newman and his firm.

C. Disqualification of Mr. Newman and His Firm Would Work a Substantial Hardship on the Applicants.

Both DR 5-lOl(B) and DR 5-lO2(A) are subject to an r

exception that allows a lawyer to testify "[a]s to any matter, if refusal would work a substantial hardship on the client Iecause of the distinctive value of the lawyer or his firm as counsel in the particular case." DR 5-lOl(B)(4).

This Board need not be told how fully that condition is satisfied in this case by Mr. Newman. There can be no doubt of the hardship these applicants would undergo if.they were forced, at this point in this licensing proceeding, to obtain counsel to substitute for Mr. Newman and his firm.

Furthermore, a proceeding such as this one, extending as it has over many years and dealing with the most technical of issues, is the paradigm case in which a lawyer and his firm almost necessarily take ca a " distinctive value" to their clients. One need not even note that the proposed Model Rule 3.7 in this respect is less stringent than the present Code sections, providing an exception where " disqualification of the lawyer would work substantial hardship on the client" regardless of the lawyer's distinctive value.

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Mr. Newman's firm has represented Houston Lighting &

Power Company in connection with the licensing of the South Texas Project since 1973. Mr. Newman has had principal responsibility for that effort during the entire period.

Throughout the approximately 12 years in which various NRC proceedings and reviews have gone forward, he and lawyers in his firm have had almost daily contact with HL&P officials and h other personnel, with its contractors, and with the NRC staff concerning the project and the NRC licensing problems in-I volved. Mr. Newman himself possesses an unmatched reservoir of knowledge concerning the regulatory issues involved in this proceeding. His background and that of his firm are particu-larly important right now, given the fact that Phase II of this proceeding will involve at least some matters covered in Phase I -- e.g., previous testimony. To have to replace Mr. Newman or his firm on the brink of the hearing scheduled i.

for this summer would be an enormously serious blow to the applicants. The seriousness is underscored by the fact that Hugh Rice Kelly, the senior vice president and general counsel of HL&P, appears on this response as counsel to urge specif-ically the importance of this matter to HL&P.

Apart from all else, then, Mr. Newman or his firm cannot properly be disqualified because of the client hardship exception to the disqualification rule.

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, CONCLUSION There is no impropriety in the continued representa-tion of the applicants by Mr. Newman and his law firm.

Respectfully submitted, RILLIAM H. ALLEN Covington & Burling 1201 Pennsylvania Avenue, N.W.

P.O. Box 7566 Washington, D.C. 20044 (202) 662-5420 OF COUNSEL:

Attorney for Houston Lighting &

HUGH RICE KELLY Power Company, Project Manager Senior Vice President & of the South Texas Project General Counsel acting herein on behalf of Houston Lighting & Power itself and the other Company Applicants, The City of San 611 Walker Street Antonio, Texas, acting by and Houston, Texas 77001 through the City Public Service Board of the City of San Antonio, Central Power and Light Company, and City of Austin, Texas April 25, 1985

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t f ,QP[] { ~,] [ " " A " "' ~ ~T,g j September 8, 1981 SOUTH TEXAS PROJECT REPORT ON CONTRACTOR REPLACEMENT INTRODUCTION This report outlines the steps which have been taken to study the possible replacement of Brown & Root as architect-engineer and construction manager for the South Texas Project. Reasons are set forth why these steps should be taken now. This report describes the method used to obtain and to analyze the proposals by prospective replacement contractors and, finally, recommends a course of action.

I. Background Performance by Brown & Root (B&R) on the South Texas Project (STP) has been a matter of increasing concern.

The most visible problems have been in B&R's actual construction activities, including related quality assurance functions, culminating in the issuance by the Nuclear Regu-latory Commission (NRC) of a Show CE.use Order last year.

Although improvements in these areas during the past year --

as confirmed by both HL&P and NRC -- indicate that B&R can properly continue those functions, there are continuing serious problems with respect to B&R's ability to complete i

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engineering and.to manage construction effectively.

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.dd 5![ 9f' 5 The problems encountered by B&R in engineering and construction management derive from its extremely limited experience in nuclear projects; its lack of sophisticated management controls to ensure proper coordination between engineering and construction, as well as proper scheduling and sequencing of construction operations; lack of seasoned y

personnel in the nuclear field; and B&R's inability to gather an appropriate management team for a project of this magnitude and complexity. The difficulties with the engineer-ing to date are reflected both in the Quadrex report and in other reviews conducted of individual systems. The diffi-culties in construction management are evidenced by continuing delays and changes in scope, only some of which can be ascribed to evolving regulatory requirements.

We have concluded that B&R lacks the necessary depth to perform its engineering and construction management tasks in an orderly, timely and cost effective manner, and that the prospects for improvement are poor owing to B&R's limited experience in nuclear projects and its inability to make the necessary improvements to date. Thus, retaining B&R to per-form such functions wou'ld, in our judgment, result in very significant delays in completing the project.

We have further concluded that it is feasible and desirable to replace B&R with a contractor with extensive nuclear experience in engineering and construction management 1

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e 3-while continuing B&R's responsibility as constructdr. The availability of the new contractor's experienced personnel . _ _ _

will enable design and engineering of STP to progress at a l faster rate and to better support the construction effort at STP. In addition, the new contractor will greatly bolster construction management by strengthening the scheduling and p.lanning functions currently being performed by B&R. Reten-tion of B&R as the constructor will provide continuity at j the job site and facilitate B&R's cooperation in the A-E/ con-t structor management takeover, which is essential.

The balance of this memorandum summarizes the intensive study we have conducted during the past six weeks of the alternatives available to HL&P and its partners in the South Texas Project.

II. Alternatives Examined There are basically four components in the management of a large nuclear power project. They include: project management (the function executed by HL&P for STP); architect-engineering services; construction management; and construction.

Brown & Root has conducted the latter three functions at the STP.

We have examined the possibility of terminating all of B&R's activities under the STP contract. We concluded, for the reasons mentioned above, that B&R must be relieved of

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W2:$nNk architect-engineering and construction managament services as quickly as possible, consistent with licensing require-ments. We believe, however, that B&R can continue construc-tion work under the direction of a new contractor for engineer-ing and construction management. This also allows some face-sav.1g for B&R which may be of great importance because, as discussed below, their cooperation is essential in order to have a smooth transition -- which is important, not only to the success of the project but also for licensing reasons.

III. Study and Action by Management There are about seven architect-engineers in the United States who have experience in the nuclear power field. They include: United Engineers and Constructors (UE&C) ; Sargent

& Lundy; Burns and Roe; Gilbert Associates; Gibbs & Hill; Ebasco; Stone & Webster; and Bechtel Power Corporation.

Although the projects of Ebasco, Stone & Webster (S&W) and Bechtel have not been uniformly successful, they are, in our judgment, the only firms with the resources necessary to assume architect-engineering and construction management responsibilities for a job of this magnitude. The others

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lack the necessary human resources, technical sophistication and experience to step into a job of this size and complexity.

Informal contacts were made with Ebasco, Stone &

Webster and Bechtel to determine their interest in undertaking this work. In addition, an expression of interest was solic-ited from Westinghouse. These contacts established that all four companies were interested in the project, on July 24, 1981, a Request for Proposals (RFP) was dispatched to them.

The RFP sought information on the resources available in each company to undertake a two-part process involving, first, an assessment and " bench marking" of construction and engineering work done to date; and, second, completion of engineering, construction and startup of the STP units. Those submitting proposals were asked to identify key personnel, as well as total corporate resources, available to support the STP. In addition, the companies were asked to identify any licensing questions associated with the assumption of responsibilities by them, as well as their flexibility in accommodating con-straints imposed by licensing considerations. A copy of the RFP is included as Attachment 1.

Each organization submitted a lengthy proposal which described its approach to the tasks outlined in the RFP, its relevant experience and resumes of key individuals to fill each major slot. Each company also identified the major features of its commercial offer in the form of general terms l

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and conditions relating to compensation and responsibility for defective work, as well as assumption of responsibility for work perforned by B&R.

The Westinghouse offer, which was submitted in partner-ship with Gilbert Associates, contemplated complete assumption of responsibilities for the project, including project manage-p ment. In essence, Westinghouse proposes a " turnkey job,"

which was not solicited by the RFP. Moreover, the proposal 7

contained unrealistic commercial terms and raised extremely serious licensing questions. Accordingly, the proposal was non-responsive and not further evaluated.

The proposals submitted by Ebasco, S&W and Bechtel were evaluated in detail by Messrs. Oprea, Goldberg and Newman.

Upon completion of their independent reviews, they met to exchange reactions, concerns and questions regarding each proposal. These matters were discussed in letters sent to each candid &te. At the same time, arrangements were made to visit each company at its home offices in order to allow each an opportunity to elaborate on its proposal, to answer questions identified in the letters and to arrange inter-I views with key personnel proposed for major positions.

l I

Messrs. Oprea, Goldberg and Newman visited each con-tractor, starting with Ebasco (August 24-25), and followed by Stone & Webster (August 31-September 1) and Bechtel

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(September 3-4). The meetings were extremely helpful in assessing the capability of each organization, as well as its understanding of the tasks involved in undertaking the South Texas Project.

IV. Criteria for Evaluation and Overview of Proposals The following nine criteria, each of which are dis-

$I in evaluating the cussed in detail below, were utilized i

proposals:

(1) Dedicated Resources, .

(2) Pool of Corporate Resources, (3) Prior Experience, (4) Understanding the Transition Process, (5) Management Systems, (6) Takeover Experience, (7) Flexibility, (8) Commercial Considerations, and (9) Licensing.

(1) Dedicated Resources The most essential aspect of the evaluation is the commitment of skilled, seasoned people in key positions such as project manager, manager of engineering, construction Another important consideration, the operating

  • / style and approach of each contractor, is discussed in the following Section V.

5 yao

- u manager, cost and scheduling manager, records management, and quality assurance. Each crganization offered its share of extremely capable people and all indicated a willingness to accept a " key man" provision which would preclude reassignment of certain individuals without the prior consent of HL&P.

Although Ebasco offered the services of several t

very impressive people, the dedicated technical resources of S As between the two, t S&W and Bechtel are significantly greater.

4 S&W has an edge in view of its commitment to assign to the e project Mr. V. A. Suziedelis, Executive Vice President of S&W.

Stone & Webster indicated that Mr. Suziedelis would be available to devote 60-70 percent of his time to the STP for a period of at least one year, giving up all other respon-sibilities except those associated with his position as a senior officer and director of the corporation. Bechtel's senior representative (Project Manager) is performing L similar work at another major nuclear job. He appears to be an able person but has not held positions of great visi-l bility in the Bechtel organization. Although there are different strengths and weaknesses in each organization, the dedicated personnel in S&W and Bechtel project teams are comparable and appear to have the " chemistry" necessary to succeed.

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(2) Pool of Corporate Resources The total human resources of each organization .

is an impor. tant f actor in making a selection. The project, as it stands, is formidable; howevar, the results of the critical, comprehensive review of the engineering and con-struction work performed by B&R (which would be the first job of the new contractor) may indicate a need for even larger numbers of people and a greater diversity of technical talent than now foreseen. Ebasco is unacceptably " thin" because, among other things, of its commitment to the Allens Creek Project. Bechtel Power Corporation with more than 22,000 engineers, is almost twice the size of Stone & Webster and probably has a greater diversity of talent.

(3) Prior Experience Bechtel has, by far, engineered and built more nuclear power facilities in the U.S. (about 60) than either S&W (25) or Ebasco (13).

(4) Understanding the Transition Process Stone & Webster conveyed a surer understanding of the tasks involved in taking over a project from another engineer / constructor than either Bechtel or Ebasco. In l particular, S&W demonstrated a better " feel" for the task involved in statusing the engineering and construction work performed to date, and the need for systematic analysis of I

such work prior to the release of further engineering and

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construction activities. Bechtel's grasp of this matter was somewhat superficial; they appear to understand the elements of the transition process, but had not given the matter the careful thought and analysis demonstrated by S&W. As discussed further below, Ebasco demonstrated the least appreciation of the complexity of the transition process.

1 (.5) Management Systems All three organizations utilize sophisticated management systems for evaluating job progress and controllin.g cost and schedule. S&W, however, offered a unique " extra."

f S&W is a leader among A-Es in the development of reference nuclear power plants (RNPPl. One of its RNPPs is " mated" to an NSSS of the type incorporated in STP. Accordingly, S&W has, in being , a Work Breakdown Structure (WBS) which identifies the specific tasks to be accomplished in a series of discrete job " packages." Although S&W would have to do some adaptation of its WBS, it has a distinct

" leg up" on the process, and probably could proceed more quickly and with greater certainty to assess the progress of STP and proceed in an orderly fashion to release further t

l L engineering and construction work.

! (6) Takeover Experience l

Each of the candidates purported to have some experience in "taking over" projects from other A-Es.

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~ J Although Ebasco had actually taken over A-E and constructor responsibilities on a nuclear power project in Mexico, the experience is not really on point because Ebasco was not required to undertake a prolonged interface,with the dis-charged contractor; nor was the transition under the jurisdiction of the U. S. Nuclear Regulatory Commission.

Neither S&W nor Bechtel had any true " takeover" experience.

(7) Flexibility Both Bechtel and Ebasco indicated that they could.

4 alter their respective approaches and personnel assignments l to meet the requirements of the STP as circumstances develop.

Stone & Webster appeared to be less flexible, particularly in connection with personnel assignments. It was suggested, for example, at our meeting that S&W consider a person other than the individual designated in the proposal for Project l Manager. S&W nevertheless pressed for its initial choice.

Flexibility is regarded as an important factor because review of B&R's work, as well as licensing conditions, may require a shift of resources and changes in functional responsibilities.

(8) Commercial Considerations Commercial arrangements were only briefly touched upon. Bechtel appeared to be the most forthcoming of the candidates by offering a fixed fee of $12 million, together

L nPDP:4" 12 -

with an incentive package which would provide up to an additional $15 million in fee. Bechtel agreed to accept financial responsibility for defects in its workmanship up to $10 million.

Stone & Webster initially offered a " cost plus percentage of cost" contract, but then modified its proposal g

by offering a fixed fee of $24 million (adjustable for escalation and scope changes) with earned incentives expressed as a percentage of estimated costs and further incentives (in, the sole discretion of HL&P) based on S&W's performance.

S&W would, however, limit its liability for defective workman-ship to $3 million per unit.

Ebasco's proposal, likewise, initially contemplated a " cost plus percentage of cost" contract for Phase B activ-ities. A fixed fee of approximately $1 million was offered to cover a very brief Phase A effort. Ebasco has now furnished a proposal incorporating a fixed fee of $ __ million and an opportunity to earn $ __ million in incentive fees. Ebasco's proposal with respect to penalties for defective workmanship is not clear at this time.

In general, commercial considerations in a job of this type are secondary. We believe that, in the course of negotiations, all candidates can be " brought around" to a set of commercial arrangements of approximate parity.

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V. -

(9) Licensing Stone s' Webster had clearly given more consideration to licensing questions than either Bechtel or Ebasco. S&W understood the potential necessity for a construction permit amendment and offered intelligent suggestions for meeting regulatory problems. Although less developed, Ebasco also 4 reflected an understanding of licensing considerations l

d' associated with the transition to a new contractor, although 3

its thinking was less developed than S&W. Bechtel was some-

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what shallow in explaining its view of licensing matters, but this may be attributable to the fact that the chief licensing engineer it proposes to use on the STP was not available for discussion at the time of our meeting. A subsequent tele-phone conversation with the licensing engineer confirmed our impression that licensing requirements can only be evaluated

! after further discussions with NRC.

I V. Operating Style and Approach of Each Contractor Each organization brought a different approach to the takeover of the STP job. Ebasco proposed a " blitzkrieg" evaluation over a period of four weeks by very senior people in order to perform a preliminary baseline evaluation of the progress on the STP. We are skeptical about this approach because none of the senior level personnel involved in the

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evaluation have responsibilities thereafter for doing the job. Presumably, Ebasco would continue the baseline evalu-ation after it moved into Phase B but, in general, the Ebasco suggestion is somewhat naive; it fails to reflect the complexity involved in the transition from job evalu-ation and baselining to production activities.

Stone & Webster did not propose any change in staff

between Phases "A" and "B." The same people charged with responsibility for assessing the project will also have responsibility for future engineering and construction.

After an initial period of 4-6 weeks, S&W proposes an

" intensive planning session" with HL&P to review the status of the job and planning future work. S&W suggested the possibility of several and " intensive planning sessions" over a period of about 6 months in order to establish priorities for verification activities, new engineering and further construction. Although S&W would assign personnel to Houston, the job would be controlled in virtually every l

important aspect from its Boston headquarters.

Bechtel proposes to have the STP administered by its Los Angeles Power Division, through its Houston office. We expressed concern that the movement of a large number of l

people to the Houston office (about 250) would almost double the size of that office and thereby create significant administrative problems. In addition, we noted that the i

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s 4..;s t Houston office had no prior nuclear experience. We also expressed concern to Bechtel that its proposed Project - _ .

did not carry Manager and Engineering Manager for Phase "A" over to Phase "B." Bechtel indicated that an appropriate provision would be made for an orderly transition between personnel in each phase. We remain concerned, however, that the administrative problems involved in establishing a

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j large nuclear office in Houston could be extremely disruptive L

in the crucial early months of the work. This matter should be discussed further with Bechtel, if they are to get the assignment.

The foregoing is a subjective analysis of each proposal from several vantage points. In general, Ebasco appears to lag considere.bly behind Bechtel and S&W in the competition.

In particular, we have significant concern regarding Ebasto's as well as l

document control and records management systems, the experience of certain of its key individuals.

The competition is extremely close between Bechtel and i

Stone & Webster.

Stone & Webster appears to offer, at the i

outset, a stronger team with closer involvement by high level management. Bochtel, on the other hand, has fielded a good team and, more importantly, has enormous resources which can be called upon to accommodate presently unforeseen requirements

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b A serious concern, however, is whether access to the con-siderable resources of the Bechtel organization can be -

achieved through a fledgling Houston office.

.An attempt at.a quantitative, objective evaluation is incorporated in Attachment 2 to this report. It would show slightly ahead of in the competition with Ebasco trailing substantially.

4 VI. Timetables All of the prospective candidates seemed ready to start work almost immediately.

Ebasco believes that it can release new drawings within 3 months while a review goes on of other existing i

drawings, specifications and designs. Ebasco projects a period of 6 months in order to establish a realistic formal schedule and cost estimate. Ebasco would plan to submit a transition program within one month after contract award, and complete the task of assessing and verifying B&R's I

l work within 8 months. Ebasco would be prepared to assume l

l construction management functions within 3-6 months after l

l contract award.

Stone & Webster, as noted above, contemplates an initial evaluation period of 4-6 weeks, followed by an

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! intensive planning session and similar intensive planning sessions over a period of about 6 months. S&W would plan to have a good schedule and cost estimate within 10 months i

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after contract award, and a projected schedule for the first year of work by December, 1981. S&W plans to assume con-

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struction management functions almost immediately af ter contract award on a phased basis. Their proposed 4chedule' indicates that substantially all construction maniige%ent responsibility could be assumed within 6 months after contract .

award.

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.Bechtel would plan to assume construction management ,

,p functiions about 4 weeks af ter contractfdward,"and progres- #

t' L sively increasing its construction manachment, activities e

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over c, period of ab'o'ut six months. Bechtel projects that

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it will be 9 months after contract awa'rd before a definitive .

cor_t and schedule can be produced. > a' s . . ,g Bechtel and Stone & We N ter contemplate a; staff of g .

' about one thousand atxthe peak of work activity. Ebasco A c

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indicates that it could perform ths,$ob with a staff of 350. 4, (3

^ VII. Licensing and Other Internal' Considerations

- Replacement of a contractor for a.chitect-engineering - . ,

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7, and construction management is;4nprecedented m in MRC experience.

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.It is unclear whether a construction permit amendment w'ill'be; - - ,

required. If an amendment is required, there may be a need,,

for a prior notice and hearing. / The process'of'b 3plementing

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A s */ Whether $r not an amendm'ent is.needed', the replace- ,,

ment of B&R will undoubtedly have to be conside!'ed -

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in-the current operating license hearing and_c$mpli-

, cations may thus arise as to the timing of-the take- f over of responsibilities by the new contractor.

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the decision to replace Brown & Root in A-E and construction N

management-fur:ctions may be heavily influe'qced by licensing matters. We have informed two key officials in the NRC Staff regarding our consideration of rcleasing Brown & Root from all A E k and construction .nanagement functions g It is g , , ,

necessary,however,tohavemorbdefinitivediscussions

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with the NRC Staff and, especially, its legal arm to deter-

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mine the nature ffkany licensing hurdles. An early decision i /

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is, therefore, very is.7ortant; until the action is taken, we

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$d are effec'tively, precluded from meaningful discussions with the NRC Staff, and cannot complete plans for the chaageover.

in addition, word is>ieaking through several sources i

that this. change is b'eing contemplated. This , of course, ,

. Mould introduce a good deal of instability in STP activities, a \

'!, A decisi.on at an early date is also important so that Brown

& Root can be approached in a way conducive to gaining its cooperation in an orderly transition. All proposals stressed, ,

'~ ' the importance of this cooperation.

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5 VIII.. Recommendation

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Attachmant 1 July 24, 1981 Page 1 of 5 I REQUEST FOR PROPOSAL I. Scope Of tbrk A. Generals You are invited to subnit a proposal for the take-over and performance of the rannaining engineering, design, and construction management work of the proje. Included in this is the need to review the existing engineering, design,and construction work to verify conformance with applicable regulatory, code, and sound in&1stry practices and bench-mark their status.

Changes would be required to be made to the otmpleted enaineering, design,and construction, where appropriate.

e B. Detailed:

Also included in the work scope are the following activities which the successful contractor would be recponsible to perform.

1. Preparation of procurement specifications
2. Preparation of erection specifications
3. Preparation of purchase requisitions and orders
4. Preparation of licensing reports, answers to inquiries, and amen &ents
5. Secure and maintain ASME III Design "N" stamp
6. Participate in monthly project status review meetings
7. Planning, scheduling, and cost control of Engineering and Construction I
8. Training of client and contractor personnel Review of supplier design drawings and sOcMares 9.
10. Review of construction contractor programs and sucdares
11. A&ninistration of contauction subcontracts
12. Development and maintenance of a doctznent control and records management system
13. Institute a nonthly change control system. Provide timely reports to the utility identifying potential changes and their estimated impact on project costs and schedule.

C. Responsibility:

The firm selected to cxmplete the project would be resporsible to perform those engineering and construction managenent services necessary to secure the requisite ASME certifications, as well as satisfy licensing and I & E requirements.

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  • _2-July 24,1981 3?OM 70R PIOPOSAL
  1. Construction work is currently planned to remain the responsibility of the existing contractor. This could change at a later date in the event it is determined that such a chanae would be in the best interests of the project.

D. Quality Assurance:

Engineering, Design, and Construction work will be performed under the

" Engineers" QA Program, which will have to satisfy the QA ocmnitments set forth in the SAR.

II. Conduct of Work It is envisioned that the required work will be done in two phases.

A. Phase "A" work consists of those activities dealing with review of the existing engineering, design, and construction activities and their associated records to bencrrrark project status. Also included in Phase "A" is the preparation of a project ocznpletion cost and schedule g

forecast.

B. Phase "B" work consists of resunption of productive engineering, design, and construction activities. It is anticipated that the Phase "B" work can be initiated prior to the ccznpletion of Phase "A" work provided the requisite licensing matters associated with this change of Engineer and Construction Manager have been resolved with the Nuclear Regulatory Comnission.

It C. All work, irrespective of phase, is to be executed with dispatch.

is essential, therefore, that the project be staffed swsly with qualified and seasoned professionals in sufficient nunbers to aco:rnplish the required work.

III. Proposal Requirenents A. Schedule of Subnittal - within ten (10) working days upon receipt of this request. Based on receipt by afternoon of July 24, 1981, proposal due in Houston by 0800 AM, August 10, 1981. Award and start of work is anticipated on or before Septenber 4,1981.

B. Proposal Content The proposal, as a minimun, should address those elanents specified below. Any other areas not listed and which are believed to be sig-nificant, should be addressed as well.

1. Organization - Identify your plan for staffing the project for conduct of each phase of work. Provide organization charts, names of all key hs of the managernent team (down to

" Principal Engineer" and " Construction &2pervisor" levels) each Identify against ,

and provide up-to-date resunes for each. IT SFOULD BE named individual their date of availability.

NOIID THAT "ORGANIZATICN" IS LIKEIX 'IO BE '!HE M1T IMPOR1 ANT ELDIENT IN DECIDING Wlo SiOUID FINISH 'IHE PEATILT.

-3 W y0R PROPOSAL July 24, 1981 1

2. Iogistics - Identify for each phase of work what portion of your organization will be working where. Particular atten-tion should be paid to the following locations-
a. liouston
b. Job Site
c. Htne Office
d. Other
3. Mxlus Operandi - Identify your plan for carrying out the impor-tant elements of work. This should include, but not be limited to,the following:
a. Review of SAR ctmmit
ments
b. Review and statusing of engineering calculations
c. Review and statusing of engineering specifications f' and other technical referer.ce h=mts l
d. Review and statusing of engineered and bulk material procurernent
e. Review and statusing T.gineering drawing developnent including "lcid" status and " design change notices"
f. Review and statusing open non-conformance reports (NCR's) 9 Establishing required changes to the project docunent control and records management program
h. Review and statusing construction
i. Identification of unresolved field change requests (ECR's) to engineering for corrective action
j. Review adequacy of the project material control pro-gram
k. Developnent of a licensing strategy and plan to pre-pare a C.P. amen &nent and attend a conference with the NRC in order to address the following:

(1) A/E's technical qualifications (2) A/E's QA Program (3) Interface between old and new engineering (methodology and analyses)

(4) Interface of A/E's QA Program with Constructor's QC activities (5) Retraining of constructor to A/E's QA Program requirenants (6) Changes to existing SAR comnitments (7) Changes to existing design criteria (8) Interface between A/E's QA Program and that of the utility

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July 24, 1981 EBQUEST FOR PROPOSAL

l. Identification of construction related activities to con-tinue during Phase "A" and required manning resources
m. Review of construction facilities and equipnent. Identify needs for job cxmpletion
n. Review, selection, and assimilation, where prudent, of current Engineer's human resources (both engineering, QC, and Construction Managment personnel)
4. Preliminary Scheduling - Provide preliminary CPM style network schedules featuring the key work elments associated with the job takecner, execution, and ccupletion. (Current estimated project status is as follows:)

Unit Engineering construction h

70% 50%

1 2 20% 15%

45%

'Ibtal: 65%

5. Manloading - Provide a preliminary manloadino for engineering, design, and construction management activities reflected on the networks provided in response to "4" above.
6. Final Schedule and Cbst Estimate - Identify how many months frczn contract award to prepare an official project cost and detailed schedule.
7. Identify what Engineering and Construction Panagement systems, if any, will be utilized for the work remaining to be done.
8. Contractual - For each type and phase of work, identify what forms of contracting would you rs.um.ead be utilized. A matrix-type response should be provided along the following guidelines:

Phase A Phase B Engineering Design Cbnstruction Managment Quality Assurance Maximtzn use of ltrnp sun or incentive type contracting is en-I couraged.

Describe your position with respect to financial responsibility for defects in engineering and/or construction in existing work discovered after you have cxxnpleted your review of, and accepted, I such work.

9. Otzmensation - Provide your schedule of costs, markups, and fees l

for each type and phase of work based on the contractual options K+, =-4ed in response to "8" above.

Identify what financial liability you are willing to accept for rework caused by your failure to properly execute Phase "B" work.

July 24, 1981 JtEQlEST FOR PROPOSAL

10. special Experience Identify any power plant related experience gained fzun assuming engineering and/or construction responsibilities frczn another organization.
11. Potential Transitional Considerations If it were necessary for a transitional period that you perform pur engineering function as a consultant to the utility review-ing the designs of its current Engineer prior to release to con-struction, would such a contractual relationship be acceptable?
12. If you have answered "11" above in the affirmative, describe how r

you would propose to interface with the utility and its current

}

r Engineer during the transitional period.

5

a Attachment 2 Ebasco S&W Bechtel Committed personnel Corporate resources t

Management systems Understanding of Verification Phase C/S Controls Document control & RMS Transition Plan QA Sophistication Licensing Sophistication Experience Contractual provisions Readiness to proceed

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- Septefrber 14, 1981 SOUTH TEXAS PROJECT REPORT ON CONTRACTOR REPLACEMENT O

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September 14, 1981 SCUTH TEXAS PROJECT i REPORT ON CONTRACTOR REPLACEMENT l l

INTRODUCTION This report outlines the steps which have been 4

f taken to study the possible replacement of Brown & Root as b architect-engineer and construction manager for the South '

4 Texas Project. Reasons are set forth why these steps should be taken now. This report describes the method used to obtain

! '- and to analyze the proposals by prospective replacement con-tractors and, finally, outlines a course of action.

I. Background Performance by Brown & Root (BER) on the South Texas Project (STP) has been a matter of increasing concern.

The most visible problems have been in B&R's actual

! construction activities, including related quality assurance 1

I functions, culminating in the issuance by the_ Nuclear Regu-latory Commission (NRC) of a Show Cause Order last year.

Although improvements in these areas during the past year --

as confirmed by both HL&P and NRC -- indicate that B&R can properly continue those functions, there are continuing serious problems with respect to B&R's ability to complete engineering and to manage construction effectively.

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The problems encountere:1 by B&R in engineering and ment derive from its extremely limited

. construct ion manage cxperience in nuclear projects; its lack of sophisticated management controls to ensure proper coordination between cngineering and construction, as well as proper scheduling and sequencing of construction operations; lack of seasoned personnel in the nuclear field; and B&R's inability to gather an appropriate management team for a project of this h gnitude and complexity. The difficulties with the engineer-ing to date are reflected both in the Quadrax report and in other reviews conducted of individual systems. The diffi-i culties in construction management are evidenced by continuing 2

delays and changes in scope, only some of which can be ascribed to evolving regulatory requirements.

We have concluded that B&R lacks the necessary depth to perform its engineering and construction management tasks in an orderly, timely and cost effective manner, and that the prospects for improvement are poor owing to B&R's limited experience in nuclear projects and its inability to make the necessary improvements to date. Thus, retaining B&R to per-s form such functions would, in our judgment, result in very significant delays in completing the project.

We have further concluded that it is feasible and desirable to replace B&R with a contractor with extensive nuclear experience in engineering and construction management l

~

while continuing BER's responsibility as constructor. The availability of~the new contractor's experienced personnel will enable design and engineering of STP to progress at a faster rate and to better support the construction effort at STP. In addition, the'new contractor will greatly bolster construction management by strengthening the scheduling and Reten-planning functions currently being performed by B&R, tion of BER as the constructor will provide continuity at i the job site and facilitate BER's cooperation in the A-E/

~

! construction management takeover, which is essential.

The balance of this memorandum summarizes the .

intensive study we have conducted during the past six weeks of the alternatives available to EL&P and its partners in the South Texas Project.

II. Alternatives Examined There are basically three components in the design and construction of a large nuclear power project. They

! include:

architect-engineering services; construction manage-ment; and construction. Brown & Root ha's conducted all three l

functions at the STP.

We have examined the possibility of terminating We concluded, all of B&R's activities under the STP contract.

for the reasons mentioned above, that B&R must be relieved of architect-engineering and construction management services as quickly as possible, consistent with licensing require-ments. We believe, however, that B&R can continue construc-tion work under the direction of a new contractor for engineer-This also encourages B&R's ing and construction management.

_4 cooperation in effecting a smooth transition -- which is

~

essential, not only to the success of the project but also for licensing reasons.

III. Study and Action by Management There are about seven architect-engineers in the United States who have experience in the nuclear power field.

They include: United Engineers and Constructors (UE&C);

Sargent & Lundy; Burns and Roe; Gilbert Associates; Gibbs &

Hill; Ebasco; Stone & Webster; and Bechtel Power Corporation.

)

i Although the projects of Ebasco, Stone & Webster r

(S&W) and Bechtel have not been uniformly successful, they

(.

are, in our judgment, the only firms with the resources .

necessary to assume architect-engineering and construction management responsibilities for a job of this magnitude.

the others lack the necessary human resources, technical sophis-tication and experience to step into a job of this size and l complexity.

Informal centacts were made with Ebasco, Stone &

Webster and Bechtel to determine their interest in undertaking this work. In addition, an expression of interest was solic-ited from Westinghouse. These contacts established that all four companies were interested in the project.' on July 24, i

1981, a Request for Proposals (RFP) was dispatched to them.

The RFP sought information on the resources available in each company to undertake a two-part process involving, first, an assessment and " bench marking" of construction and engineering work done to date; and, second, completion of engineering, construction and startup of the STP units. Those submitting l

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proposals were asked to identify key personnel, as well as total corporate resources, available to support the STP. In addition, the companies were asked to identify any licensing questions associated with the assumption of responsibilities by them, as well as their flexibility in accommodating con- l straints imposed by licensing considerations. A copy of the RFP is included as Attachment 1.

Each organization submitted a lengthy proposal which 5 described its approach to the tasks cutlined in the RFP, its 4

~

relevant experience and resumes of key individuals to fill each major slot. Each company also identified the major' ,

features of its commercial offer in the form of general terms

. and conditions relating to compensation and responsibility for defective work, as well as assumption of responsibility for work performed by B&R.

i The Westinghouse offer, which was submitted in partnership with Gilbert Associates, contemplated complete assumption of responsibilities for the project, including project management. In essence, Westinghouse proposed a

" turnkey job," which was not solicited by the RFP. Moreover, the proposal contained unrealistic commercial terms and raised extremely serious licensing questions. Accordingly, the proposal was non-responsive and not further evaluated.

The proposals submitted by Ebasco, S&W and Bechtel were evaluated in detail by Messrs. Oprea, Goldberg and Newman.

I Upon completion of their independent reviews, they met to

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cxchange reactions, concerns and questions regarding each proposal. These matters were discussed in letters sent to each candidate. At the same time, arrangements were made to visit each company at its home offices in order to allow each an opporturiity to elaborate on its proposal, to answer questions identified in the letters and to arrange interviews with key personnel proposed for major positions.

Messrs. Oprea, Goldberg and Newman visited each

, contractor, starting with Ebasco (Aagust 24-25), and followed i

by Stone & Webster (August 31-Septenber 1) and Bechtel (September 3-4). The meetings were extremely helpful in assessing the capability of each organization, as well as its understanding of the tasks involved in undertaking the ,

South Texas Project. Subsequent to the meetings supplemental information was furnished by each candidate.

IV. Criteria for Evaluation and Overview of Proposals The following nine criteria, each of which was discussed in detail below, were utilized */ in evaluating the proposals:

(1) Dedicated Resources, _

(2) Pool of Corporate Resources, (3) Prior Experience, (4) Understanding the Transition Process, (5) Management Systems, (6) Takeover Experience, y Another important consideration, the operating style and approach of each contractor, is discussed in the following Section V.

1

. (7) Flexibility, (8) Commercial Considerations, and (9) Licensing.

(1) Dedicated Resources The most essential aspect of the evaluation is the commitment of skilled, seasoned people in key positions such as project manager, manager of engineering, construction f manager, cost and scheduling manager, records management, and

, quality assurance. Each organization offered its share of extremely capable people and all indicated a willingness to s -

accept a " key man" provision which would preclude reassign-

ment of certain individuals without the prior consent of HL&P.

I

^

Although Ebasco offered the services of several very impressive people, the dedicated technical resources of S&W and Bechtel are significantly greater. As between the two, S&W has an edge in view of its comnitment to assign to the project Mr. v. A. Suziedelis, Executive Vice President of S&W. Stone & Webster indicated that Mr. Suziedelis would be available to devote 60-70 percent of his time to the STP for a period of at least one year, giving up all other respon-sibilities except those associated with his position as a senior officer and director of the corporation. Bechtel's senior representative (Project Manager) is performing similar work at another major nuclear job. He appears to be an able person but has not held positions of great visibility in the Bechtel organization. Supplemental information from Bechtel l

L -_ _ _ _ .- __ _ _ _.__ _ _

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indicated that an experienced nuclear man would be assigned as Project Director and would replace the current Manager of

! the Houston Office and this may help to offset the " visibility l factor" advantage enjoyed by S&W. Although there are different

! strengths and weaknesses in each organization, the dedicated personnel in S&W and Bechtel project teams are comparable and appear to have the " chemistry" necessary to succeed.

(2) Pool of Corporate Resources The total human resources of each organization is an important factor in making a selection. The project, as it stands, is formidable; however, the results of the

[

critical, comprehensive review of the engineering and con- ,

struction work performed by BER (which would be the first job of the new contractor) may indicate a need for even larger numbers of people and a greater diversity of technical talent

. than now foreseen. Ebasco is unacceptably " thin" because, among other things, of its commitment to the Allens Creek Proj ect". Bechtel Power Corporation with more than 22,000 engineers, is almost twice the size of Stone & Webster and i

probably has a greater diversity of talent.

[

(3) Prior Experience Bechtel has, by far, engineered and built more nuclear power facilities in the U.S. (about 60) than either 4

Ssw (25) or Ebasco (13) .

(4) Understanding the Transition Process Stone & Webster conveyed a surer understanding of __

the tasks involved in taking over a project from another

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. ' engineer / constructor than either Bechtel or Ebasco. In 4

particular, S&W demonstrated a better " feel" for tha task involved in statusing the engineering and construction work

, performed to date, and the need 'for systematic analysis of such work prior to the release of further engineering and construction activities. Bechtel's grasp of this matter, i

as conveyed in its original proposal, was somewhat superficial, j

but a supplemental filing of September 9, 1981, by Bechtel

, provided a better in-depth analysis of the transition. As

, discussed further below, Ebasco demonstrated the least appre-ciation of the complexity of the transition process.

(5) Management Systems ,

i All three organizations utilize sophisticated management systems for evaluating job progress and controlling cost and schedule. S&W, however, offered a unique " extra."

S&W is a leader among A-Es in the development of reference nuclear power plants (RNPP). One of its RNPPs is " mated" to an NSSS of the type incorporated in STP. Accordingly, S&W has, in being, a Work Breakdown Structure (WBS) which identifies the specific tasks to be accomplished in a serica of discrete job " packages." Although S&W would have to do some adaptation of its WBS, its has a distinct " leg up" on the process, and probably could proceed more quickly and with greater certainty to assess the progress of STP and proceed ,

in an orderly fashion to release further engineering and con-struction work. Bechtel would use essentially the same system

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- but would have to create the packages already in hand at S&W.

(6) Takeover Experience Each of the candidates purported to have some experience in "taking over" projects from other A-Es. Although Ebasco had actually taken over A-E and constructor responsi-bilities on a nuclear power project in Mexico, the experience is not really on point because Ebasco was not required to undertake a prolonged interface with the discharged contractor; nor was the transition under the jurisdiction of the U. S.

' 'r Nuclear Regulatory Commission. S&W completed Con Ed's coal plant at Astoria, taking over at about the 50 percent mark ,

s while Bechtel has taken on construction management functions y at several WPPS nuclear units. Neither experience is comparable to the changeover contemplated here.

(7) Flexibility Both Bechtel and Ebasco indicated that they could alter their respective approaches and personnel assignments to meet the requirements of the STP as circumstances develop.

Stone & Webster appeared to be less flexible, particularly in connection with personnel assignments. It was suggested, i _

for example, at our meeting that S&W consider a person other l

than the individual designated in the proposal as Project Manager. S&W nevertheless pressed for its initial choice.

! Flexibility is regarded as an important factor because review of B&R's work, as wel'1 as licensing conditions, may require a shift of resources and changes in functional respon-sibilities.

- - - , , w---. - - , .

.)

(8) Commercial Considerations Commercial arrangements were only briefly touched upon. The following is a very general overview. Each organization utilizes varying indirect loadings and there are also wide differences in fee arrangements, but, as noted below, this is not a significant factor in the overall evalua-tion.

Bechtel appeared to be the most forthcoming of j the candidates by offering a fixed fee of $12 nillion, together

! Iwith an incentive package which would provide up to an,addi-J tional $15 million in fee. Bechtel agreed to accept financial responsibility for defects in its workmanship up to $10 million.

Stone & Webster initially offered a " cost plus per-contage of cost" contract, but then modified its proposal by offering a fixed fee of $24 million (adjustable for escala.

tion and scope changes) with earned incentives expressed es

a percentage of estimated costs and further incentives (in the sole discretion of EL&P) based on S&W's performance. S&W would, however, limit its liability for defective workmanship to $3 million per unit.

Ebasco's proposal, likewise, initially contemplated a " cost plus percentage of cost" contract for Phase B activi-ties. Ebasco has now furnished a proposal incorporating a fixed fee of about $5.4 million. There would also be an opportunity to earn $10.8 million in incentive fees. The I

fee is subject to adjustment when definitive cost and schedule

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e 1

schedule estimates are agreed upon. Ebasco's proposal with .

l I

respect to penalties for defective workmanship would appear to be about $2.7 million. .

In general, commercial considerations in a job of this type are secondary. We believe that, in the course of negotiations, all candidates can be " brought around" to a set of commercial arrangements of approximate parity.

(9) Licensing Stone & Webster had clearly given more consideration f to licensing questions than either Bechtel or Ebasco. S&W understood the potential necessity for a construction. permit .

O amendment and offered intelligent suggestions for meeting -

regulatory problems. Although less developed, Ebasco also i

reflected an understanding of licensing considerations associated with the transition to a new contractor. Bechtel was somewhat shallow in explaining its view of licensing matters, but this may be attributable to the fact that the chief licensing engineer it proposes to use on the STP was not available for discussion at the time of our meeting. A subsequent telephone conversation with the licensing engineer confirmed our impres-sion that licensing requirements can only be evaluated after further discussions with NRC.

V'. Operating Style and Approach

  • of Each Contractor Each organization brought a different approach to the takeover of the STP job.

Ebasco proposed a " blitzkrieg" evaluation over a period of four weeks by very senior people in order to perform t

a preliminary baseline evaluation of the progress on the STP.

We are skeptical about this approach because none of the I senior level Personnel involved in the evaluation have responsibilities thereafter for doing the job. Presumably, Ebasco would continue the baseline evaluation after it moved into Phase B but, in general, the Ebasco suggestion failed to reflect the complexity involved in the transition from job evaluation and baselining to production activities.

Stone & Webster did not propose any change in staff 1 l

+

between Phases "A".and "B". The same people charged with responsibility for assessing the project will also have .

responsibility for future engineering and constructien.

After an initial period of 4-6 weeks, S&W proposes an -

" intensive planning session" with HL&P to review the status of the job and planning future work. S&W suggest1d the pos-sibility of several " intensive planning sessions" over a period of about 6 months in order to establish priorities for verifi-cation activities, new engineering and further construction.

Although S&W would assign personnel to Houston, the job would l

be controlled in virtually every important aspect from its Boston headquarters.

Bechtel proposes to have the STP administered by its Los Angeles Power Division, through its Houston office. We expressed concern that the movement of a large number of people to the Houston office would almost double the size of that office l

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and thereby create significant m'dministrative problems. In addition, we noted that the Houston office had no prior nuclear experience. We also expressed concern to Bechtel that its proposed Project Manager and Engineering Manager did not carry over tb " Phase

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for Phase "A" B". Bechtel indicated that an appropriate provision would be made for an orderly transition between personnel in each phase. We remain concerned, however, that the administrative problems involved in establishing a large nuclear office in Houston could be extremely disruptive in the crucial early months of the work. This matter should be discussed further with Bechtel, if they are to get the assignment.

' e e e The foregoing is a subjective analysis of each pro-posal from several vantage points. In general, Ebasco appears to lag considerably behind Bechtel and S&W in the competition.

In particular, we have significant concern regarding Ebasco's document control and records management systems, as well as the experience of certain of its key individuals.

The competition is extremely close between Bechtel_

and Stone & Webster. Stone & Webster appears to offer, at the i

outset, a stronger team with closer involvement by high level management. Bechtel, on the other hand, has fielded a good team and, more importantly, has enormous resources which can be called upon to accomodate presently unforeseen require-l ments . A serious concern, however, is whether access to the j

b

., considerable resources of the Bechtel organization can be

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achieved through a fledgling Houston office.

VI. Timetables All of the prospective candidates seemed ready to start work almost immediately.

Ebasco believes that it can release new drawings within 3 months while a review goes cns of other existing drawings, specifications and designs. Ebasco projects a period of 6 months in order to establish a realistic formal schedule and cost estimate. Ebasco would plan to submit a transition program within one month after contract award, ,

and complete the task of assessing and verifying BER's work within 8 months. Ebasco would be prepared to assume construc -

tion management functions within 3-6 months after contract award.

Stone & Webster, as noted above, contemplates an initial evaluation period of 4-6 weeks, followed by an inten-sive piknning session and similar intensive planning sessions over a period of about 6 months. S&W would plan to have a good schedule and cost estimate within 10 months after contract award, and a projected schedule for the first year of work by i December, 1981. S&W plans to assume construction management functions almost immediately after contract award on a phased basis. Their proposed schedule indicates that substantially all construction management responsibility could be assumed within 6 months after contract award.

4 Bechtel would plan to assume construction management l '

functions about 4 weeks after contract award, and progressively I___.-______._,_____..__ _ _ _ _ _ _ __ _ - _ _ . ._

increasing its construction management activities over a

- period of about six months. Bechtel projects that it will be 9 r.onths after contract award before a definitive cost and schedule can be produced.

-,nsel contemplates a staff of about 880 at the i

peak of work activity while S&W is closer to 1400. Ebasco indicates that it could perform the job with a staff of about 530.

VII. Licensing and Other Internal Considerations k

j Replacement of a contractor for architect-engineer-ing and construction management is unprecedented in NRC

$ experience. It is unclear whether a construction permit -

amendment will be required. If an amendment is required, there may be a need for a prior notice and hearing. */ The process of implementing the decision to replace Brown & Root in A-E and construction management functions may be heavily influenced by licensing matters. We have informed two key officials in the NRC Staff regarding our consideration of l

releasing Brown & Root from all A-E and construction management functions. It is necessary, however, to have more definitive discussions with the NRC Staff and, especially, its legal arm to determine the nature of any licensing hurdles. An early decision is, therefore, very Laportant; until the action is taken, we are effectively precluded from meaningful discussions with the NRC Staff and cannot complete plans for

> the changeover. ,

  • / Whether er not an amendment is needed, the replacement l of B&R till undoubtedly have to be considered in the current operating license hearing and complications may thus arise as to the timing of the takeover of respon-sibilities by the new contractor.

}

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. In addition, word is leaking through several sources that this change is being contemplated. This, of course, could introduce a good deal of instability in STP activities. A decision at an early date is also important so that Brown & Root can be approached in a way conducive to 3

gaining its cooperation in an orderly transition. All proposals stressed the impartance of this cooperation.

VIII. Results of Evaluation 3 Although the judgment is very close, we recommend the selection of Bechtel to perform architect-engineering

, and construction management functions for the South Texas .

1' Project.

Stone & Webster has offered an extremely capable project team backed by high-level, capable management. They 4

have also demonstrated a good understanding of the task

ahead, especially during the first year of the job.

Bechtel, likewise, has offered a good team but,

perhaps more important, Bechtel has enormous resources behind its project team. This is vital because of the uncertainty of what will take place during the next nine to twelve months. The veritification program may very well indicate a need for resources that are simply too great and/or diverse for the smaller S&W organization.

The main concern regarding the Bechtel Proposal is

that it is planned to be conducted under the wing of the Houston office, which has no nuclear capability and would 1

. have to be more than doubled in size to staff up for the South Texas Project. Management of the Houston office would also have to be strengthened. Both problems can be ameliorated by a more gradual building of the Houston office under stronger direction. Bechtel has indicated a willingness to take such steps and, subject to confirmation of their position on these matters, we recommend that the Bechtel proposal be accepted as the basis for the negotiation of a definitive contract.

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Attachm3nt 1 1 .

Page 1 of 5

2. Scope of Hbrk A. General:

You are invited to sutmit a proposal for the take-over and perfomance

. of the remaining engineering, design, and construction managernent work of the project. Included in this is the need to review the existing engineering, design,and construction work to verify conformance with applicable regulatory, code, and sound in&1stry practices and bench-mark their status.

Changes would be required to be made to the carrpleted engineering, design,and construction, where appropriate.

I l1 G.' Detailed:

( Also included in the work scope are the following activities which the -

j soccessful contractor would be responsible to perfom. ,

1. Preparation of procurernent specifications
2. Preparation of erection specifications
3. Preparation of purchase requisitions and orders ,
4. Preparation of licensing reports, answers to inquiries, and arnen&nents i 5. Secure and maintain A9E III Design "N" stamp
6. Participate in monthly project status review meetings l

l 7. Planning, scheduling, and cost control of Engineering and l

Cbnstruction

8. Training of client and contractor personnel
9. Review of supplier design drawings and procedures *
10. Review of construction contractor programs and gMares
11. A&ninistration of construction subcontracts
12. Developnent and maintenance of a docment control and records management system .
13. Institute a ncnthly change contzel system. Provide tinely reports to the utility identifying potential changes and their estimated inpact on project costs and schedule.

C. Responsibility: .

1he firm selected to conplete the project would be responsible to perform those engineering and construction management services necessary to secure the requisite ASE certifications, as well as satisfy licensing

and I & E requirariants.

4 4 1

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~ h M R PROPOSAL Construction work is currently planned to remain the responsibility of

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the existing contractor. '1his could change at a later date in the event it is determined that such a chance would be in the best interests of the project,. . _.

t D. Quality Assurance: .

Engineering, Design, and Construction work will be performed under the

" Engineers" QA Program, which will have to satisfy the QA ccr:mitments set forth in the SAR. .

II. Cbnduct of hbrk

- It is envisioned that the required work will be done in two phases.

A.' Phase "A" work consists of those activities dealing with review of the existing engineering, desian, and construction activities and their associated records to benchnark project status. Also included in Phase "A" is the preparation of a project ccenpletion cost and schedule j forecast. .

B. Phase "B" work consists of resmption of productive engineering, design, It is anticipated that the Phase "B" work and construction activities.

can be initiated prior to the completion of Phase "A" work provided

/ the requisite licensing matters associated with this change of Engineer and Construction Manager have been resolved with the Nuclear Regulatory Crmission.

It C. All work, irrespective of phase, is'to'be executed with dispatch.

is essential, therefore, that the project be staffed ymp.ly with qualified and seasoned professionals in sufficient numbers to accenplish the required work.

III. Proposal Requir eents l A. Schedule of Sutrnittal - within ten (10) working days upon receipt of

! this request. Based on receipt by afternoon of July 24, 1981, proposal l due in Houston by 0800 AM, August 10, 1981. Award and start of work is

! anticipated on or before september 4, 1981. ,

! B. Proposal Content The proposal, as a minimtrn, should address those elements specified belcu. Any other areas not listed and which are believed to be sig-j nificant, should be addressed as well.

1. Organization - Identify your plan for staffing the project for

-conduct of each phase of work. Provide organization charts, names of all key members of the managenent team (dcun to

' Principal Engineer" and "Cbnstruction Spervisor" levels),

and provide up-to-date resumes for each. Identify against each named individual their date of availability. IT SlotLD BE NCTIE THAT "0RGANIZATION" IS LIKELY W BE 'IME EST IMPORIANT ELEMENT IN IECIDING WIC SiOULD FINISH THE PK:0ECT.

i. ..

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. ,envEr 70R PROPOSAL f

2. Logistics - Identify for each phase of work What portion of your organization will be working where. Particular atten-tien should be paid to the following locations:
  • a. Houston
b. Job site
c. Htrne Office
d. Other .
3. Mx5us Operandi - Identify your plan for carrying out the inpor-tant el pents of work. This should include, but ret be limited to,the following:

c

a. Review of SAR ctzmitments 4

P b. Review and statusing of engineering calculations

c. Review and statusing of engineering specifications and other technical reference documents .
d. Review and statusing of engineered.and bulk material procurement
e. Review and statusing engineering drawing developent including " hold" status and " design change retices"
f. Review and statusing ope'n i.e- u dormance 4 p.i.s (NCR's)
g. Establishing required changes to the project &cunent centrol and records management program
h. Review and statusing construction
i. Identification of unresolved field change requests (ICR's) to engineering for corrective action l
j. Review adequacy of the project material centrol pro-gram
k. Developent of a licensing strategy and plan to pre-i pare a C.P. amendment and attend a conference with the NRC in order to address the following:

I

~ (1) A/E's tectnical qualifications (2) A/E's QA Program (3) Interface between old and new engineering bethodology and analyses) l (4) Interface of A/E's QA Progre with Cmtructor's

( GC activities (5) Retraining of constructor to A/E's QA Program requirements l (6) Changes to existing SAR ocmnitments l (7) Changes to existing design criteria (B) Interface between A/E's QA Program and that of the utility

k W KR PRDPOSM,

. 1. Identification of construction related activities to con-

. tinue during Phase "A" and required manning resources

~

m.
  • Review of construction facilities and equipnent. Identify needs for job ocmpletion
n. Review, selection, and assimilation, wtere prudent, of current Engineer's hunan rescurces (both engineering, QC, and construction Managernent personnel)
4. Preliminary Scheduling - Provide preliminary CPM style network schedules featuring the key work elements associated with the

, job takeover, execution, and ccznpletion. (Curre.nt estimated project status is as follows:)

thit Engineering Ccestruction 4

1 70% 50%

, 2 20% 15%

I

'Ibtal: 65% 45%

, 5. Manloading - Provide a preliminary manloading for engineering, ,

> design, and construction management activities reflected on the networks provided in response to "4" al:ove.

6. Final Schedule and Cost Estimate - Identify how many nonths frcan contract award to prepare an official project cost and detailed
schedule.
7. Identify what Engineering and Construction Management systems, if any, will be utilized for the work remaining to be done.
8. Contractual - For each type and phase of work, identify what forms of contracting would you rh.e4 be utilized. A matrix-type response should be provided along the following guidelines:

Phase A Phase B l

l Engineering Design Cbnstruction Management Quality Assurance l

Maximum use of lurp sum or incentive type contracting is en-ccuraged.

Describe your position with respect to financial responsibility for defects in engineering and/or construction in existing work discovered after ycu have ecmpleted your review of, and accepted, such work.

9. Lwsation - Provide your schedule of costs, markups, and fees l for each type and phase of work based on the contractual options
  • roccanended in response to .*8" above.

< Identify what financial liability you are willing to accept for rework caused by your failure to properly execute Phase "B" work.

\

grer FDR PICPOS7d.

.' o

10. Special Exterience Identify any power plant related experience gained fztrn assuming engineering and/or construction responsibilities frem another organization.
11. Potential Transitional Considerations
  • If it were necessary for a transitional period that ycm perform your engineering function as a consultant to the utility review-ing the designs of its current Engineer prior to release to con-struction, would such a contractual relationship be acceptable?

.i' 2. If you have answered "11" above in the affirmative, describe how

( you would propose to interface with the utility and its current Engineer during the transitional period.

LI s e

s. .

I. ,  ; Attcchment 2

,' o Ebasco S&W Bechtel Committed personnel Corporate resources banagementsystems a ,

) Understanding of .

{ Verification Pha.se . -

/..

C/S Controls S Document control & RMS Transition Plan ,

QA Sophistication l Licensing Sophistication l .

Experience Contractual provisions .

Readiness to proceed Approach to the take-over -

O e

e 4

VUE:

ehu UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION

'85 APR 29 All :20 BEFORE THE ATOMIC SAFETY AND LICENSING BOARD Cff!LE ur SEc;g ig,n CCCKETING & SEgy;cy BRANCH c

In the Matter of )

)

HOUSTON LIGHTING & POWER ) Docket Nos. 50-498 OL COMPANY, et al., ) 50-499 OL

)

(South Texas Project, )

Units 1 and 2) )

NOTICE OF APPEARANCE OF COUNSEL Notice is hereby g:.ven that William H. Allen enters an appearance as counsel for Houston Lighting & Power Company in the above-captioned proceeding.

Name: William H. Allen Address: Covington & Burling 1201 Pennsylvania Avenue, N.W.

P.O. Box 7566 Washington, D.C. 20044 Telephone: (202) 662-5420 Admissions: District of Columbia Bar, Supreme Court of the United States, federal courts of the District of Columbia and several other federal courts.

Name of Party: Houston Lighting & Power >

Company Post Office Box 1700 Houston, Texas 77001 William H. Allen April 25, 1985

Cy 1

t 00LKETED UShRC UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION T5 FR 29 M1 :20 -

BEFORE THE ATOMIC SAFETY AND LICENSING BOARD OFF;CE OF SECRLTAH?

C0CMETING & SERVICf.

In the Matter of ) BRANCH

)

HOUSTON LIGHTING & POWER ) Docket Nos. 50-498 OL COMPANY, _ET _AL. ) 50-499 OL (South Texas Project, Units 1 )

and 2) )

CERTIFICATE OF SERVICE I hereby certify that a copy of " Applicants' Response to CCANP Motion To Reopen Phase I Record," " Applicants' Memorandum Concerning Counsel's Continued Representation of Applicants," and " Notice of Appearance of Counsel" have been served on each of the following individuals and entities either by deposit in the United States mail, first class, postage prepaid on April 25, 1985, or by Air Courier on April 25, 1985 (indicated by "*"), or by hand delivery on April 26, 1985 (indicated by "**").

    • Charles Lechhoefer, Esq.
  • Brian Berwick, Esq.

Chairman, Administrative Judge Assistant Attorney General Atomic Safety and Licensing for the State of Texas Board Panel Environmental Protection U.S. Nuclear Regulatory Division Commission P.O. Box 12548, Capitol Station Washington, D.C. 20555 Austin, TX 78711

  • Ernest E. Hill 5106 Casa Oro Administrative Judge San Antonio, TX 78233 Hill Associates 210 Montego Drive ** Lanny Alan Sinkin Danville, CA 94526 3022 Porter St., N.W., #304 Washington, D.C. 20008 l

I l

3 s

Mrs. Peggy Buchorn Executive Director

Citizens for Equitable Gray, Allison & Becker Utilities, Inc. 100 Vaughn Building Route 1, Box 1684 807 Brazos Brazoria, TX 77422 Austin, TX 78701-2553

    • Oreste Russ Pirfo, Esq. Dr. Thomas S. Moote, Esq.

Robert G. Perlis, Esq. Administrative Judge Office of the Executive Legal Atomic Safety and Licensing Director Appeal Board U.S. Nuclear Regulatory U.S. Nuclear Regulatory Commission Commission Washington, D.C. 20555 Washington, D.C.

Gary J. Edles, Esq. Dr. W. Reed Johnson Chairman, Administrative Judge Administrative Judge .

Atomic Safety and Licensing Atomic Safety and Licensing Appeal Board Appeal Board U.S. Nuclear Regulatory U.S. Nuclear Regulatory Commission Commission Washington, D.C. 20555 Washington, D.C.

Atomic Safety and Licensing Atomic Safety and Licensing Board Appeal Board U.S. Nuclear Regulatory U.S. Nuclear Regulatory Commission Commission Washington, D.C. 20555 Washington, D.C. 20555 Docketing and Service Section Office of the Secretary U.S. Nuclear Regulatory Commission Washington, D.C. 20555 (original plus two copies)

AW V

.