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.E s se UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION BEFORE THE ATOMIC SAFETY AND LICENSING BOARD In the Matter of S
S HOUSTON LIGHTING & POWER S
Docket Nos. 50-498 OL COMPANY, ET AL.
S 50-499 OL S
(South Texas Project, S
Units 1 and 2)
S 4
CITIZENS CONCERNED ABOUT NUCLEAR POWER, INC. (CCANP)
PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW Lanny Alan Sinkin 838 East Magnolia Avenue San Antonio, Texas 78212 (512) 734-3979 Counsel for Citizens Concerned About Nuclear Power, Inc.
Of Counsel:
Robert Hager, Esquire Christic Institute 1324 North Capitol Street Washington,
D.C.
20002 (202) 797-8106 8500150320 050703 PDR FOIA LEIGHTOG4-293 PDR
@c f 8 "b" N3 Dated:
September 20, 1982 L'%i f-
e
- s e
o I
- e As TABLE OF CONTENTS Page I.
INTRODUCTION.
1 1.0 Corporate Character.
1 2.0 The NRC Staf f View of the Applicant's Character.
13 II.
MEASURING HL&P's CORPORATE CHARACTER 42 3.0 Foresight 42 4.0 Judgment 48 5.0 Perception 55 6.0 Resolve.
79 7.0 Integrity.
98 8.0 Values 111 III.
FINDINGS ON THE ISSUES 125 9.0 Issue A.
125 10.0 Issue B 126 11.0 Issue C.
129 12.0 Issue D 129 13.0 Issue E.
130 i
IV.
FINDINGS ON THE CONTENTIONS 134 14.0 Contention 7e.
134 V.
CONCLUSIONS OF LAW.
135 VI.
ORDER 136 APPENDIX As Listing of Issues A-1 i
's, s,
e
.i I.
INTRODUCTION 1.0 Corporate Character 1.1 In the United States a corporation is a creature of law.
Hale v.
Henkel, 201 U.S.
43, 75 (1906).
1.2 Corporations, unlike natural persons, have no inherent capability of acting.
They can only act through agents in the form of natural persons.
A.
S. MILLER, THE MODERN CORPORATE STATE, at 38 (1976).
1.3 Human character is revealed by the sum of a person's acts and omissions.
Corporate character is similarly found in the sum of the acts and omissions of the corpora-tion's shareholders, directors, officers, employees, agents, or any other person acting for or employed by the corporation.
Where an assessment need be made on a corporation's character, these corporate acts and omissions provide the measure of character.
1.4 The acts and omissions themselves determine how the corporation's goals are pursued and whether those goals are achieved.
1.5 A hierarchial organization is characteristic of modern corporations.
Miller, supra at xiii.
Major decisions are made at the highest levels of the corporation with deci-sions of losser important delegated to lower levels within the hierarchy.
1
)
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1.6 If a corporation chooses to organize itself in a hierarchial tashion, then the acts and omissions of the cor-poration most probative of character will be the acts and omissions of the highest authorities.
The directives given to subordinates and the ability to discern and take corrective action when those directives are not effectively implemented are key tests of corporate character.
1.7 The highest authority in the c1rporation is the owner.
In the case of a publicly held corporation, the owners are the shareholders.
Among the shareholders' powers are the power to elect new directors, Model Business Corporation Act S 36, and remove current directors, Model Business Corporation Act S 3 9.
1.8 The responsibilities for supervision and manage-ment of the corporation are usually. designated in the by-laws of the corporation.
Model Business Corporation S 27.
Typi-cally, the Board of Directors exercise the authority of the corporation, supervise the exercise of that authority, and direct the management of the business and af f airs of the corporation.
Model Business Corporation Act S 35.
1.9 The officers and agents of the corporation perform management duties based on authority in the by-laws or delegation by the Board of Directors.
Model Business Corporation Act S 50.
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1.10 By examining the acts and omissions of the entire corporation as discreet items, as patterns, and as cumulative effects, a judgment on corporate character can be made.
1.11 The managerial process involves creating strategies or programs, giving direction to carry out these prog' aas, and ensuring the programs are ef fectively carried r
out.
1.12 This process is an iterative process.
Automatic implementation of directives is not assumed.
Instead, manage-ment has a feed back system to inform the perception of the top decision makers as to whether a given decision results in implementation in fact and whether that implementation indeed moves the corporation toward the overall goal.
1.13 The qualities of character needed to success-fully emplof this process are:
1.13.1 Foresight - Developing of strategies and a detailed plan to achieve the desired goal in the desired manner, in part by avoiding foreseeable problems.
1.13.2 Judgment - Selecting the appropriate people and making the correct decisions necessary to achieve the goal.
1.13.3 Perception - Establishing the complex of communicative functions necessary to successfully receive infor-mation, identifying problems, and relaying information to the h
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appropriate decision maker (which may be the person identify-ing the problem).
1.13.4 Resolve - Seeing to it that decisions are effectively carried out, accepting responsibility for correct-ing identified problems, acting in a timely fashion to address problems, taking effective action to cure problems, and pre-venting recurrence of similar problems.
1.14 The presence or absence of foresight, judgment, perception or resolve determine whether the qualities of corporate character relevant to management are present.
1.15 Corporate character is also subject to the tests of trustworthiness, reliability, and honesty.
A corporation is trustworthy if their activites are pursued in a manner com-mensurate with the task undertaken.
Generally, the test is whether their products work well or their services accomplish their purpose.
1.16 A corporation is reliable if the information they provide conforms to reality so that action can be reason-ably based on such information.
1.17 A corporation is honest if the corporation does not make representations it knows or should know are false or misleading.
1.18 By examining the qualities of trustworthinoss, reliability, and honosty, an overall assosamont can be made of the corporation's integrity.
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1.19 Finally, the performance of a corporation l
reflects the values of the corporation, anothe.r important quality of character.
Whether the corporation gives the high-est priority to the most important goals is an c.ssential element of character.
1.20 While all corporations are regulated in the sense of being subject to the corporation and other laws of the United States, certain corporations or corporate activ -
ities have been singled out for special attention.
1.21 Among those corporations or activities so selected are those requiring a license' granted by a government regulatory body.
A corporation licensed to engage in such a regulated activity surrenders some of its customary indepen-dence in return for the privilege of conducting the licensed activity.
1.22 The regulator may prescribe ultimate standards, such as charactor, by which the licensee's performance will be judged.
The regulator may adopt rules, regulations, and liconse provisions determining the manner in which the corpo-ration pursues its daily activities; require submission of reports to the regulators require the regulatee to inform the regulator of any conditions or events which indicato the regu-I latoo is not in compliance with the regulator's mandatos; con-duct routine inspections and special investigations of tho l
licensoe's activitios; and tako enforcement action against the
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licensee including terminating the licensee's privilege to engage in the licensed activity.
1.23 Where the regulator has adopted character as an ultimate standard, the licensee's performance in relation to the regulator's requirements is a measure of character for the regulator to use.
1.24 For the regulated corporation, there is a special challenge.
Such a corporation must integrate into its values, goals, and operating process the values, goals, and requirements of the regulator.
1.25 Performance takes on greater importance.
In a regulated industry, actions to be taken are, in part, dictated by the regulator.
Any failure to take a required action would place the corporation in noncompliance leading the regulator to possible disciplinary decisions or to revocation of the authority of the corporation to act.
1.26 Among the regulated corporations, there is a special group licensed to engage in activities which are inherently dangerous.
A regulatory " character" standard will normally be more rigorously defined and enforced for such a corporation, ospecially where a single failure of foresight, judgment, porception, or resolve can have catastrophic conse-quonces.
The requiromonts of trustworthiness, reliability, and honosty will also be rigorously applied to performance.
- Whether the licensoo has fully embraced the values ombodied in
+'.
7 the regulatory legislation and process will similarly be closely scrutinized.
1.27 Regarding the licensing of nuclear reactors, the Nuclear Regulatory Commission (NRC) has stated:
"a decision to license nuclear plants has moral implications which deserve serious consideration, since operation of those plants will cost human lives."
46 Fed. Reg. 39580 Col. 2.
1.28 The health ef fects of radiation are not identifiable to their source as are many environmental pollut-ants and other threats to public health.
For this reason, the possibility of liability for damages through tort actions for low-level radiation injury is not available as an incentive for high quality and safety in the construction and operation of a nucioar power plant.
E. G. Burcat, " Uncompensated Victims of Low Level Radiation Unnecessary Hostages of the Price-Anderson Debate," 15 Forum 847 (1980).
1.29 Moreover, the Price-Anderson Act, 42 U.S.C.
S 2210,, sharply limits the amount of property damages that might be recovered by the public in the ovent of a cata-strophic accident.
Accordingly, the incentive of tort liabil-ity is significantly curtailed for this hazard as well.
1.30 The normal incontives of tort liability are replaced, in the context of nucioar reactors, with the dotor-cont potential inhoront in licensing and regulation, princi-pally by the NRC.
Most forms of stato regulation aro
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preempted.
See e.g. Northern States Power Co. v. Minnesota, 405 U.S.
1035 (1972).
1.31 For these reasons, the regulatory requirement of good character imposed by the NRC on its licenses, 42 U.S.C.
S 2232a, takes on far greater importance in the context of a nuclear power plant than do the similar " character" provisions of virtually any other regulatory scheme, such as, for exam-ple, th0 regulations of the Federal Communications Commission.
1.32 This principal test for assuring the quality of licensee performance and protecting the health and safety of the public is normally enforced through the detailed provi-sions of NRC regulations.
NRC Staff enforcement procedures to ensure compliance with regulations look to the past to deter-mine compliance, rather than looking forward to planning cures, Tr.
9536.
1.33 But the decision to be made by an Atomic Safety and Licensing Board ( ASLB) rogarding issuance or denial of an operating license is, as the Commission itself observed,
" predictive in nature," Tr. 202 f at 18.
The task addressed in these findings, a task uniquely suited to the ASLB is to look to the past record of HL&P to discern patterns of conduct that reveal qualities of charactor relevant to the operation of a nuclear power plant.
1.34 The attributes of character relevant to the operation of a nuclear power plant are broad.
They are as broad as the risks involved in operation of the plant s the
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risk of low-level radioactive pollutants degrading the envi-conment, the. risks of catastrophic accident comparable to the ef fect of a nuclear weapon (See " Catastrophic Releases of Radioactivity," Scientific America, April 1981, Vol. 24 4, No.
4), and even the risk of diversion of weapons grade materials.
1.35 While the Commission, by its rules, regulations, and standards, sets the permissible level of damage from anti-cipated accidents or routine operation, the ASLB has a moral responsibility to assure by affirmative findings that the license applicant will not increase that risk by poor perfor-mance of its duties 1.36 This proceeding is for purposes of granting or i
denying licenses to operate two nuclear reactors of 1250 mega-watts each known as the South Texas Nuclear Project.
These reactors are located near Bay City in southern Texas.
Bay City is a town of approximately 20,000 residents located roughly midway between the major metropolitan areas of Houston and Corpus Christi.
1.37 The sito is at the mouth of the Colorado River, on the edge of the Gulf of Mexico, and within 200 miles of the U.S. border with Mexico.
1.38 A major accidont with significant rolosses of radioactivo matorial could have very significant human, eco-logical, and political consoquoncos.
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1.39 This operating liconso proceeding has boon hold on an expedited basis pursuant to the Commission's Memorandum
10 and Order CLI-80-3 2, dated September 22, 1980.
Tr. 202 f at 1, et seg.
The Commission's Memorandum and Order was prompted by the Notice of Violation and Order to Show Cause (Ef fective Immed iately), Staff Ex. 46, dated April 30, 1980, and a subse-quent request by the two intervenors shortly thereaf ter for a public hearing on the Order to Show Cause.
See letter to Victor Stello, May 28, 1980.
1.40 The Commission's Memorandum and Order observed that issues raised by intervenors related to the " lack of com-potence (i.e. technical) or character qualification" on the part of Houston Lighting and Power Co. (HP&L), the holder of the c'onstruction permit for the South Texas Nuclear Project and applicant for the operating license.
Tr. 202 f at 18.
The Commission concluded the allegations, if proven, could provide an " independent and suf ficient basis" for denying the license application.
Id.
The Commission endorsed the sugges-tion of the ASLB appointed to hear the license application that expedited hearings should be held on the quality assur-ance issues raised by the intervenors and the Order to Show Cause.
Id.
The Commission specifically ordered that the Board "look at the broader ramifications of theae charges in order to determine whether, if proved, they should result in the denial of the operating license application."
Id. at 19.
1.41 The incorporation of the Commission's concerns into this proceeding was a mattor producing significant dis-agreement among the parties.
Soo Tr. 197-325, 733-747,
11 Notice of Appeal and Request for Directed Certification (March 22, 1981).
The key dif ference of opinion was whether remedial acts taken by the applicants should be included in the expe-dited hearing.
Id.
The ASLB concluded the Commission would want the ASLB to at least take evidence on such acts.
Tr.
298-299.
1.42 The " broader ramifications" of the charges are to be drawn from the evidence compiled in the adjudicatory hearings held in 1981 and 1982 by the ASLB.
These ramifica-tions reach the ultimate statutory issue of the character and basic technical competence required of an operating license.
42 U.S.C. S 2232a.
1.43 Because HL&P has only recently acquired the services of Bechtel and Ebasco to replace those of Brown and Root as architect-engineer and constructor and because HL&P is itself in the process of undergoing changes in response to the severe problems found at the project, the technical competence available at the present time to the project is changeable and uncertain.
1.44 By contrast HL&P remains in control of the project and retains the same responsibility for the project it has held since the beginning.
HL&P also remains as the appli-cant for a license to operate the reactors once completed.
1.45 It is the fundamental character of HL&P--as revealed by the evidence submitted in this proceedings--which shows whether HL&P can, in the future, safely operate the
l' 12 reactors in a competent manner and in compliance with NRC requirements.
1.46 While the Atomic Energy Act requires the NRC to make character a condition of licensing, Id.
the NRC has never adopted any but the most general standard for character.
10 C.F.R.
S 50.40 (c).
The NRC has never adopted specific criteria for measuring character.
The character attributes defined above will, therefore, be used in measuring HL&P's character.
These include the qualities of foresight, judg-ment, perception, resolve, integrity, and values.
1.47 Each of thes'e attributes of character will affect in some way the ultimate technical competence HL&P would bring to the operation of the South Texas Nuclear Project.
They also comprise the overall attributes to be considered in determining whether an applicant has the requisite character to be granted an operating license for a nuclear facility.
1.48 The questions of financial integrity and tech-nical competence to operate a nuclear power plant are the usual focus of inquiry concerning an operating license appli-cant's qualifications.
This proceeding is the first in which an applicant's character has been specifically raised.
The question of character will naturally take precedence over all other issues since character is a fundamental issue.
This pr-ocedure is especially called for where the technical
13 resources relied upon by the applicant are in flux and possessed largely by organizations other than the applicant's.
1.49 Moreover, the technical resources required for construction--and which are presently available for inspec-tion--are substantially dif ferent from those required for operation, which are in development and likely to change in the five years remaining prior to the currently projected operation dates.
1.50 By comparison, the qualities of character do not change from the construction to the operating phases of the facility.
The standard applied for judging character does become more strict when operation is the issue "because of the inherent seriousness of operational error."
Carolina Power and Light Co. (Shearon Harris Nuclear Power Plant, Units 1, 2,
3, and 4), LBP-79-19, 10 NRC 37, 42- (1979).
2.0 The NRC Staff View of the Applicant's Character 2.1 The NRC Staf f testified that HL&P's record of compliance with NRC requirements was " poor".
Tr. 9727.
This fact alone should be sufficient to support a denial of an operating license.
A poor record in complying with NBC requirements at the construction stage is one of the best indicators of how the applicant will perform during the operation of the plant.
2.2 The NRC Staf f agreed that a poor record is relevant and probative but concluded such a record was not h-
14 de te rminative.
Tr. 9576 f 49.
The NRC Staff argued that the difference in " scope of material effort" between construction and operation can somehow mitigate the impact on the operating license decision of a poor peformance in the management of construction.
Id.
2.3 This argument is merely makeweight and must be rejected.
While the range of managerial effort is broader during the construction phase, Tr. 9899, 9903-04, the nature of the management control required during the operating phase is much more deep and intensive.
Carolina Power and Lighting Co.,
supra.
The fact that one task requires management that is broad in range while the other requires management that reaches deeply and intensively to control matters of detail is a distinction without a difference for determining the ade-quacy of corporate character.
In determining the character of an operating license applicant, poor performance in management during the construction phase is strongly predictive of poor performance during the operation phase.
See Tr. 202 f at 18.
2.4 Management character required of an NRC licensee must be flexible enough to respond to the demands of each task required of it.
It has been held that where a legitimate question of this nature is raised, the ASLB must be able to make an affirmative finding that there is reasaonable assur-ance the applicant will carry out its required program.
Consumers Power Co. (Midland Plant, Units 1 and 2), ALAB-106, RAI-73-3, page 182, 184 (1973).
't.
15 2.5 Indeed, ASLB precedent holds
" plant operation to require a,oreater showing of technical qualifications and management capability compared to plant construction."
Carolina Power and Lighting Co., 10 NRC 37, 42 (1979) (emphasis added)
Accordingly, the NRC Staff's distinction cuts in just the opposite direction.
Because of the far greater " inherent seriousness of operational error," id., compared to construc-tion error and because failures in operation are not subject to the same opportunities for timely correction, qualifica-tions of character based on past reliable safety performance are both more important and judged according to a stricter standard.
A " poor" management record at the construction state translates to a prediction of a worso than poor perfor-mance at the operating state.
2.6 While the NRC Staf f treats the construction QA/QC program as entirely separate from the operations QA/QC program, Tr. 9903-04, the character of management required to carry out j
the written program is of entirely the same nature. The possi-bility that HL&P may be able to change a " poor" grade into a
" good" grade simply by changing subjects from management in broadth to management in depth is a possibility the NRC cannot entertain.
The consequences of poor managomont during the operation of a nuclear facility are far too gravo to indulge i
such bonofits of the doubt.
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16 2.7 HL&P showed itself to be unable to achieve more than a poor record in displaying the corporate character capa-ble of compliance with NRC requirements during the construc-tion phase.
To overcome the legitimate question this record raises, an af firmative showing must be made that will excuse HL&P's performance.
Consumers Power Co., supra.
2.8 The applicant for an operating license comes to the ASLB with the burden of proving it meets the NRC standard on every issue legitimately raised.
Cf. 10 C.F.R. S 50.40.
Once the issue of character is legitimately raised that issue becomes paramount because the character of the applicant will permeate all the acts and omissions of the applicant.
The clear responsibility of the ASLB is to assure that an appli-cant for an operating license proves itself qualified in all the relevant attributes of character.
2.9 The issue of HL&P's character was raised in this proceeding by the Commission itself.
Tr. 202 f at 18.
There is no question as to the legitimacy of the issue.
2.10 The fact that the applicant is the holder of the construction permit for this project is no reason to give the applicant the advantage of any presumption that an oporating licenso will be granted.
The Power Reactor case made clear that no entitlements accrue to the consruction permit holder simply because the plant has boon built.
Power Reactor Development Co. v. Electricians, 367 U.S. 396 (1961).
The grant of an NRC construction permit to HL&P doos not oporato
17 as a " grandfather clause" in a proceeding for issuance of an operating license.
The construction permit holder comes before the ASLB, as would any applicant for an operating l
license, with the burden of proving it meets the NRC standard on every issue to be determined by the ASLB.
As stated pre-viously, character is the most important of these issuss.
2.11 An operating license for a nuclear reactor is a license in the classical sense of being the grant of a privi-lege.
Black's Law Dictionary 829 ( 5th ed. 1979).
There is no question of right involved in the decision to grant or deny such a license.
The only questions are those related to maxi-I mum protection of the public's health and safety.
i 2.12 There is no need for the NRC to take any risk in l
selecting an applicant to receive an operating license for a nuclear reactor.
It will not necessarily wasto time or f
I resources if an applicant other than HL&P receives the operat-ing license for the South Texas Nuclear Project.
All such considerations palo in the face of the NRC's mandato and unique responsibility to protect the public.
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2.13 When the NRC Staf f which is most intimately f amiliar with the overall record of an applicant testifies to its institutional view that the record of an applicant is
" poor," Tr. 9727, 9875 1. 8-10, 9879, the burdon on that appli-l l
1 cant becomes great to show this record does not reflect its charactor.
Just as thoro is no prosumption that a construc-i tion pormit holdor should have some advantage or bo hold to a i
i s
18 lesser standard, there is no presumption in determining whether to grant or deny an operating license that a poor record during construction does not reflect on character.
To the contrary, there is no better measure of character for an ASLB to use than performance under a previously granted NRC license.
2.14 For the NRC to take a risk by granting an oper-ating license to an applicant knowing the applicant's record to be poor benefits only the applicant while being inimical to the public health and safety.
See 10 C.F.R. 50.40(c).
2.15 The burden on HL&P, the re fore, is to prove its poor record is unrelated to the qualities of character requir-ed to receive an NRC operating license.
HL&P must carry the burden of assuring the ASLB that its poor record cannot be viewed as arising from defects in the qualities of character needed for operating a nuclear plant.
If the events demon-strating the applicant's poor record can be reasonably under-stood as deriving from failure of character, the ASL8 may not risk granting a license on the possibility or even probability that some other competing explanation could also be found for the poor record.
Certainly isolated failures that re flect no pattern or result from unforoseeable causes outside the con-trol of the applicant, if clearly proven, might provide such an explanation.
But unless the applicant convincingly shows that it is not possible for poor charactor to aise provide a rossonable explanation of the ovidence, the risk should not bo a
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l taken.
If HL&P did receive an operating license without full and convincing assurances that RL&P's indisputably poor record i
l during construction was unrelated to qualities of character required of an NRC license holder, a grave risk to the public woald be created contrary to the Atomic Energy Act and imple-i menting regulations.
Unless the ASLB is able to find that this poor record cannot be reasonably related to the relevant qualities of character, the ASLB is precluded by its moral and legal responsibilities from granting the application by HL&P.
In such a case, another applicant not presenting such risks would be required.
2.16 The NRC Staf f has taken the position that RL&P's record of compliance with NRC requirements, though poor, was not suf ficiently poor to conclude HL&P lacks the character required of an NRC licensee.
Tr. 9576 f 49.
2.17 In addition to the scope of work argument rejected above as makeweight and contrary to NRC precedent, the NRC Staf f of fers the additional excuse that "HL&P has shown a willingness to implement corrective actions."
Id.
The NRC rosident inspector elaborated this opinion as follows:
"(Wlo did feel that management did not deliberately cause these infractions.
Management was not grossly negligent because they didn't do them purposely.
Management was not unwilling to correct the deficion-cios once they were pointed out.
They may not have boon able to do it to our satisfaction, but they woro never unwilling."
Tr. 9854.
l
l' 20 This concept was of ten expressed by the words "they tried" or variations thereof.
For example:
"They tried to obey the Code of Federal Regulations."
Tr. 9854.
"They attempted to.
. establish the QA program in accordance with all NRC regulations.
They tried.
They may not always have attained it, but they tried.
Tr. 9854-55.
"They tried to put an end to--they tried to investi-gate--and apparently didn't do an adequate job--they tried to investigate the allegations of harassment and so forth."
Tr. 9057.
(emphasis added in each quotation).
The absurdity of this excuse becomes quite clear when HL&P is given credit for trying "to secure construction permits."
Tr. 9854.
If HL&P had not tried to secure a construction per-l mit, there never would have been a South Texas Nuclear Project under HL&p's management.
Furthermore, the application for a construction permit is a voluntary expression of a willingness to comply with the rules, regulations, and license conditions which result from a successful application.
The idea that by applying for such a license HL&P would, therefore, have an excuse for noncompliance flies in the face of all reason and logic.
2.18 The suggestion that the mere absence of purposeful violation and of a refusal to even try to comply with NRC requirements can be used as a benchmark for assassing tho adequacy of charactor required of an NRC licanso applicant
21 must be rejected.
Though there is no testimony in the record, cf. 9909-10, there is no question the NRC would immediately stop work when it even appeared that a license holder totally refused to try to comply with NRC requirements.
Such a con-clusion merely states the obvious.
2.19 It would be only folly to build a nuclear power plant without at least ostensibly trying to comply with NRC requirements because only an NRC licensed reactor can be oper-ated.
Inherent in the decision to build a nuclear reactor is the decision to try to comply with licensing requirements.
Any other course would be tantamount to abandoning the proj-ect, as NRC Staff enforcement action would surely require through revocation of the construction permit.
If HL&P had not tried, there never would have been a licensing hearing.
The mandate of 10 C.F.R. Part 50, Appendix B, is not to try but to achieve; performance is measured in terms of ef fective-ness, not energy level.
2.20 That HL&P tried to " implement corrective actions," Tr. 9576 f 49, af ter they were instructed to do so by the NRC, is even less pursuasive and reflects little if anything about the character of HL&P.
2.21 Nor is it pursuasive of good character, as the resident inspector seemed to believe, that HL&P would cake corrective action in anticipation of NRC enforcement action but after the NRC had identified problems.
Tr. 9857-58.
Whether HL&P took action after a citation or after
22 notification of a potential citation is irrelevant to the deci-sion to be made in this proceeding.
In an NRC enforcement action, the level of civil penalty may be reduced--but not elimi-nated--if the licensee takes prompt and comprehensive corrective action.
47 Fed. Reg. 9991 Col. 3.
This proceeding is not an enforcement action in which such mitigating actions are relevant.
This proceeding is concerned with the acts and omissions which constitute noncompliance as these acts and omissions reflect the applicant's character.
While Issue B was accepted by the ASLB to permit development of a record regarding such remedial actions, Tr. 298-299, Issue A--for which a finding of character must first be made--specifically excludes the value of any corrective actions.
(The issues appear in Appendix A to these findings.)
2.22 The significant aspect of the repeated HL&P attempts to take corrective action.is in fact "HL&P's inabil-ity to identify problem areas without NRC intervention." Tr.
9576 f 47.
Once the NRC brought a problem to HL&P's atten-tion, any correective action can hardly be found to demon-strate a truly voluntary desire to perform quality work.
Action taken under the threat of enforcement action reveals not good character but simply a practical desire to avoid the consequences of noncompliance.
If by taking action in antici-pation of NRC enforcement action HL&P could avoid a citation, it was surely in their interest to do so.
It is not always nocessary to await official notification of violation to understand that the NRC would bo taking enforcomont action
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23 l
if corrections are not made.
There could be the implied message from the NRC Staf f that if faulty work was not stopped voluntarily by HL&P, the NRC would take action to stop it.
Tr.
9683.
I 2.23 For example, during one period in 1978, there l
were no Quality Control cadweld inspectors assigned to inspect rebar splices made during the night shif t.
Staff Ex. 13 at 2.
HL&P issued a stop work order on concrete placement in the Unit 1 containment building pending inspection of these splices only after the NRC Staff had informed HL&P of the failure to have inspectors present.
Id. at 14.
Had HL&P failed to issue such a stop work order, the uninspected cadwelds might have been covered in concrete prior to inspec-tion and af ter the NRC put HL&P on notice of the uninspected I
1 conditions.
Tr. 9205 f 33.
Had HL&P permitted such concrete work, an even more serious enforcement action would quite likely have ensued.
2.24 Clearly, if a notice of violation had already issued, HL&P would similarly risk a more severe penalty by not taking corrective action.
2.25 The pattern that speaks most clearly from the record is that of the NRC calling HL&P's attention to problems HL&P was not previously aware of, but should have been aware of, if there had been a real " willingness--indeed desire--on the part of the responsible of ficials to carry cut to t-he letter" the HL&P quality assurance effort.
See Consumers
J' i'
24 Power Co.,
supra at 184.
See e.g. Tr. 1378 (morale of QA/QC inspectors), Tr. 9535-37 (August 15, 1978 meeting).
o 2.26 But even where NRC inspectors did bring problems to the attention of HL&P, EL&P did not always promptly agree to take corrective action.
One such example related to in-place storage of the reactor vessel and piping, for which two violations were cited on March 20, 1981.
Staff Ex. 83.
The inspector's report showed that he informed HL&P that the reac-tor vessel and the main coolant loop piping had sandblast grit and dust inside and that access was inadequately controlled.
Nearly two months later these conditions were not corrected.
Instead, the inspector was informed that HL&P's Quality Assur-ance (QA) Manager, Mr. Frazar, considered the conditions to be acceptable.
The inspector then met with Mr.
Frazar to again inform him that HL&P's in-place storage was inadequate and cited to him the pertinent standards.
Nearly two weeks later the conditions were still not corrected.
Though Mr. Frazar agreed to improve control of access to che vessel, he insisted that dust was not a problem.
The next day the NRC Staff resi-dent inspector and his supervisor performed a follow-up inspec-tion which revealed that the vessel was still not sealed, that dust, grit and rodents had entered the vessel, and control of
~
access had not been improved as agreed.
Mr. Frazar was advis-ed of the conditions yet again, but on the next day the vessel was still not adequately protected.
Id. at 9-10.
HL&P ultimately did admit, tao months later, that the cited t
4 j
25 conditions were out of compliance.
App. Ex. 15 at 3.
The idea that HL&P would even argue over assuring the cleanliness of the reactor vessel interior is particularly disturbing.
2.27 The record does not bear out that HL&P "tried" in ways pertinent to relevant qualities of character.
"Trying" must go beyond just creating an appearance of willingness before it can be credited to good character.
As NRC Staff testified:
" Desire doesn't really accomplish the work. " Tr. 9507.
For example, HL&P was responsible for inculcating in its workers a regard for quality in the construction of STNP.
The action which its president, Don Jordan pointed to as satisfying that responsi-bility can be considered no more than a gesture.
Jordan noted that HL&P had a " published policy.
that a strong, indepen-dent quality assurance function" would be "a point of every nuclear or fossil project.."
Tr. 1223 f 10.
Jordan identified a particular letter he had signed on December 9, 1974, as embodying that policy.
Id.; See Tr. 1223 f Attachment 1.
Jordan stated i
the letter was published in all'HL&P QA Manuals.
Tr. 1223 f 10, Tr. 1281.
But, as of July 24, 1980, an independent review of QA management at STNP found:
"The HL&P QA Manual contains no evidence of manage-ment endorsement nor evidence of a policy statement which commits to quality performance and defines responsibility for attaining quality objectives."
Staff Ex. 48, Exhibit 1 at 2.
Jordan stressed the wide circulation this letter received within HL&P.
Tr. 1281.
He concluded:
-~
l*
26 "That information was distributed that broadly, so there's no question in their minds as to what the dedication is."
Id.
A single letter, even one signed by the president of a corporation, can hardly be relied on to eliminate all ques-tions regarding management's commitment to quality.
Cf. Tr.
1752-54.
The letter to the officers and department heads had gone out six and a half years before Mr. Jordan testified.
Tr. 1223 f Attachment 1.
"Trying" to establish the proper regard for quality by means of such a letter is not an acceptable indicia of good character.
2.28 For the company president who has no experience in technical areas, Tr. 1369, 1324, to "go down and look at those welds" or put his " hands in the concrete voids", Tr.
1387, is again not the kind of "try" which indicates good character.
Nor does the company president attending a one-day course on QA/QC in response to an NRC finding of " widespread noncompliance by the licensee" with NRC QA/QC requirements, Staff Ex. 46, Order to Show Cause at 11, appear to be more than cosmetic under the circumstances.
Tr. 1345-46.
Jordan could not remember any specific examples where policies concerning quality were updated as a result of the course.
Tr. 1348; Tr. 1223 f at 10.
2.29 HL&P did not present a clear record of positive
~
willingness--even desire to correct problems.
On occasion, they resisted the conclusion of the NRC that a condition
~~
o.
27 should be remedied.
See 2.26, supra.
Moreover, HL&P devel-oped a pattern of reacting to NRC notices of violation or threats of a notice of violation rather than true initiative in detecting and correcting problems.
Such reactions cannot be credited as showing good character.
Rather they are to be expected of any applicant simply to remain under consideration for a license.
More than mere gestures that can be cited as "trying" are necessary to reflect good character.
The rele-vant quality of character is not merely "trying" but a clear resolve in preventing, detecting, and correcting problems, demonstrated at every step in the process of effecting mana-gerial decisions.
See 10 C.F.R. Part 50, Appendix B, Criter-ion XVI.
HL&P's failure at STNP was not "a matter of being unwilling" to build a plant in accordance with NRC require-ments, Tr. 9512 1.
4, and perhaps not even "not knowing how to do it," Tr.
9511 1.
15 but Cf. 9512 1.
5.
Rather HL&P's failure at STNP was, according to NRC testimony, in not having "the strength of character in the quality world to make it happen." Tr. 9511 1. 16-19.
This lack of strength of charac-ter is elaborated below in the discussion on the quality of
" resolve."
See 6.0, infra.
2.30 The importance given by the NRC Staff to HL&P's willingness raises a more fundamental issue.
HL&P 's willing-ness to conform to NRC requirements is frequently contrasted with their failure to keep informed of problems at the site, a prerequisite for correcting those problems, and their failure i
6 28 to take the necessary steps to see to it that their programs are fully implemented.
E.g. Tr. 9797.
2.31 The general theme of HL&P's own testimony was that a basically sound " program" and " organization" was under-mined by " breakdowns in implementation."
Tr. 1301; Tr. 1446.
It is clear from all sides that failure of implementation was one of the core problems at STNP.
See e.g.
Tr.
1917-18, 1918, 9763-64.
Successful implementation of programs requires a tenacious resolve to see to it that things get done.
Programs can be prepared by consultants, Tr. 88 3, in terms prescribed by the NRC, Tr. 1984, 1994-95.
For this reason, creating an adequate program and organizational structure that looks good on paper, Tr. 9602, though an importaqt task, is nowhere near as important a test of managerial character as is implementation.
The value content of the program is supplied by NRC requirements, preparation draws upon the skills and experience of others outside the corporation, and the final product is easily reviewed by the NRC for defects, Tr. 1995.
The risks that a poor program on paper will result in a poorly constructed plant are, for these reasons, less great than are the risks associated with the failure to fully implement the paper programs, a failure that is less easily detected.
The most important function of management is implementation, that is to see to it that things actually get done.
While others may write and edit programs, only management can manage.
The
29 NRC relies on the strength of character of HL&P for assurance that HL&P's programs are fully implemented.
See Tr. 9511.
2.32 The suggestion that HL&P's responsibility at STNP is limited to the role of " director of the program" which develops policies and procedures while leaving implementation to others, Tr. 2291, reveals a profound misconception.
That such a misconception should be offered by the highest officer of the corporation with full time responsibilities for STNP is clearly unacceptable.
Tr. 1318.
When that same officer is also responsible for meeting all NRC regulatory requirements, Tr. 1300, the implications of such an abdication of responsi-bility for corporate chara.cter are very serious and verge on disqualifying.
2.33 By far the most important portion of the task of building a nuclear power plant in accordance with NRC require-ments is implementation--seeing to it that everything is done correctly and in accordance with design, specifications, and procedures.
This task is the principal function of corporate managers.
It is the function most important for assuring the safe operation of the plant.
It is the function HL&P has most consistently failed to perform.
Tr. 9576 f 8 (principal f ail-ure not adequacy of in-place pregram but failure to ef f ective-ly implement the program).
Most important for this inquiry, 1
tue pattern of failure to carry out commitments, Tr.
1747, is of far more significance to an assessment of character than is
l-30 the willingness to make commitments pleasing to or required by others.
The willingness of HL&P to write programs and direc-tives and to make commitments to implement those programs and directives need not be questioned; it is HL&P's strength of resolve in seeing to it those commitments are carried out that presents the true test of HL&P's character.
It is this test which HL&P has failed.
2.34 Aside from the excuses of " scope" and "willing-ness" discussed and rejected above, the only other reason given by the NRC Staff to justify its opinion that HL&P's record was "not sufficiently poor" to conclude HL&P does not have the necessary managerial competence or character to be granted an operating license, Tr. 9576 f 49, is that HL&P's lack of involvement in the construction of STNP was due to inexperience "rather than irresponsible corporate management."
Id.
This excuse is an extremely important one for this pro-i ceeding because lack of involvement by HL&P in STNP construc-l tion relates to both of the indicia of poor character named by the Commission as potentially disqualifying.
As the Commission said in its special charge to this Board,
"Either abdication of responsibility or abdication l
of knowledge, whether at the construction phase or
~
operating phase, could form an independent and suf fi-l cient basis for revoking a license or denying a license application on grounds of lack of competence (i.e.
i technical) or character qualification on the part of the licensee or license applicant.
42 U.S.C.
2232a."
Tr.
202 f at 13. (emphasis added).
I L
i 31 When the panel states that it has found a lack of detailed involvement by HL&P in the total scope of construction activi-ties, the panel is finding precisely the abdication of respon-sibility and knowledge which the Commission and this Board are concerned not exist at a nuclear plant.
For the panel to then attempt to differentiate this abdication as resulting from inexperience rather than irresponsibility is to offer a mean-ingless explanation.
Such abdication is per se irresponsible whether resulting from inexperience, willfulness, or other circumstances.
The circumstances go only to the severity of the irresponsibility; they do not negate the irresponsibility.
The NRC Staff itself recognized the inappropriateness of this explanation when they testified that a failure by HL&P manage-ment to remain adequately knowledgeable of the site activities would be a failure to discharge their responsibility.
Tr.
9778.
Similarly, the NRC Staf f recognized that HL&P failures to recognize and correct inadequate staffing levels, to iden-tify and correct recurring problems, Statt Ex. 46, Appendix D at'9, to maintain adequate audit surveillance, and to take ef fective action to identify the root causes of these problems constitute failures to discharge HL&P's responsibilities.
Tr.
9779-9785.
While HL&P would not necessarily be responsible for taking the specific action, HLsP would be responsible for either taking the action or seeing that someone else delegated to do so took the action.
Tr. 9785-9787.
i
.i 32 2.35 Though counsel for HL&P made much of the dis-tinction between HL&P's responsibility for delegated authority
(" ultimate" or " general") and for non-delegated authority
(" specific" or "particular"), See Tr. 9773-77, 9780-81, 9785-86, 9790-91,* the distinction is one of little importance for a conclusion concerning character.
First, 10 CFR Part 50, Appendix B, Criterion I, makes it clear that HL&P is responsi-ble for the execution of the quality assurance program irre-spective of whether the task is delegated to others.
- Second, the very same qualities of character needed by upper corporate management to assure " control over activities affecting the quality" of the project, id.,
Criterion II, apply whether the tasks are delegated to an outside contractor or are delegated to the lower levels inside HL&P.
These are essential quali-ties of character necessary for good management: the quality of perception to keep informed of problems in implementation and the quality of resolve in seeing to it that directives are properly implemented.
The very suggestion that HL&P could somehow not be specifically responsible for the failures listed in 2.36 below itself echoes the general theme discussed above of an HL&P tendency to abdicate responsibility.
2.36 The NRC Staf f testified that each of the following documented failures was an appropriate criterion to apply in judging HL&P's character:
=,
33 2.36.1 the failure to systematically identify quality control problems.
Tr. 9761, Staff Ex. 46, Appendix D at 9.
2.36.2 the failure to maintain detailed involvement by HL&P in the total scope of construction activities.
Tr. 9762.
2.36.3 the f ailure to acquire detailed knowledge of construction activities.
Tr. 9762.
2.36.4 the failure to prevent the recurrence of poor construction practices.
Id.,
Staff Ex. 46, Appendix D at 10.
2.36.5 the failure to properly implement a Quality Assurance (QA) audit and surveillance program.
Tr. 9763, Staff Ex. 46, Appendix D at 11, 100.
2.36.6 the failure to maintain an aggressive QA pro-gram on the part of HL&P.
Tr. 9764.
2.36.7 the failure to ensure that Brown and Root main-tained an effective and aggressive Quality Control (QC) program.
l$
2.36.8 the failure to assure that Brown and Root ef fectively implement written in-place requirements and proce-dures.
Id.
Tr.
9576 f at 8.
2.36.9 the failure to have knowledge relative to the manner in which construction was implementing its QA/QC program.
Tr. 9767.
2.36.10 the failure to assure that the persons and organizations performing quality assurance functions had suf fi-cient authority and organizational freedom to identify quality related problems.
Tr. 9768, See Staff Ex. 46, Appendix D at 49.
34 The NRC Staff testified that HL&P was responsible for each of these failures.
Tr. 9771, Cf. Tr. 9576 f et seg.
2.37 The NRC Staff's definition of " irresponsible,"
as used in their ultimate conclusion on HL&P's character, was defined as involving deception, unwillingness, " deliberateness or gross negligence."
Tr. 9794-95, 9798, 9801.
The Staff's definition of gross negligence included "a failure to carry out a responsibility of your job or your lack of attention to details."
Tr. 9800, 9802.
This definitien was qualified to include only matters that are material, Tr. 9803, and which are not "very unimportant."
Tr. 9804.
The witnesses applied these tests to come to the conclusion that HL&P did not lack the character necessary to obtain a license.
But it is appro-priate to make an independent application of these tests to the facts of this case for several reasons.
2.38 First, it appeared that although the NRC Staf f agreed to these tests, their ideas appeared to be worked out for the first time while testifying.
For example one of the staf f witnesses, while agreeing to the definition of "irre-sponsible" stated above, also seemed to identify responsibil-ity with "trying," a concept which is entirely inconsistent with the gross negligence definition.
("One can responsibly try to do something and still not be able to."
Tr. 9801.)
2.39 Second, the NRC Staf f had never, prior to giving testimony in this proceeding, been called upon to give
35 an opinion on whether HL&P or any other licensee had the char-acter to obtain an NRC license.
Tr. 9718-23.
Accordingly, they have no expertise in drawing a conclusion on this ultimate question.
2.40 The NRC Staf f's testimony, as discussed above, was that HL&P failed to carry out numerous responsibilities, a sampling of which are listed in 2.36.
The NRC Staff itself did not testify whether HL&P's failures to carry out these responsibilities, all of which were previously stated to be valid criterion for juging character, are either immaterial or "very unimportant", Tr. 9805-11, 9813-15, 9823-27.
Even in the absence of such testimony, it may be determined that the list of failures are neither immaterial nor unimportant.
It is fair to conclude that these failures both separately and cumulative involving quality assurance at STNP, cannot be characterized as "very unimportant" and indeed are at least important.
See Tr. 9576 f 39, ("importance of quality assur-ance").
Since each involves " failure to carry out a responsi-bility," Tr. 9800, they would then fall squarely within the NRC Staff's definition of " gross negligence".
Gross negli-gence is, according to the NRC Staf f, one of the ways in which an NRC licensee could display irresponsibility.
Accordingly, although the NRC Staf f presented testimony in the abstract that HL&P was not irresponsible--as a ground for arguing that HL&P did not have suf ficiently poor character to be denied a
license--a deeper more precise application of the actual
36 standard used by the NRC Staff to the facts of numerous HL&P failures found by the NRC Staf f would yield the contrary conclusion.
2.41 The NRC Staff's factual findings have a high probative value because of the expertise that lies behind them.
The individual failures described by the NRC Staf f and listed above are accepted here as proven.
2.42 The NRC Staf f's tests for defining character and intermediate concepts such as gross negligence or "irresponsi-bility" are also of value because of the nearly empty page upon which a,ny definition of character must be written for purposes of this proceeding.
Aside from the Commission's Order and Memorandum, Tr. 202 f et seq., there is little to guide the Board in assessing the qualities of character that are required of an NRC licensee.
For the reasons stated above, the NRC Staff's application of this test to the facts may be rejected.
In any event it is clear that the NRC Staf f's in-depth analysis fails to support its initial conclu-sion that HL&P's lack of involvement was not due to irrespons-ibility.
The only reason that can be discerned for this inconsistency is perhaps a lingering perception by NRC Staff that some element of intent or not "trying" (unwillingness) must be involved to reject an applicant on character grounds.
i See Tr. 9801, 9854, 9855, 9857, 9862.
This view is expressly rejected.
As discussed above, 2.17-2.32, merely "trying" to l
comply with NRC requirements is of little weight in the t
37 determination of character, however much it may ease relations between a licensee and the NRC Staff.
The qualities of char-acter required of an NRC licensee go far beyond mere lack of bad intent, or malice.
2.43 Aside from any NRC Staff position or test, the failures set forth in 2.36 above are clearly very serious, demonstrate a lack of responsible performance on the part of HL&P, give true substance to the " poor" assessment of HL&P's performance, and relate directly to the character of HL&P--or more precisely the lack thereof--necessary to receive an operating license for a nuclear reactor.
2.44 For an explanation of HL&P's dismal record, as noted in 2.34, the NRC Staf f of fers " inexperience in nuclear construction, rather than irresponsible corporate management."
(emphasis added)
Tr. 9576.f.
49.
Cf. Tr. 9511, 9517.
But inexperience can never be an excuse for irresponsibility, or other failures of character.
The NRC Staf f themselves agree that inexperience does not absolve a licensee, if inexperience happened to be the reason for the licensee's failure to dis-charge its responsibilities.
Tr. 9829.
This is surely the case.
Inexperience is no more than a factor to be dealt with by any company undertaking a project for the first time.
Tr.
I 9836.
In the very beginning of commercial nuclear projects, it was necessary to hire in experience from the naval nuclear program in order to go forward quickly with commercial nuclear jobs.
Tr.
2318-19.
Lack of experience in technical areas i
I
/
38 does not necessarily lead to lack of technical competence, Tr.
1333.
Nor does inexperience in management of nuclear projects lead to or excuse the lack of qualities of character necessary to manage the construction and operation of a nuclear power plant.
2.45 There can be no question that both HL&P and the contractor hired by HL&P suf fered from inexperience in nuclear work.
E.g. Tr. 9936, 9526, 9529.
Mr. Goldberg, brought as the "most talented man in the country" to help solve the prob-lems encountered in building STNP, Tr. 1273, considered as his first priority " people's capabilities" and the "need for added experience."
Tr. 1168, 1164.
Frazar, in charge of QA at STNP from 1975 until 1981, lacked the requisite experience to per-form his job.
Tr. 1906.
The fact that Frazar and many others at STNP lacked experience sufficient to adequately perform their jobs does not reflect on their character as individuals.
But it does reflect on the quality of judgment of the company responsible for placing these persons in jobs beyond their capabilities, and leaving them in those jobs for long periods of time where they were able to affect the quality of con-struction of STNP.
Unrealistic hopes that inexperienced per-sons would be able to adequately perform jobs outside their
~
capability, Tr. 9556, reflects a serious lack of sound judgment.
2.46 That HL&P as an organization lacked overall experience with nuclear, see e.a.
Tr. 9939, and that Brown and
39 Root's experience was limited, See Tr. 1337, 1339, was clear from the very outset of the STNP project.
Foresight should have led HL&P to plan for this lack of experience in both organizations by providing extensive training, regular use of consultants, regular third party audits, heightened surveil-lance and other effective management tools for detecting prob-lems.
HL&P should have fashioned an organizational structure with intimate upper management involvement in implementation of written programs and hired fully experienced personnel.
2.47 Lack of experience is not an excuse for poor performance, as the NRC Staff testimony might suggest; rather, it is an opportunity to demonstrate important qualities of character relevant to operating a nuclear power plant, such as judgment and foresight.
HL&P's failure to demonstrate these qualities during the construction phase of HL&P compels the conclusion that these same failures of character may be expected to interfere with the operation of the plant, a task at which HL&P is equally inexperienced.
2.48 The last excuse offered by the NRC Staff for not finding HL&P's poor peformance grounds for disqualifying HL&P from obtaining an operating license is that though " problems seemed pervasive with respect to quality assurance and quality control, no irreparable construction deficiencies were found in any of the construction already completed."
Tr. 9576 f.
49.
40 2.49 This emphasis by NRC Staff on whether the faults in construction uncovered by the NRC were " reparable" is mis-placed.
" Character" is a fundamentally different inquiry than the question whether in fact the plant is suf ficiently well constructed to be safely operated.
The NRC Staff is under-standably concerned with assuring no unsafe plant be con-structed.
But the question of character addresses not whether STNP as constructed to date is safe, but whether HL&P has the l
necessary character to operate STNP, however safely con-structed the plant may be.
This question can only be answered by the ASLB.
2.50 The inherent inappropriateness of using the
" reparable" nature of construction deficiencies as a test of character is that essentially all deficiencies, once discov-ered, are literally " reparable."
Tr. 9882.
The real problem with deficiencies in quality control is that there can be no guarantee, short of demonstrating highly successful quality construction and quality assurance, that all the deficiencies in a plant have been found and repaired.
Tr. 9883, 9885, cf.
9979; cf. Applicant's FOF 347 at 307. (increased inspection yields increased number of findings).
Though there was no testimony on the issue, it may be true that those deficiencies that are least " reparable," See Tr. 9888, are also the deficiencies that are most dif ficult to find af ter the fact.
Cf.
Tr. 9977.*
For these reasons, the NRC Staff's argument that HL&P's character was not so poor as to be disqualifying
41
)
l i
because none of the deficiencies found at the plant were irreparable, must be considered simply irrelevant.
2.51 For the reasons stated above, many of the NRC's findings of fact and much of the analysis which falls within its expertise is accepted.
The NRC Staff's ultimate conclu-sion, however, that HL&P's record was "not suf ficiently poor" to disqualify HL&P from receiving an operating license on character grounds must be rejected.
In its very wording, the Staff conclusion creates an unacceptable standard.
The ASLB is more inclined to see if the past performance of the appli-cant borders on or achieves excellenct, than whether such per-formance is minimally acceptable.
In light of the documented failures giving substance to the " poor" assessment, HL&P would not meet the minimally acceptable test and certainly not the test of a higher standard..
Either HL&P's best performance was not good enough or HL&P did not care enough to do their best.
Either way, HL&P has not demonstrated the necessary character.
II.
MEASURING HL&P'S CORPORATE CHARACTER 3.0 Foresight 3.1 Foresight is a very important character quality for a nuclear reactor operator.
The key test of foresight is whether strategies and detailed plans are developed which are designed to achieve objectives and avoid foreseeable problems.
In the case of an operating reactor, safe opera-tion is obviously the goal.
Avoiding foreseeable problems is a crucial part of that goal.
Once a problem develops, it may already be too late to prevent a catastrophe.
Taking every possible precaution in light of known risks is the mark of good character.
3.2 One HL&P witness gave a succinct description of the planning process and its importance.
~
"(Y]ou start with first identifying what the requirements are that you have to meet and then you go about in a systematic way to fashion a means to accomplish those objectives, you assess the resources that it's going to take to do it, and then the fact that it will require training so that the resources are prepared for the activity.
You will probably spend as much time in planning the execution of the work, if not more, than you do in the execution itself."
Tr. 1160-61 Unfortunately for ML&P, Mr. Goldberg was not recruited to HL&P until October 1980, Tr. 860, long after the planning process was over and implementation under way.
42
43 3.3 The first objective of a planning process is to reach a consensus on what the corporation is doing.
As one writer put it, the first commandment of management is to
" develop and communicate a strategy...a unified sense of direction to which all members of the corporation can relate."
J.
E.
Ross & Michael J. Kami, CORPORATE MANAGEMENT IN CRISIS:
WHY THE MIGHTY FAIL at 21 (1973) [ hereinafter cited as Ross & KAMI) (emphasis in the original).
The suc-cess of this effort is in good part determined by the goal setting process employed by the corproation.
See e.g. W.
R.
Osgood, BASICS OF SUCCESSFUL BUSINESS PLANNING at 73 (1980).
Where there are several goals, priorities must be given to each goal in relation to others.
See e.g.
R.
S.
Sloma, HOW TO MEASURE MANAGERIAL PERFORMANCE at 64 (1980).
A diagnos-tic function is established to monitor performance in light of the goals and to continually improve performance in meet-ing objectives.
See e.g.
R.
Abramson & W. Halset, PLANNING FOR IMPROVED ENTERPRISE PERFORMANCE at 16 (1979).
A good planning process is complex and comprehensive. Id.
3.4 The initial planning facing HL&P was the over-all planning for its utility system.
The decision to build nuclear reactors is the relevant outcome of this planning process.
The ASLB does not look behind such a decision unless contentions relevant to that decision, such as alter-native means of supplying power, are raised.
In this
l' 44 proceeding no such contention was accepted.
See Memorandum and order, August 3, 1979.
3.5 Having decided to build a nuclear plant, HL&P then had to plan for the successful completion of that undertaking.
In part, HL&P could rely on its past experi-ences.
HL&P had built one of the largest fossil fuel plants on line in the United States.
Tr. 1256-57.
From this experience, HL&P knew there would be a high turnover rate in personnel.
Tr. 1290.
The effects of high turnover on the work force would have to be addressed.
For example, high tirnover would require continuous training, an integral part of a good quality assurance process anyway.
Sloma, supra at 187, item 48.
Perhaps most important for this inquiry and decisio7, HL&P knew that a construction force on any project is likely to be a group of tough people.
Tr. 5095-96.
HL&P knew that harassment and intimidat' ion could happen and, in fact, did happen on HL&P's fossil projects.
Id.
3.6 HL&P also had to plan with an awareness it lacked experience in the nuclear field.
See 2.46 supra.
When HL&P picked Brown and Root to be the architect-engineer (a/e) and constructor, HL&P also had to plan to compensate for B&R's absence of experience as a nuclear a/e and limited experience as a nuclear constructor.
As an NRC witness observed, managerial competence is in part recognizing
e
+
45 existing limitations on that competence, Tr. 9955, and planning accordingly.
3.7 Engaging in the construction of a nuclear plant, HL&P also had to plan to meet the requirements of 10 C.F.R. Part 50, Appendix B, the requirements to develop and implement effectively a quality assurance program.
In typical nuclear industry practice conforming to the mandates of Appendix B, the plans, policies, and procedures of a nuclear utility are only tools used to achieve a far more comprehensive responsibility of management.
Staff Ex. 48, Ex. 1 at 14-15.
Development of these tools is the threshold task of planning.
The plan also had to ensure HL&P met its broader obligations under Appendix B. Tr. 9372, 9505, 9576 f 41, 9602, 9604, 9774.
3.8 As part of its nuclear commitment, HL&P had to adopt and fully implement a highest priority goal of quality construction.
The risks are too great for quality construc-tion not to take precedence over any other goal, except worker safety.
3.9 In fact, HL&P's record does not indicate the foresight necessary to achieve the task or avoid foreseeable problems.
High turnover plagued the project in some of the most critical areas of performance with no visible HL&P measures to compensate for the worst effects.
Tr. 9538, Staff Ex. 46, App. O at 86.
Harassment and intimidation
1 l*
6 46 were chronic and directed towards the worst possible group on the site.
See, 6.22-6.29, infra.
No special precautions were taken in quality assurance to compensate for the limited experience of B&R, Tr. 1336-37, in spite of known deficien-cies in past B&R quality of wor,t.
Tr. 2121.
A senior officer highly qualified in nuclear engineering and construc-tion was not hired until the project was far along.
See 3.2, supra.
Since HL&P brought in most of its QA staff from outside the organization, Tr.1477, HL&P had the opportunity to hire expertise.
However, the first manager of quality assurance for HL&P had very limited experience in nuclear plant construction.
Tr. 1105-07, 1173-74.
The second quality assurance manager was even less qualified through experience.
See 2.45, supra., Tr. 862, 878-880.
Only in 1980-81 did HL&P clearly address itself to the need for an adequate experience base in its personnel involved with the nuclear project.
Tr. 1158-59.
By 1980-81, B&R also began to address itself to the actual task to be accomplished.
Tr. 1158.
3.10 While HL&P QA was HL&P's tool for detecting fundamental problems in ML&P's management of the quality assurance program for the project, selection of unqualified QA directors, 3.9, supra, was only part of the failure to properly plan to assure this tool's ef fectiveness.
HL&P hired a consultant to assist in the development of the QA
47 program, Tr. 883, but no further QA consultants were hired until 1980.
Id.
As late as January 1980, B&R was still developing a program to familiarize construction foremen with the requirements and duties of the Quality Control inspectors.
Staff Ex. 46, Attachment 5 at 11.
ML&P had f ailed to assure such a program existed from the beginning of the project.
The first time HL&P comm.ced itself to an annual audit of the QA program was in 1980-81.
Tr. 1942-43.
3.11 Had HL&P had the foresight to hire fully experienced people, HL&P might have avoided the foreseeable results of their failure to do so.
Inexperienced people
" thrash around" while learning, often for years if the task is complex.
Tr. 1160.
A lack of foresight will produce a slow learning curve with the corporation doomed to repeat history.
See Tr. 1919-20, 2044, 1473, 1059, 1158 1. 10-13.
An organization which should have been structured to achieve "the maximum degree of responsiveness and...end results,"
Tr. 2235, ended up with audit reports not going outside the organization being audited, Tr. 1898, no routine management reports being written, Id., communications blocked by an unwieldy structure; Tr. 1504 f 7, 42, attachment 1; non-traditional, inef fective lines of communicstion, Tr. 1901, l
and an inability to communicate Tr. 9514.
3.12 As of July 1980, an independent consultant found that HL&P had still not commited to a " quality first"
48 philosophy regarding the construction of STNP.
Staff Ex.
46, Ex. 1 at 2, 8; Tr. 1591 1. 14-15.
Nor had HL&P met its responsibilities under Appendix B. 2.36, supra.
Nor had HL&P compensated for B&R's lack of experience.
Tr. 9508.
4.0 Judgment 4.1 A plan is only as good as the people who implement the plan.
Selection of people highly qualified to perform their tasks is a fundamental demand of nuclear reac-tor technology.
A recent study determined that 38% of the most serious problems occurring at nuclear reactors traced to human error.
PRECURSORS TO POTENTIAL SEVERE CORE DAMAGE ACCIDENTS, 1969-1979, NUREG/CR-2497.
4.2 In the face of HL&P's and B&R's inexperience, it would only be prudent for HL&P to put in place strong, highly qualified, and experienced people as well as taking every step necessary to ensure a working environment where such people could be effective.
Yet the opinions delivered in this proceeding were unanimous, except for HL&P, in attributing much of HL&P's failure to people, not programs.
See o.g._ Tr 1159-64, 9529.
4.3 When the Board of Directors selected Jordan as President in 1974, Tr. 1223 f 3, Jordan had previously been a vice president with no technical responsibilities.
Tr.
1369.
His primary activities appear to have been public
49 relations related.
Id.
Also in 1974, Mr. Jordan had no I
training in quality assurance.
See, 8.72, infra.
l 4.4 In 1977, the Board of Directors elected Jordan l
l as Chief Executive Officer.
Tr. 1223 f 3.
At that time, l
Jordan still had no quality assurance training or l
experience.
See, 8.72, infra.
Not until 1980 did Jordan l
receive any such training and that training was minimal.
Id.
4.5 When selecting their top of ficers, including the chief decision maker, the Board of Directors did not mandate training in quality assurance as a prerequisite or as a post election requirement.
In December 1975, HL&P l
l received construction permits for STNP.
41 Fed. Reg. 831 (1976).
But from 1975 through 1980, the Board of Directors never considered it necessary for their President and later CEO to be trained in the quality assurance disciplines applicable to a nuclear plant.
4.6 HL&P did select Oprea to be the highest officer l
in charge of STNP.
But Oprea was trained only in books, not actual experience.
Tr. 2243.
4.7 Jordan had authority for three years prior to the Order to Show Cause to assign Oprea full time to STNP, Tr. 1314, 1341-44, but did not do so despite his awareness Oprea was spending a great deal of time on this one project compared to the time spent on his many other responsibili-ties.
Tr. 1344, See 6.15, infra.
50 4.8 Oprea relied, in part, on top HL&P managars, serving as the QA Program Evaluation Committee, to monitor the effectiveness of the QA program.
Tr. 1504 f 47 4.9 The first QA Manager for HL&P had limited nuclear qualifications.
Tr. 1105-07, 1173-74.
The second QA Manager Frazer was even less qualified by his experien-ces.
Tr. See 2.44, 3.9 supra.
As the highest HL&P employee with solely QA responsibilities and as the person who at one point claimed " total responsibility for the quality assur-ance on the Fourth Texas Project," Tr. 1102, Frazer merits a mora in depth examination as part of this inquiry.
4.10 Even Jordan recognized that as of 1981, Frazer's experience in terms of construction was limited, Tr. 1274 ("not inexperienced"), as was his experience in terms of nuclear projects, Id. ("not inexperienced...now").
A consultant found Frazer not to possess the credentials the consultant considered essential to the task.
Tr. 1905-06, 1924.
Frazer was responsible for seeing to it that HL&P QA performed the sophisticated analyses required of the QA function, rather than doing inspections--a QC function.
Tr.
2043.
4.11 Frazer is described as energetic, perceptive,
~
having a good attitude and intent, good work habits, articu-late, and bright.
Tr. 1444, 1767.
His circumstances,
51 however, seem to fit the general pattern of HL&P QA--strong on desire but short on experience, Tr. 9555, leading to an inability to perform which disappoints HL&P's hopes.
Tr.
9556.
Frazer, like Oprea, relied on training to overcome an absence of experience.
But training is no substitute for l
experience in a complex undertaking, such as construction of I
a nuclear power plan.
Tr. 9552.
4.12 An illustrative example is the comparison of Frazer's understanding of QA/QC when he has time to sit down l
with 10 C.F.R. Part 50, Appendix B with the understanding which emerged during cross examination.
In his prepared testimony, he defines and distinguishes " quality assurance" and " quality control."
Tr. 906 f 16-17.
Quoting from Appendix B,
Frazer accurately recounts the meaning of the terms and how the functions differ.
Jd.
But faced with cross exami-nation, Frazer introduces concepts into the two functions that are in fact inappropriate.
Tr. 2155.
For example, QC is spoken of as managing the work against specified cri-teria, when, in fact, QC has no managerial function in rela-l tion to construction work.
QA is spoken of as planning and executing when in fact QA is a verifying function not a directing function.
Tr. 2075.
This slippage away from rig-orous terminology is to be expected when a discipline is learned from books without real experience to which the con-s cepts can be attached.
For Frazer to attempt to manage 1
i l
i
52 HL&P's entire QA program from such an insubstantial base was obviously very difficult and, reviewing the record, unsuccessful.
4.13 Responding to NRC concerns regarding B&R OC morale, HL&P increased surveillance by HL&P QA.
Tr. 1504 f 12.
But Frazer did not set up a system which identified for HL&P QA the things they should monitor and report back to him en.
Tr. 5092.
He was not even sure exactly what his staff did do to monitor.
Tr. 5093.
Later, the NRC found that HL&P QA had gotten caught up in details more appropriate for QC and were not performing the evaluat!)n function that was their purpose.
Tr. 1938-39.
Again, without experience, Frazer could not know that his directives might result in disrupting or destroying his staf f's performance of their real duties.
4.14 Frazer's performance is not a reflection on Frazer but, rather, a very significant indicator that HL&P puts people in inappropriate positions and leaves them there for long periods of time.
As a result, people fail to per-form the required task.
4.15 While the NRC was detecting deterioration in the overall performance of HL&P's QA/QC program just prior to the special investigation in late 1979, the top HL&P managers on the Program Evaluation Committee apparently failed to detect similar serious problems.
Tr. 1504 f 48.
J
54 result was people hired with less than the necessary credentials, Tr. 1905, people hired with the necessary cred-entials but unable to perform effectively, Tr. 1595-96, 9533-34, people performing tasks not within their capabili-ties, Tr. 1164, insuf ficient numbers of people assigned to tasks, Tr. 9576 f 36, 9605-06, 9629, 9964, and numerous people assigned to a task which still does not get per-f o rmed.
Tr. 9516.
4.18 After the Order to Show Cause, HL&P had to bring in 15 or 16 people from another company to compensate for management inabilities.
Tr. 2069-2070, Staff Ex. 48, Ex. 1 at A-3, item 3.
This same replacement method had already been used once before.
Tr. 5120.
4.19 The need for replacements was particularly acute in the top quality assurance positions.
See e.g. Tr.
1935-36 (Site Supervisor QA); Tr.'1938, 1999, 2066 (Site Manager); Tr. 1998 (Project QA Supervisor); App. Ex. 35; App. Ex. 36.
4.20 Based on the record, HL&P has shown poor judgment in staffing its own organization and in assessing the staffing done by its prime contractor.
Poor judgment would be bad enough, but poor judgment most directly affec-ting the QA/QC program is intolerable.
For the President of HL&? to testify that in retrospect HL&P needed someone more experienced than Frazer in 1977, Tr. 1466-67 does nothing
~_.
55 to mitigate the seriousness of the failure, particularly since Jordan never considered replacing Frazer even after the Order to Show Cause.
Tr. 1274.
The record speaks clearly to the proposition that HL&P demonstrated a company-wide lack of judgment; the evidence is conclusive that the proposition is proven.
Once proven, such a proposition is disqualifying for an operating license applicant.
5.0 Perception 5.1 Once a plan is in place and people are selected to implement the plan, the next critical quality of corpo-rate character to be measured is perception.
The communica-tions complex for an operating reactor must deliver informa-tion in a useful form and a prompt manner to the proper decision maker.
If a problem has occurred, the appropriate decision maker must know that fact and correctly perceive what the problem is.
Corrective action to prevent disaster will depend on the clarity of both information transmitted and the perceptiveness of the receiver.
5.2 Like individuals, corporations receive informa-l l
tion and formulate perceptions based on that information.
Through this process problems are identified for avoidance or resolution.
The quality of perception of an individual 1
L
57 l
information, management cannot evaluate the status and adequacy of projects, promptly resolve quality problems at the functional level, and keep involved.
Id.
5.5 The NRC Staff investigations identified these very problems with HL&P management:
" lack of detailed knowledge... hindered HL&P's ability to maintain adequate i
control over its general contractor."
Tr. 9576 f 7.
HL&P
" corporate management was negligent in not keeping itself informed of site activities and accompanying problems."
Tr.
9576 f 35.
Because HL&P failed to maintain adequate know-ledge of site activities," it also failed to " assure quality control problems were properly identified."
Id. at 42; See Id,.
at 7.
5.6 These failures of perception led to an overall pattern of an HL&P " inability to identify problem areas without NRC intervention."
jd. at 47.
5.7 The failure of perception was endemic in the HL&P organization.
It suf fered from a systematic failure to adopt or effectively implement the various means necessary to aid the information flow to upper management.
It failed to assess site documents in order to discover trends and j
thereby allowed chronic problems to persist.
Jd. at 8, 44.
HL&P's audit of QA was impaired; it failed to do supplemen-tal audits and did not audit B&R implementation of construc-l tion procedures for 1977 through 1979 or QA/QC procedures i
4
,,._,n-,..
.-.--_,.n.,
58 for 1978 and 79.
Id. at 32.
HL&P failed to analyze noncon-formance reports, (NCR's), field requests for engineering action (FREA's), and the examination checks / inspection books to discover trends and causes so that underlying problems could be corrected.
I d,.
at 26. HL&P failed to maintain an adequate audit program to reveal inadequacies in QA/QC or an audit surveillance program to discover problems in construc-tion.
Jd. at 36-37, Staff Ex. 4 6, App. D a t 9 9-10 4.
5.8 HL&P's fundamental absence of perception occurred at the time the decision was made to build a nuclear plant.
There is substantial evidence in the record to support the conclusion that HL&P did not perceive build-ing a nuclear plant as really very different from building a fossil plant.
5.9 In 1974, the new president of HL&P signed a letter regarding HL&P's quality as'surance program.
Tr.
1278, 1223 f Attachment 1.
The letter itself applies the program to both nuclear and fossil fueled plants without distinguishing between the two.
Ici.
5.10 In 1975, almost all of HL&P's system was gas fired.
Tr. 1223 f 5.
The South Texas Nuclear Project was HL&P's first nuclear power plant involvement.
Tr. 1472.
HL&P's practice with fossil plants was to delegate to the contractor substantial responsibility for meeting safety
59 standards.
Tr. 1223 f 9.
HL&P had never had a quality assurance program prior to STNP.
Tr. 1475.
5.11 The major difference between fossil and nuclear plants first noted by HL&P's top officers was the power of quality assurance personnel to close down a plant, if stan-dards were not being met.
Tr. 1473.
HL&P's president did not know if such a stop work order had ever been issued on one of their fossil plants.
Tr. 1477-78.
While HL&P under-stood this new QA power and responded to its existence, Tr.
1473, the overall response of HL&P does not indicate top management perceived the underlying rationale for giving the quality assurance personnel this power.
5.12 HL&P did not see the difference between fossil and nuclear plants as significant enough to require recruit-ment of a top executive officer with prior nuclear experi-ence.
Instead, HL&P gave the responsibility for STNP to an existing officer, Mr. Oprea.
5.13 Having been with HL&P since 1952, Tr. 1504 f 3, Oprea had extensive experience with large fossil fueled units.
Tr. 1257-58.
He was the second strongest and most influential officer of the corporation.
Tr. 1270.
While he did have a background in quality assurance training, Tr.
2243, he had no actual nuclear experience before HL&P put him in charge of STNP.
He attempted "to get a handle" on the uniquely nuclear issues facing HL&P.
Tr. 1473.
60 5.14 Organizational 1y, HL&P set up a structure which minimized the difference between a nuclear plant and a fossil fueled plant.
First of all, the structure isolated HL&P top management from the daily quality assurance activi-ties at the site.
Prior to the creation of a new vice-president position, there were three layers of organization between the Site Quality Assurance Manager and Oprea.
Cf.
1504 f 7, 42, Attachment 1.
The Site QA Manager reported to a Project QA Manager who in turn reported to the Manager of Quality Assurance.
The Manager of QA reported to Oprea.
Later, when the new vice president was created, a fourth layer was placed between Oprea and the Site QA Manager.
Id.
Four of the five top personnel with quality assurance responsibilities were located in Houston, not at the site.
Tr. 1504 f 7, 42.
5.15 The multiple responsibilities given to the various positions in the structure ceinforced the minimizing of nuclear and fossil dif ferences.
Prior to the Order to Show Cause, Oprea was responsible for STNP, fossil plants, operations assignments, construction of power plants, opera-tion of powerplants, quality assurance, and communications with the NRC.
Tr. 1318-19, 1272, 1260, 1300.
In May, 1978, HL&P promoted Mr. Turner to Vice President, Power Plant Construction and Technical Services.
Tr. 5085-86, 1504 f
61.
Oprea delegated quality assurance and commun-ications with the NRC to Turnc{.
Tr. 5099.
Turner also had responsibilities for engineering construction, cost, and schedule.
Tr. 3385, 5087.
Once Mr. Turner assumed this position, Oprea stopped receiving Inspection and Enforcement repf[ks directly from the NRC.
Tr. 5099.
Instead, he received copies sent by Turner.
Iji.
For quality assurance matters, Turner relied completely on Mr. Frazer, the Manager of Quality Assuranca.
Tr. 5104.
Frazer had respon-sibilities for quality assurance at all HL&P facilities, each of which required a tailor made program.
Tr. 2206, and at least some of which required staff supervision.
Tr.
5284-85.
The Project QA Manager who reported to Frazer had responsibility for quality assurance at STNP, Allen's Creek -
(a proposed but since cancelled nuclear reactor), and the fossil plants.
Tr. 5134 No where'beyond the site manager level was there an HL&P manager or officer with sole respon-sibility for nuclear quality assurance.
5.16 HL&P permitted B&R to adopt a similar isolating structure.
Tr. 1977-78.
The B&R Project QA Manager went on site only periodically as late as January 1980.
Staff Ex.
46, Attachment 5 at 10.
5.17 The isolation of quality assurance at the site and the blurring of fossil and nuclear responsibilities pro-duced predictable detrimental results for quality assurance l
l
62 a t STNP.
When HL&P discovered B&R had seriously underesti-mated engineering completion in the early stages of the pro-ject, Jordan went to Oprea to charge Oprea with getting the project back on track.
Tr. 1232.
The person ostensibly responsible for assuring compliance with NRC regulations, including independence of QA/QC was placed under direct scheduling pressures by the highest officer of the corpora-tion.
Oprea was in charge of getting the plant built as well as QA/QC.
Tr. 1272.
The cumbersome structure pre-vented crucial information reaching top management.
Tr.
2242.
The 9L&P site QA group ended up with major responsi-bilities for reviewing and approving the planning, develop-ment, and implementation of B&R QA and construction proce-dures, Tr. 863, but little access to management to discuss problems arising from those responsibilities.
Lower manage-ment was isolated, Tr. 2236, and developed a belief that executive management did not have a positive attitude toward and was not involved in quality.
Tr. 2113.
At least one i
independent consultant concluded the site management belief was in fact a correct perception.
Staff Ex. 46, Ex.'l at 2, 8.
The consultant concluded that the structure weakened the power of the on-site inspectors and possibly led to more intimidation and harassment than would have occurred had there been more direct executive management involvement.
Tr. 1739.
I
63 5.18 In response to the Order to Show Cause of April 30, 1980, Jordan assigned Oprea full time to HL&P's nuclear projects.
Tr. 1223 f 7.
Jordan did so because "That's the way it ought to be."
Tr. 1319.
Nevertheless, as of May 19, 1981, Oprea still did not know that Charles Singleton was the superintendent of the Civil QC inspectors, Tr.
2176, whom the Order to Show Cause clearly demonstrated were under tremendous pressures from construction and needed management support.
As of June 1981, Oprea could not recall a single report from B&R coming directly to him.
Tr. 3437.
Even assigned full time to STNP, Oprea is screened from receiving information directly from the prime contractor.
5.19 HL&P's failure to adequately perceive the dif-ferences between a nuclear reactor and a fossil fueled gen-orator produced a system in which severe quality problems could develop at STNP which management could not perceive.
Having minimized the differences from the beginning, HL&P put itself in a position where it could not respond to problems going to the heart of those differences--problems in the nuclear quality assurance program.
This basic failure of perception is another in the long history of HL&P failures which preclude regulatory confidence in HL&P having the necessary character to operate a nuclear recctor.
64 5.20 While obviously of great importance, HL&P's failure to adequately distinguish between fossil and nuclear plants is only one in a long series of failed perceptions.
5.21 One of the most serious failures of perception in the context of this inquiry is a failure to perceive signals of trouble.
For example, when HL&P learned the FBI was conducting an investigation at STNP, HL&P took no speci-fic action in response, such a conducting its own investiga-tion.
Tr. 1463 Had it done so, HL&P might have discovered what the NRC's special investigation discovered a few months later resulting in the Order to Show Cause.
ML&P had to use strong language on numerous occas' ions in order to get B&R's attention.
Tr. 5079.
But HL&P failed to see that the necessity for repeatedly using such language indicated a contractor unresponsive to HL&P control.
After the Order to Show Cause, B&R issued a formal procedure for the resolution of disputes, a very unusual act.
Tr. 9548.
HL&P failed to perceive the necessity of such a formal procedure as an indication of serious internal problems at B&R, rather than a cure for those problems.
B&R twice sent " Great White Saviors" to the site to try to pull the job together.
Tr.
9533-34.
Both quit.
Jj,.
This turnover should have signalled HL&P that B&R management was a major part of the problem.
Tr. 9523.
Cf. Staff Ex. 48, Ex. 1 at A-6, Staff Ex. 46, App. O a t 86.
65
,5.22 HL&P often did not perceive the difference between effective action and merely doing something.
Between the time oprea asked Turner for a list of possible consultants to audit the QA program and the actual decision to hire Bechtel, half a year went by.
Tr. 2251, 2254.
Even then the decision came after the NRC began revealing the results of their special investigation.
Tr. 2251.
Consi-deration of a solution for six months may have given oprea the idea he was doing something, but actually what he was doing was ineffective in addressing the problem of QA program adequacy.
The new documents designed to cure the problems created by misuse of FREA's created a similar problem; the FCR's permitted construction to handle planning errors directly with engineering so there would be no docu-mentation of repeated planning errors and no corrective action program developed for such errors.
Tr. 5143-45.
l Oprea equated management involvement with physical visibil-l ity on his part.
Tr. 2244, 2245, 2278-79.
Being seen and heard, Tr. 2296, and talking with people, Jd., would both be and be perceived by others as management involvement.
Oprea did not see that such a response was a disfunctional response to a problem the HL&P independent consultant had identified as the most important problem executive manage-ment had.
Staf f Ex. 48, Ex.1 at 2.
The President of HL&P believed that a published policy committing HL&P to quality
66 should settle any questions about that commitment, Tr. 1281, with any subsequent quality problems amounting to minor implementation problems corrected by a few improvements.
Tr. 1446.
The conclusion that merely publishing a policy makes such a policy effective is obviously inappropriate, particularly for a top officer.
In the face of the Order to Show Cause, Oprea could continue to believe that the HL&P QA program had been and continued to be in compliance.
Tr.
1504 f 5.
5.23 HL&P persistently refused to recognize when people were unable to perform their tasks.
See 4.9-4.14, supra.
Jordan never considered replacing Frazer.
Tr. 1274.
Jordan maintained that coordination between upper and mid-management was a normal consistent thing af ter having received and reviewed, Tr.1439, a consultant's report finding just the opposite.
Tr. 2242.
Oprea thought Frazer had done an " exemplary" job since the Order to Show Cause, Tr. 1768, when in fact a year after the Order to Show Cause HL&P still received a barely passing mark from NRC evalua-tors.
Staff Ex. 133.
5.24 One of the more striking and signigicant per-ceptual failures of HL&P is the failure of upper management to realize when they are personally responsible.
Even though Jordan and Oprea are more involved in STNP than in HL&P's fossil plants, Tr.1477, they still fail to perceive
67 how their involvement, or lack thereof, contributed and continues to contribute to STNP's poor record.
5.24.2 A consultant in 1978 said project manage-ment needed strengthening.
Tr. 5119.
As a result new per-sonnel were hired and personnel from another organization were brought in to fill positions until qualified people could be found.
Tr. 5119-20.
But management weakness resurfaced as a prime cause of the deficiencies identified in the Order to Show Cause.
A repeated inability to establish effective management reflects serious deficiencies in the Board of Directors and top officers.
l 5.24.2 When Jordan first became a top officer of HL&P, he saw no need to review the decision to hire B&R because whoever hired them in the first place must have believed B&R was competent.
Tr. 1336-37.
For Jordan not to I
satisfy himself regarding the prime contractor on HL&P's major construction project reflects a limited view of the role and duties of a new top officer.
5.24.3 Even while granting that the NRC and Bechtel reached essentially the same conclusions, Jordan still finds no basis for a heightened sense of his own pos-sible inadequacies.
See e.g. Tr. 1447-48.
5.24.4 Yet there is clear evidence that Jordan's level of involvement and comprehension is seriously lacking.
Prior to 1980, he did not make regular visits to the site.
68 Tr. 1264-66.
While he testified that he was familiar with the findings which accompanied the Order to Show Cause, Tr.
1387, Staff Ex. 46, in fact he was not.
Tr. 1398, Staff Ex.
46, App. D at 96-100.
Nor was he familiar with HL&P's response to the Order to Show Cause.
Tr. 1394-95, Staff Ex.
47 at 55-62.
Jordan seems to think he can grasp the import of a document like the Order to Show Cause by looking at a bad weld and putting his hands in a concrete void.
Tr.
1387.
5.24.5 As of May 1981, Jordan did not make it his practice to read each Inspection and Enforcement (I&E) report issued by the NRC regarding STNP.
Tr. 1405.
Jordan let Oprea handle these reports.
Tr. 1405-07.
The number of I& E reports since the Order to, Show Cause and up to May 1981 was 55, or roughly five per month.
Rather than once burned, twice wary, Jordan seems to have taken little if any notice of the Order to Show Cause.
5.24.6 A pattern begins to emerge that Jordan in f act does not want to manage STNP but prefers to remain uninformed.
His testimony is replete with examples of what he did not know.
He did not know what was being done after the Order to show Cause to communicate the quality concept to the STNP work force, Tr. 1283, did not know or was not sure whether there was a particular officer or high ranking person in HL&P whose name was given out for "whistleblowers"
o 69 with quality problems to call, Tr. 2189, see also Tr.
1349-52, did not know and coitid not hazard a guess regarding the percentage of time spent on STNP matters by vice presi-dents of HL&P involved with STNP, Tr. 1314-16, 1344, did not know specifics about how the quality control programs were changed over the past year, Tr. 1346-49, did not know there was a specific PSAR commitment to do audits, Tr. 1398, Cf.
Staf f Ex. 46, App. A at 15, did not know if new personnel received orientation in QA/QC, Tr. 1281, and did not know whether HL&P recommended or ordered B&R to remove people in the B&R QA/QC program.
Tr. 1401. Cf. Staff Ex. 48, Attach-ment 1 at (1-6), item (1).
5.24.7 Oprea testified that there was an
" illusion factor" in quality assurance which misled his per-ception.
Tr. 2174.
But penetrating illusions to get at the truth is precisely the perception sought in this inquiry.
Oprea failed to penetrate this illusion and discover that HL&P QA managers were too involved in solving specific problems and not looking for the causes of problems.
Tr.
2151, 2235.
Oproa's failure was worse than that of the QA managers because he did not even see there was a problem.
1 Oprea terms this particular QA failure an " unfortunate ove rsig h t. "
Tr. 2174, cf. Staff Ex. 47 at 47.
But this
" ove rs ig h t" produces such results as Field Request for Engineering Action (FREA's) not being analyzed to evaluate L
70 "the cumulative effects on structures of the discrepancies and deviations from design authorized by FREA's."
Staff Ex.
46, App. D at 93.
By minimizing the failure, Oprea puts distance between himself and a major source of potential errors which he " overlooked."
Furthermore, had oprea not only perceived the problems QA was having but pursued the cause, he might have seen that by trying to compensate for B&R's inability to effectively carry out the B&R program, HL&P was sacrificing its ability to oversee the project.
5.24.8 Perhaps the most significant perceptual failure on oprea's part was his refusal to recognize that Frazer could not handle his job.
Besides the examples given in 5.23 above, a further example serves to illustrate Frazer's problems.
During the investigation leading up to the Order to Show Cause, NRC investigators approached Frazer regarding the absence of any HL&P ' audits of B&R construction procedures during 1977, 1978, and 1979.
Staff Ex. 46, App.
D at 99.
Frazer first of fered the explanation that HL&P had not committed to audit all such B&R site procedures.
Id.
But the NRC had found that none of the procedures were audited for three years.
Id,.
Frazer then offered the explanation that HL&P survelliances fulfilled the auditing commi tme nt.
Id,.,
cf. Tr. 1792-1814.
Later Frazer admitted that surveillances were not audits.
Id,.
Here is a quality
71 assurance manager with significant parts of his program in shambles offering lame excuses.
Oprea should have perceived by 1979 that Frazer was in the wrong job.
Instead of accepting responsibility for Frazer's plight and moving to correct the situation, Oprea showed a tendency to blame subordinates for his own failings.
Tr.
5295-96.
Oprea demonstrates the same pattern as Jordan of not wanting to manager when he delegates authority, he absolves himself of responsibility.
Such abdication is exactly what the Commission feared the ASLB would find once the record was fully developed.
5.24.9 Even when oprea clearly had a respon-sibility, he failed to accurately perceive that respon-sibility.
As the top of ficer of HL&P specifically respon-sible for STNP, Oprea had a responsibility to ensure the QA program was being effectively imp 1'emented.
But the only serious consideration he gave to hiring an outside con-sultant to evaluate the QA program came in response to his expectation the NRC would increase inspection activity after the accident at Three Mile Island.
Tr. 2222.
This con-sideration was not an independent desire on Oprea's part to assure himself he had a good program or an independently perceived need to take extra safety precautions after the accident.
Instead, the Oprea consideration was a reactive, defensive measure in expectation of increased regulatory
72 scrutiny.
Even the prospect of such increased scrutiny did not produce an actual decision to do the audit until the NRC had been on site for two months and began informing HL&P of significant deficiencies in their QA program.
Even in self defense, Oprea failed to show management initiative in the quality area.
He repeatedly shows a tendency to leave quality to others.
See Staff Ex. 46, Attachment 1 at (1-6)-(1-7), items (2) and (3).
5.25 A corporation cannot see if the tools for per-ception are either not in place or not functioning.
5.25.1 Oprea's QA Evaluation Committee had the function of periodically reviewing the status and adequacy of the QA program but apparently failed to detect and/or failed to report to oprea the widespread noncompliance found by the NRC.
Tr. 1504 f 48.
Turner chaired the committee, ld.., but he relied on Frazer for QA information. Tr. 5104.
5.25.2 Early in the project, B&R severely under-estimated the amount of engineering completed prior to going into the field to begin construction but HL&P f ailed to detect the underestimation.
Tr. 1228-46.
5.25.3 The audit system was an important tool for HL&P to be kept informed regarding the adequacy of the QA program and the effectiveness of the construction program.
As touched on in 5.24.8, some parts of the audit program did not function for years.
See Staff Ex. 46, App. O at 95-101.
I 73 5.25.4 Even where programs in theory were func-tioning, the reality was far from effective performance.
See e.q. Staff Ex. 64 at 8 (July 1980-no procedures to implement PSAR); Staff Ex. 46, App. A at 13 (no evidence Senior Vice President B&R told of unresolved audit items as required by PSAR); Staff Ex. 64 at 3-4, 5-8 (September 1980 j
- audit impasse not resolved by management); Staff Ex. 46, App. D at 92 ( trending of NCR's--no formal program, no approved procedures); jd,. at 93 (trending of FREA's--no l
l approved procedures); jf. at 98 (surveillance checklists not l
l identifying unsatisf actory conditions); JJ1., App. 3 at 3-18 (Corrective Action Requests left in files without disposi-l tion); Staf f Ex. 83 (auditing breakdown), Staff Ex. 52 at 7 (possibly safety related items being resolved on punch list rather than with NCR or FREA despite absence of procedure complying with 10 C.F.R. Part 50,' App. B, Criterion V); Tr.
1504 f 15-16, 85 (absence of clear delineation of very important stop work authority); Staf f Ex.11 at 1, 7-8 (NRC l
finds Megger testing performed for eight months without cri-l teria for acceptable readings);'Tr. 1744 (in some cases too many procedures impaired work).
This samplo of flaws amd breakdowns in the HL&P system for perceiving problems is in l
fact evidence of a generalized breakdown in the establish-mont and proper uso of perceptual tools.
Rocovery from this breakdown has como slowly, soo o.g. Staff Ex. 52 at 5 l
l l
W-
o 74 (first trending of FREA's to be done in April 1981); Staff Ex. 71 at 5 (systemd engineering to be established in October 1980); jd. at 12 (HL&P trending of HL&P audits to be begun in September 1980).
With the key perceptual tools disfunctional, management could not receive adequate infor-mation.
5.25.5 Sometimes missing or inadequate tools for perception had ef fects ranging far beyond failure to provide information.
See e.g.
5.24.7, supra.
The NRC found HL&P had perhaps as many as 5 and as few as 3 QA personnel on i
site covering civil activities.
Tr. 9605-06, 9628-29.
These QA personnel could have served as a safety valve for the badly abused QC force, Tr. 9628, but the QA were so few in number, they could not even maintain their own schedule i
for surveillance.
Tr. 9964.
5.25.6 Sometimes a perceptual tool was useless because no one knew it existed.
Oprea had an open door l
policy but the first time the policy appeared on paper was in 1980.
Tr. 2290.
5.25.7 Sometimes a perceptual tool actually pro-vided information but no one porcoived the information.
Staf f Ex. 46, App. O at 93.
5.25.8 There is no excuse for the managemont mess created by HL&P.
By lato 1979, an offectivo mechanism for a
4 75 i
i identification, solution, and prevention of recurring i
problems was common in the nucleer industry. Tr. 2042-43.
5.26 The most important of HL&P's perceptual failures was the failure to identify the real causes of problems.
This proceeding was permeated with the term " root cause," a term meant to characterize that cause which, if l
i corrected, would prevent reoccurence of the same problem.
See e.g. App. Ex. 3 at 2.
Since the predominant issue in this proceeding is the character of the Applicant, the bur-den is on the Applicant, as set forth in 2.7-2.15 above, l
to show that bad character is not the real cause of each of the documen'ted failures.
Rather than reach the ultimate issue at this point, however, it is instructive to look at i
less fundamental root causes.
Particularly instructive is I
j to examine the various perceptions of root causes presented by the parties on the record.
5.27 HL&P stated that a study conducted by the l
Bechtel Power Corporation (Bechtel) enabled HL&P to respond to the Order to Show Cause by addresses causes rather than j
sysmptoms.
Tr. 1504 f 19.
The Bechtel study contains six j
" root causes" and proposed cures.
Staff Ex. 48, Ex. 1 at 4-7.
HL&P adopted these six with some modification.
Tr.
1504 f 27.
The only significant dif ference is found in the first itom--procedures.
While Bechtol was concerned that j
h i
l
76 the procedures be linked to meeting "STP-QA program require-ments, Staff Ex. 48, Ex. 1 at 4, the HL&P formulatior. links the procedures to construction specifications and job requirements.
Tr. 1504 f 27, item (1).
This difference in formulations highlights the difference in orientation between a quality assurance specialist and a utility merely building a power plant.
Except in this one item, the HL&P and Bechtel formulations are quite similar.
5.28 of the six HL&P root causes, four, Jd,.,
items (1), (2), (4), and (5), are little more than restatements of the Appendix 8 requirements.
See 10 C.F.R. Part 50, \\pp. 8, Criteria II, V, XVI, XVII, XVIII.
For HL&P to identify a cause of noncompliance as a need for better compliance focuses attention on details of compliance activity which need improvement.
There is no attempt to go deeper in searching for causes if such an approach is taken; symptoms may indeed be mistaken for causes.
5.29 The NRC Staf f delved deeper in searching for the root causes of HL&P's failures and perceived far more useful sources for the problems than merely details of compliance activity.
See o.a. Tr. 9936 (over reliance on contractor and failure to asure contractor was carrying out duties), Tr. 9937 (too much attention to details at the oxpense of broader view), Tr. 9936, 9937, 9939-40
I 77 (inexperience), Tr. 9936, 9938 (logistics and communica-i tion), Tr. 9491-94 (failure to train and to adequately surveil), Tr. 9576 f 47 (auditing impossible in face of ineffective system of records control), Tr. 9523 (inadequate j
top management at site), Tr. 9576 f 39 (B&R unable to con-duct an adequate QA/QC program; HL&P unable to ef fectively monitor B&R program).
5.30 The HL&P process of addressing causes of non-compliance in terms of improving compliance activities can the risk of repeating past " cures" without addressing the real problem.
In fact, in the QA/QC area, there is a t
i striking similarity between acts taken in the past to respond to concerns regarding QC morale and acts taken after the Order to Show Cause.
Compare Tr. 5074-91 and Tr. 1504 f I
28.
Similarly, changes to achieve clarity of procedures I
were made in the past.
Tr.1504 f 14, 15, Staff Ex. 11 at 5, CEU Ex. 12.
i 5.31 HL&P has consistently exhibited a tendency to I
label serious problems as merely " procedural."
Cf. Tr. 906 at 33.
This tendency either shows a marked distortion of perception, or is a form of rationalization and denial.
However described, it is a tendency which reveals a serious i
defect of character.
Cf. also App. For 62 at 66 (lack of l
QA autonomy and authority, inadequato auditing and attention to trends in recurring problems designated as only "proco-l duros").
In the course of a D&R audit in 1980, an impasso I
d' 78 developed between the auditors and those being audited resulting in the reassignment of one auditor and the resignation of another auditor.
Staff Ex. 64 at 4.
HL&P responded that the problems were largely procedural, but the NRC Staff concluded the problem was caused by management failure.
JJ!.
Similarly, HL&P responded to the charge that they failed to take corrective action in a reasonable time and get problems resolved in the area of auditing with the excuse that this problem was due to an oversight in proce-dures.
Jd. at 8.
But it appeared to the NRC Staff that HL&P's response had "not addressed the cause of the non-compliance since the audit peccess is still not functioning adequately."
Jd,.
5.32 The overall perceptual approach by HL&P led HL&P to minimize serious problems and deny the most obvious truths.
For Jordan, the Order to Show Cause represented some difficulties, Tr. 1294, indicated room for improvement, Tr. 2193, suggested HL&P could have done a better job, Tr.
1445, 1448, consisted of individual breakdowns in implemen-tation.
Tr.1301, and documented a problem that got away from HL&P for a while.
Tr. 1445.
5.33 Oproa thought the Order to Show Cause docu-monted a radical change in the project over a three month period, Tr. 2240, contained many " minor" violations, Tr 1504 f 19, reprosented a few " kinks" or " chinks" in HL&P's
79 quality armor, Tr. 2295-69, 5296, and did not represent a breakdown in the HL&P QA program.
Tr. 2229, 2274.
5.34 HL&P even used its own perceptual failures to characterize extremely serious problems as perceptual.
The harassment, intimidation, and threats directed toward QC inspectors became--for HL&P--a p.oblem of the QC perception that harassment and intimidation were occurring.
App. Ex. 4 at 2, Tr. 5103.
5.35 The perceptual failures of HL&P documented in the record cover the full spectrum; there are no success stories.
Such a performance unquestionably failed to
" achieve the necessary meticulous attention to detail and the high standard of compliance which the NRC expects of its licensees."
47 Fed. Reg. 9989 Col.
3.
6.0 Resolve 6.1 Perhaps the most important quality of character required of a company undertaking to build and operate a nucioar power plant is the quality of resolve in seeing to it that plans are implemented, commitments are fulfilled and directivos are carried out.
After foresight to make appropri-ate plans, judgment to select the appropriate personnel, and l
perception of the information needed to make decisions comes the resolvo to carry out those decisions, implomont plans, and realize the fruits of judgment.
Where thoro is true resolvo in carrying out decisions and reaching goals, the problems
l 80 raised from poor foresight and planning, poor judgment or poor perception may be eventually overcome by resolve and determi-nation to correct problems.
Without resolve, plans may be formulated, judgments made, even information gathered and orders may be given, but a quality project never realized because of failure to carry through to see that decisions become realities.
As discussed above, it is not adequate to simply "try".
Resolve goes beyond trying.
It is what gives some persons a record of accomplishments this quality of character has the same effect for corporations.
6.2 Resolve as a quality of character corresponds to the essential quality of management--the certain quality of tenacity which gots things done, which goes beyond plans and programs to implementation, in short, which gets results.
It was precisely in this area of managing that HL&P was found to be seriously wanting in numerous statements of NRC Staf f opinion.
6.3 While HL&P's managers appeared committed and responsive in discussions with NRC Staf f, unfortunately the NRC Staf f did not always see the results they expected.
Tr.
9506-07.
Management controls right down to the worker lovel woro "obviously" not working before August 1978.
Tr. 9506.
HL&P lacked adequato control over Brown and Root safety-related construction activity.
Tr. 9576 f 4, 7, Staff Ex. 46 App. D, p. 9.
The HL&P QA/QC program and management overall
81 lacked aggressiveness and effectiveness.
Id.,
Tr. 9576 f.
8, Tr. 9764.
6.4 HL&P managers failed to maintain detailed involvement in the total scope of site and construction activ-ities.
Tr. 9762, 9576 f. 35, 36.
HL&P overly relied on Brown and Root to implement the QA/QC program Id. at 3 5, and this overdependence led to a failure to assure that problems were i
effectively corrected.
Id. at 42, Tr. 9936.
6.5 This relationship of dependence on Brown and Root led to HL&P's failure to carry through on its responsibilities for the project.
HL&P failed to see that Brown and Root main-tained an effective and aggressive QC program, Tr. 9764.
More i
broadly HL&P failed to see that Brown and Root ef fectively implemented written in-place requirements and procedures.
Id.
6.6 Not only was HL&P unab.le to exercise the resolve l
to see to it that its contractor Brown and Root implement approved procedures, but HL&P also failed to properly imple-(
ment its own QA audit and surveillance program.
Tr. 9763, Staff Ex. 46, App.
D, 11, 100.
There is no question that l
implementation--that essential task of management--presented a major problem to HL&P.
See 2.30-2.31, supra.
A Chief NRC j
Inspector described this problem as a lack of "that particular management ability and strength to make the organization
. work the way the organization was set up."
Tr. 9527, 1
See also Tr. 9511.
I l
l l
I i
82 6.7 This failure to demonstrate the "particular man-agement ability and strength" to get things done, the quality of resolve, can be described in terms of abdication and fail-ure to take responsibility, See e.g. Tr. 9576 f 37, because it causes a tendency to leave the task of implementation to others.
6.8 The tendency of HL&P to leave implementation to y
others is seen in more than the failures mentioned above.
It reveals itself in the very attitude of HL&P managers toward implementation.
These managers consistently relied on pro-grams and " published policy," See e.g.
Tr. 1463, rather than action and detailed involvement in implementation, to get things done.
In QA/QC, there was a demonstrated failure by HL&P to assure that the persons and organizations performing quality assurance functions had suf.ficient authority and orga-nizational freedom to identify quality related problems, Tr.
9768, Staff Ex. 46, App.
D.
at 49.
But in the minds of the HL&P managers "that organizational indeper.ience has always been there" because it was in the program on paper; that these paper programs were not in fact implemented, See e.g.
Tr.
9764, is dismissed as a mere " shortcoming," Tr. 2504 f 45.
Implementation is constantly referred to by HL&P managers as an excuse, as though HL&P's managers can only be faulted if the written prograra, system, or " basic organization" is at fault.
See e.g.
Tr. 1446, 3421.
This ignores that, as
1 83 discussed above, establishing a program is the least of the managerial tasks facing a corporation intending to build a nuclear facility.
The program is dictated by NRC requirements and subsequently reviewed by NRC Staf f for compliance. It is the implementation of the program that is the most important responsibility of corporate management.
HL&P has responsibil-ity for implementation of an effective QA/QC program which cannot be delegated, though obviously they can assign the task of conducting the program to subordinates or an outside con-tractor.
See Tr. 9505, 10 C.F.R. Part 50, App.
B, Criterion I.
Managerial involvement in implementation is more than just an " additional layer" added to QA/QC policies and procedures.
Tr. 2135.
It is the essential function of management during the building of a quality plant.
This attitude of HL&P man-agement, which appears to minimize.the importance of imple-mentation, suggests the deeper problem displayed in the many failures associated with HL&P's management of STNP--the prob-lem of lack of resolve in managing, the lack of the determina-tion to see to it that undertakings and commitments, policies and programs were in fact carried out.
This attitude led directly to the finding of the NRC Staff that the " principal failure" of HL&P "was not the inadequacy of the QA/QC written in-place, program; but rather the failure of both HL&P and B&R to effectively implement the in-place requirements and procedures."
Tr. 9576 f 8.
84 6.9 This lack of resolve led to problems in many areas.
It led to a failure to correct recurring problems, especially in the Quality Assurance area--HL&P's most impor-tant tool for seeing to it that a quality plant was built.
It led to the abdication of responsibility--or over-dependence on others--in many areas.
It seemed to lead to a tendency to procrastinate in solving problems.
It also led to what appears as an overindulgence of Brown and Root at the cost of quality.
6.10 The most serious area where HL&P displayed its lack of resolve was in its failure to prevent and correct recurring problems.
As the NRC Staff testified, HL&P failed to " routinely correct and prevent the recurrence of identified problems," Tr. 9576 f 7.
The NRC Staf f found examples of this failure to prevent and correct recurring problems in the area of inadequate site staffing, Id. at 36, 37, and in preplace-ment, placement and postplacement of concrete.
Id. at 41.
6.11 The most pervasive recurring problem at STNP was j
in the QA/QC program.
The NRC Staff found that although HL&P was " aware of repeated complaints and allegations of harass-ment, intimidation and lack of support for quality control inspectors," HL&P nevertheless " failed to take ef fective action to identify the root cause for such problems and cor-rect those problems in order to prevent recurrence."
Id. at 40.
One manifestation of this problem was low morale.
i j
1 85 6.12 Low morale of the QA/QC inspectors was a contin-uous problem at STNP.
This problem was called to the atten-tion of HL&P on at least five occasions by NRC investigations.
Tr. 9387; Staff Ex. 9 at 2-3 (August 1978); Tr.
941314; Tr.
9363.
These problems surfaced as early as 1977.
Staff Ex. 4 at 4, Tr. 9369 (more friction between QC and construction than NRC inspector had seen in 30 years).
6.13 Low morale is a serious problem because it can lead to deficiencies in inspections by the QA/QC personnel, Tr. 9424, and it is this inspection system which is relied upon for assuring quality at the plant.
9455, 9457.*
Although some workers did state to NRC inspectors that low morale did not affect their reporting, it was also true that workers were aware that they could be fired for filing falsi-fied inspection reports.
.Tr.
9449..
Furthermore, an inspector admitting to a deliberate failure to report would face a fine, 42 U.S.C.
SS 2273, 2282.
This would make it less likely for workers to report that they had failed to identify deficien-cies.
Nevertheless, there is evidence that inspectors were less than vigorous and found it easier to sign off an inspec-tion than to confront superiors or construction management.
Tr. 9620-23, 6.14 There was a noticeable deterioration in the QA/QC program over a period of time before the November 1979 special investigation brought the problem clearly into the open.
~, - -.
1 86 6.16 While low morale of QA/QC inspectors was a per-sistent problem that revealed itself at the very outset of the STNP project and recurred right up to the time Brown and Root left the site, it was a manifestation of a deeper problem that in itself was never resolved.
The source of problems with QA/QC that led to chronic low morale at STNP was the syste-matic obstruction of quality programs at the project.
The history of the project shows that HL&P was simply unable to demonstrate the resolve necessary to deal with this underlying problem.
6.17 From the beginning, Brown and Root did not have an aggressive QA/QC program.
CCANP Ex. 68 at 5 (numbered 2).
The effectiveness of the program was so limited, an NRC reviewer suggested the "only real solution (s)" were for either HL&P to take over all QA/QC responsibility or B&R to replace all site management and some Houston management in QA/QC.
Id.
/g The B&R attitude toward quality remained unsatisf actory over the life of B&R's involvement in STNP.
6.18 The enforcement history of STNP is well docu-mented in the record.
The NRC presented three panels to test-ify regarding this history and the admitted exhibits contain a large number of I&E reports.
In addition, there are specific exhibits related to the quality problems at STNP, including intimidation of Q A/QC.
See e.g.
CCANP Exs. 16, 17, 19, 20, 54; CEU Exs. 3, 5; Staff Exs. 8, 9,
12, 26, 32, 46, 60, 70, i
95, 111, 112, 114.
87 6.19 HL&P consistently maintained that the enforce-ment history and other information available to HL&P prior to the Order to Show Cause did not suggest any pattern of prob-lems in the QA/QC program.
See e.g.
Tr. 1301 (individ ual breakdowns in implementation), Tr. 1303 (breakdowns were iso-lated instances), Tr. 1355-56 (not continuing clues), Tr. 1463 (no perceived pattern), Tr. 1464 (thread not readily appar-ent), Tr. 1504 f 11 (isolated events), Tr. 5075-76 (aberra-tions).
While HL&P did perceive an increase in the number of noncompliances in 1979, this increase was attributed to a change in NRC procedures and attitudes.
Tr. 5099.
HL&P main-tained that neither the corporation nor the NRC found serious problems in the QA/QC program prior to the Order to Show Cause.
Tr. 1504 f 18.
6.20 The HL&P position stands in stark contrast to the NRC view of this same time period.
First of all the Director of the NRC's Office of Inspection and Enforcement wrote that the " deficiencies in the Brown and Root program were so extensive that they should have been readily detected."
Staff Ex. 46, cover letter at 1.
The allegations of " harass-ment, th reats, and intimidation of B&R QC inspectors by B&R construction personnel.
. were common knowledge through rumors Id.
App. D at 9.
The NRC Staff testified that HL&P had " sufficient information to be aware of the nature of the Brown and Root QA/QC program" and the manner in which that
7 88 program was being implemented.
Tr. 9576 f 35-36, 40.
The NRC Staf f concluded that HL&P " failed to take appropriate correc-tive action" in response to the information HL&P possessed.
Id.
One HL&P QA supervisor even kept a file on allegations he had received from workers at the project.
Tr.
9716.
The NRC termed the allegations " chronic."
Tr. 9205 f 64, Tr. 9506, Tr. 9576 f 40.
6.21 While the HL&P position does stand in marked contrast to the NRC position, for purposes of assessing char-acter the difference is not significant.
Either HL&P was unaware of obvious conditions and, therefore, failed to keep itself informed or HL&P was aware of these conditions and abdicated its responsibility to correct the situation.
In its charge to the ASLB, the Commission said:
"Either abdication of responsibility or abdication of, knowledge could form an independent and sufficient basis for.
. denying a license application on grounds of competence (i.e. technical) l l
or character qualification Tr. 202 at 18.
l l
6.22 The record demonstrates that the NRC did not rely solely on HL&P's perception or resolve, but took af firma-l l
tive steps to alert HL&P to conditions in the QA/QC program.
Cf. Staff Ex. 46, App. 1.
In August 1977, Oprea received an NRC I&E report involving two incidents of threats or assaults l
by construction personnel against QC personnel.
Staff Ex.
4, 1
l Tr. 9205 f 17.
The inspection report alerted Oprea that the
89 two incidents may have resulted from an " inordinate amount of friction" between B&R QC and construction.
Id. at 4.
The level of friction detected by the NRC inspection was greater than he had seen in his 30 years of experience with the AEC/NRC involving 17 or 18 nuclear facilities.
Tr. 9365-9370.
The matter was serious enough for the inspector to investigate whether there was "a directed program of harassment and 'intim-idation of B&R QC inspectors."
Id. at 3.
Despite the inspec-tor's findings and the transmission of those findings to Oprea by the NRC, Oprea saw no need for his " higher level" involve-ment in addressing the QC situation.
Tr. 5075.
6.22.1 The record regarding this particular inves-tigation reveals that the original call to the NRC to report the assault also conveyed allegations that the incident was part of a series of such incidents and that a B&R construction superintendent told his subordinates that QC inspectors writ-ing certain deficiencies were " fair game."
Id. at 2, CCANP Ex. 20 at 1.
The record shows that Charles Singleton is the person who called the NRC.
Tr. 8474.
Singleton was one of the first QC inspectors at STNP, having been assigned to the project in December 1976.
Tr. 8383.
Mr.
Singleton became 1
Civil Discipline QC Superintendent in March 1979, Tr. 6522 f 6,
and remained in that position up to the time he testified in this proceeding in June 1981.
Tr. 6524.
During the special investigation proceeding the Order to Show Cause, Singleton J
90 told NRC inspectors that for construction management quality was a "necessary evil."
Tr. 8460.
Staff Ex. 46, App. 3 at 3-17.
6.22 In August 1978, the NRC once again attempted to alert HL&P to the problems being experienced by inspectors, Staff Ex. 9, Tr. 9387.
The NRC told HL&P that many people were going outside the project to bring their complaints to the NRC.
Tr. 5084.
For HL&P, such acts were clearly undesir-able.-
Cf. 1284-87, 2265-66.
The NRC called HL&P to the meet-ing because the NRC saw a thread of continuity which they wanted to communicate to HL&P.
Tr. 9383, 9387.
By 1978, the NRC had doubts regarding management support for the QA/QC program.
Tr. 9521.
The 1978 meeting was a warning.
Tr.
5084-85.
6.23 In late 1979, still further allegations of lack of support for QC, harassment and intimidation directed at QC, i
and deficiencies in construction led to the special investiga-l i
tion preceding the Order to Show Cause.
Staff Ex. 46, App. D l
at 5.
6.24 Just prior to the special investigation, further i
attempts to intimidate QC inspectors occurred.
The Quality Assurance Manager at the site told inspectors that if they went to the NRC, B&R would find out who had gone.
Staff Ex.
46, App. A at 4, App. D at 12, Id. App. 2 at 2-1, 2-5, 2-7, l
2-9, 2-14, 2-17, 3-24.
While the QA Manager denied he i
91 had the intent to intimidate, Id.,
App. 2 at 2-22, the number of witnesses who received the same impression of his intent makes it highly likely the intent was present when the state-ment was made.
6.25 Even during the special investigation, new incidents occurred.
A lecture by B&R, delivered in the midst of the investigation, on the role of QA/QC only added to the citations contained in the Order to Show Cause.
- See, 8.7.6, infra; Staff Ux. 46, Order to Show Cause at 9-10.
A QC super-visor made remarks to QC inspectors indicating that any QC inspector who talked to the NRC investigators would be fired.
Id.
App. 3 at 3-16.
At this same time, the site QA manager attempted to intimidate two QC inspectors who were attempting to bring an incident of document falsification to management's attention.
Staff Ex. 60.
While the events happened in November 1979, the report to the NRC was not made until May 1980.
The " worst thing of all anybody can do on the site,"
Tr. 2265-66, was in fact done.
HL&P learned of the event in the June 1980 exit interview.
Staff Ex. 60 at 4.
6.25.1 This latter occurrence in the midst of the special investigation is particulary revealing concerning what QC inspectors on this project faced. QC inspector C reported to QC supervisor J that QC inspector D had failed to make an inspection and then instructed C to change his records to show the inspection had been made.
J wrote a nonconformance report
92 on the passed inspection point and on the falsification of records.
J then reported the matter to site QA Manager E.
Ultimately, E deleted the reference in the nonconformance report regarding the falsification and menacingly accused C and another QC inspector, B,
of waging a vendetta against D.
D later admitted the falsification to NRC inspectors.
Seven months after the event, D had not been disciplined despite the fact D was already on probation for improper inspection prac-tices at the time of the falsification.
Site QA Manager E told the NRC he did not consider D's approach to C as an attempt to falsify records but rather as a commendable effort to reveal the passed inspection point.
E further explained that he deleted the reference in the nonconformance report and did not inform HL&P QA of the incident because he considered the matter an internal B&R personnel matter.
QC inspectors B and C requested transfers to another department.
The NRC referred this " internal B&R personnel matter" to the Justice Department for possible prosecution.
Tr. 10010 f 15.
6.26 When the inddinate amount of friction found in 1977 was still present in 1979-80, the NRC responded with the only action adequate to address HL&P's failure to control the activitities of its prime contraccor--an order to Show Cause, a civil penalty, and a mandatory public meeting to answer to the charges.
Tr. 9374-9380.
i
93 6.27 But the issuance of the Order to Show Cause and the supposed recommitment to quality on the part of HL&P and B&R failed to bring an end to intimidation, efforts to obstruct the proper QA/QC process, or other practices detri-mental to quality.
6.27.1 On July 28, 1980, another charge of intimi-dation was made against B&R management by an auditor who feared reprisals.
Staff Ex. 70.
HL&P's response was to call the auditor stubborn.
Id. at 6.
6.27.2 At a meeting on September 25, 1980, the sug-gestion was made to 31 B&R inspectors that they sign off with-out inspecting if they considered the craf tsman reliable.
Staff Ex. 71 at 8.
6.27.3 In mid-1981, a B&R foreman told his employees that he was more interested in quantity than quality and threatened to fire anyone who reported this instruction to the NRC.
Staff Ex. 130 at 5.
The foreman and a subordinate explained that the foreman was working under pressure from his supervisors.
Id. at 6.
6.27.4 A B&R foreman, over a six month period in 198081, intimidated workers he identified as troublemakers because they cooperated with NRC investigationa and reported problems to B&R management.
Staff Ex. 114.
Some of these
" troublemakers" were fired on technicalities.
Id. at 5, 6.
6.27.5 In 1981, a B&R worker charged that a B&R supervisor threatened that anyone who talked about problems
94 with HL&P or B&R upper supervisory personnel would be " hitting the gate," i.e.
fired.
Staff'Ex.
95 at 5.
The worker admitted not telling the truth to HL&P QA inspectors about problems.
Id.
6.28 In fact, the NRC Staf f testified that harassment and intimidation were never really under control despite any efforts HL&P may have made.
Tr. 9414, 9415, 9508, cf.
5421-22.
6.29 Other conditions adverse to quality continued to occur, many repetitions of conditions occurring prior to the Order to Show Cause.
See e.g.
Tr. 10010 f App.
A, App. C at 2,
item 18 et seq.; Staff Ex. 83 (repeated failure to ensure adequate storage and maintenance of equipment), 93 (failure to resolve audit items despite repeated attempts), 94 ( f ailure to test air content of grout for first six concrete placements permitted by NRC af ter Order to Show Cause), 95 (confirmed allegations of quality control inspector error and conspiracy to obstruct NRC investigation), 97 (corrective action inade-quate regarding quality assurance aspects required to assume ASME welding on a production basis).
6.30 Another aspect of HL&p's lack of resolve is the tendency to procrastinate in resolving known problems.
See e.g.
Staff Ex. 83 (numerous items identified earliar not resolved), 119 (corrective measures re auditing staff levels still inadequate), 124 (auditing deficiency unresolved for two years forced to resolution by lower level staff).
95 6.31 Serious lack of resolve also appears in HL&P's tendency to indulge B&R.
6.31.1 HL&P's QA Manager for STNP (F ra zer) yielded to complaints from B&R's QA Manager (Vurpillat) by directing HL&P auditors not to enforce the QA Program Description on the FSAR in their audits as these documents were "just licensing documents."
Staff Ex. 128 at 6.
Frazer went on in his testi-mony to confirm that he felt " auditors should not write audit deficiency reports against these documents in field audits."
Tr.
10123 f 11.
Frazer's instructions to HL&P auditors directly contradicted the practice approved by the NRC, as indicated in the Staff testimony that "it's very ordinary that an auditor.
. will go to the
. QA program description and.
the FSAR" when necessary.
Tr. 10347.
In practice, the NRC Staf f enforces the requirement that auditors should consult these documents, as well as NRC regulations, when needed.
Tr. 9708.
Rather than abandon the QAPD and FSAR in the face of B&R complaints, Frazer should have backed up his auditors in their desire to use the documents in their auditing.
6.31.2 In late 1977, HL&P QA staff expressed con-cern to Oprea about QC morale problems. Tr. 1504 f 13.
Oprea directed Frazer to present those concerns to the B&R QA Manage-ment Review Board ( Q AMRB ), Id. f 14, See App. Ex. 44, rather than waiting until he could deliver the message personally.
Tr.
5224.
The QAMRB is an executive level board of B&R.
Id.
See
96 CEU Ex.
6, Tr. 5267-5268.
Sending a manager to carry such an important message to such an " august body", to use Frazer's description, Tr. 5077 1 21, reduces the seriousness with which the message will be received.
Frazer was not even considered an essential member of the QA management team by Oprea.
Tr.
2232-33.
6.31.3 Similarly, when HL&P had serious concerns about B&R's construction performance, these concerns were expresed in a letter from a technical consultant to HL&P rather than by an executive officer.
CEU Ex.
5, Tr. 5224.
The customary role for a consultant is to "make recommenda-tions," Tr. 5106, to the client, which the client then turns into actions.
The Ferguson letter was not even copied to Oprea.
CEU Ex. 5 at 4.
6.31.4 The Ferguson letter and the Frazer presenta-tion were perhaps the two strongest expressions to B&R of HL&P I
l dissatisfaction.
Both contained implicit threats of firing.
That both messages are delivered by subordinate personnel rather than executive management further reveals HL&P's reluc-tance to show resolve when dealing with B&R.
6.31.5 At one point in the project, HL&P's partners l
saw a need for an independent evaluation of B&R assumptions l
l regarding cost, schedule, and materials.
Tr. 1245-49.
HL&P l
l already knew prior to the management committee suggestion that B&R's assumptions could be very wrong.
Tr. 1228-46.
HL&P t
97 abstained from voting on hiring the consultant to do such an evaluation in order not to offend B&R, Tr. 1250.
6.31.6 Despite the early warning on B&R engineering productivity. HL&P continued to employ B&R until late 1981 as architec t-e ng i'.eer.
Tr. 10403 f.
5-6.
By mid-1981, HL&P's indulgence of B&R had produced a situation in which B&R felt free to refuse HL&P suggestions regarding top management deficiencies.
Tr. 10416-17.
6.32 As early as April 1977 to January 1978, HL&P knew B&R had a poor reputation among utilities for its quality program and that this reputation could af fect recruiting.
Staff Ex. 44, Tr. 5244-45.
This poor reputation for quality was not limited to other utilities.
Even B&R's own employees stated they did not want to be around if Unit 1 was turned on because they believed the plant to be poorly built.
Staff Ex.
114 at 12, Cf. Staff Ex. 46, App. 3 at 3-17 (quality a neces-sary evil to construction management), CCANP Ex. 17 (Logan--
"B&R construction personnel have a poor understanding of the word ' quality'
").
.Yet HL&P kept B&R on the project well after there was ample evidence of serious deficiencies in B&R's quality assurance program and construction work.
HL&P, however, did not remove B&R from construction and QA/QC; B&R quit for reasons entirely unrelated to quality.
Tr. 10421, 10424.
B&R insisted that if it were to stay in construction and QA/QC, HL&P must give B&R immunity from liability arising
98 out of B&R's previous work.
Id.
B&R finally made a demand even HL&P had to refuse.
6.33 Despite all the problems, HL&P never seriously considered removing B&R from its construction and quality assurance roles.
After the Order to Show Cause, in April 1980 up until he testified in June 1981, Oprea never had a discus-sion with anyone regarding removal of B&R from these roles.
Tr. 3472-73.
Turner engaged in one brief theoretical discus-sion of that possibility.
Tr. 5087-89.
No better example of absent resolve could be found than the absence of any serious consideration of the one " root cause" approach most likely to eliminate the problems plaguing'STNP.
7.0 Integrity 7.1 If the NRC grants an operating license, the NRC is placing its trust, on behalf of 'the people, in the license.
This trust is an expectation that the licensee will perform to the highest standards of excellence.
For the licensee to do less, and particularly for the licensee to permit conditions adverse to safe operation to develop, would violate this trust.
There is no need to recapitulate the many examples already provided where HL&P has failed to meet the test of excellence and consistently failed to prevent conditions adverse to quality. HL&P clearly has not demonstrated itself worthy of the public trust.
99 7.2 If the NRC grants an operating license, the NRC is depending on the licensee to accurately represent operating conditions at all times.
When problems arise, the licensee must be capable of rapidly analyzing the problem, the sources of the problem, and the solution to the problem.
Where the problem is detrimental to safe operation, the NRC must be pre-cisely informed in order to have confidence in the licensee's remedial measures, both short term and long term.
- Again, there is no need to recapitulate the record to conclude that HL&P cannot be relied upon to even recognize a problem, let alone solve a problem.
It is worth noting that in the fifteen months following the Crder to Show Cause, NRC " inspectors spent approximately 1400 hours0.0162 days <br />0.389 hours <br />0.00231 weeks <br />5.327e-4 months <br /> following up on the implementa-tion" of commitments made by HL&P in response to the Order.
Staff Ex. 128 at 2.
The NRC does not have the resources to compensate for major inabilities on the part of licensees.
The NRC does not have the resources to compensate for major inabilities on the part of licensees.
The NRC, and the public, demand independent, self motivated licensees, not licensees who end up as wards of the state.
7.3 Perhaps the most important quality of integrity is honesty.
Honesty depends on accurate perceptions and guileless representations.
From the evidence set forth in 5.0 above, the record is clear that it is at best difficult and at worst impossible for HL&P to accurately perceive the truth.
100 Regarding the nature of HL&P's representations, there is additional evidence which can be examined.
7.3.1 The Order to Show Cause required HL&P to hire an " independent management consultant" to review HL&P's man-agement of the QA programs "to determine whether the manage-ment of the program is adequate to exercise full control over all aspects of the South Texas Project."
Staff Ex. 46, Order to Show Cause at 12.
The Commission ordered this review in response to the "past record and the importance of quality assurance during construction of a nuclear power plant Id. at 11.
The Commission had concluded that STP QA manage-ment did not " fully recognize the requirement of QA/QC organi-zational freedom" Id. at 9.
The task of the consultant included studying five possible alternatives for conducting QA/QC.
Id. at 13.
The five alternatives were the minimum to be considered; no other options were foreclosed.
Id.
7.3.2 Oprea stated that HL&P's review of the alter-natives found no others offering significant advantages over the five in the Order to Show Cause.
Tr. 1504 f 32.
In fact, a sixth interim alternative, proposed by the consultant and identified in the consultant's report as Option f, was evalu-ated and included in the report Oprea testified about.
Staff Ex. 48, Ex. 1 at 25 and Attachment A at A-14.
This sixth alternative did have significant advantages, Id.,
and was in part adopted.
Tr. 1786, Furthermore, the consultant was f amiliar with at least one other alternative having significant
t ' '.
101 advantages--third party inspection of selected activities.
Tr. 1681.
He was also aware of at least three other options worth considering--the client doing QA while the contractor does QC, Tr. 1681-81, the client's personnel supervising con-tractor QA personnel, Tr. 1684, and an independent QA organi-zation.
TR. 1547.
All four of these options appear reason-able and offered potential advantages, if the STNP QA/QC organization as of April 1980 was to be restructured.
7.3.3 HL&P gave Bechtel Power Corporation (Bechtel) the responsibility for carrying out the evaluation of alterna-tives.
Tr. 1504 f 31.
Bechtel picked Mr. John M.
- Amaral, Bechtel Corporate Quality Assurance Manager, to supervise the study.
Tr. 1504 f 119.
Bechtel satisfied the NRC criteria of independence because Bechtel, at the time, was not involved with STNP.
Tr. 2095, 2250.
But HL&P restricted Bechtel's independence by limiting their task "to giving consideration to alternative organizational responsibilities for control of the Project QA activities within the scope of the Contract with Brown and Root."
(emphasis added)
Tr. 1504 at 31.
While Oprea stated Item 1 of the Order to Show Cause required this restriction, Id.,
no such restriction was either express-ed or envisioned in the Order to Show Cause.
Staff Ex.
46, Order to Show Cause at 12-14.
In fact, had the Commission intended such a restriction, it would not have suggested Options b, c, or d, Id. at 13, because these options clearly
1.
102 require a change in B&R's responsibilities in turn requiring a change in the scope of their contract.
See e.g.
Staff Ex. 48, Ex.
1, Attachment A at A-5, item 3.
The scope of BER's QA contract, in oprea's view, was all QA for design, engineering, and construction with HL&P retaining " ultimate responsibility for the program and changes thereto."
Tr. 1504 f 5-6.
7.3.4 This HL&P restriction of Bechtel's evaluation translated into eliminating any option which required a reduc-tion in brown and Root's responsibility for quality assurance.
Tr. 2263, Staff Ex. 48, Attachment 1 at (1-6), Criterion 2.
In the Bechtel report, NRC options b, c, d and HL&P/Bechtel option f all reduce or remove B&R responsibility for quality assurance.
Staff Ex. 48, Ex.
1, Attachment A at A-4, A-7, A-10, and A-15.
These options were, there f ore, eliminated before Bechtel even began their study.
Bechtel responded within days with a recommendation.
Tr. 2112.
Then HL&P and Bechtel developed criteria to justify the choice.
Tr. 2260.
7.3.5 HL&P did not inform the NRC of the options eliminated prior to the Bechtel study but, instead, told the NRC Bechtel was requested to " perform a review of the various organizational alternatives as set forth in the Order."
Staff Ex. 48, Attachment 1 at 1-5.
7.3.6 While representing that the NRC options were evaluated, Staf f Ex. 48, Ex. 1 at 25 (submitted under oath by oprea, Id.
at 16), HL&P/Bechtel did not in fact study all
103 options as ordered by the Commission.
Option e suggested duplication of QA/QC by HL&P "in whole or in part."
Staff Ex.
46, OSC at 13.
But partial duplication in the context of this option was not considered or discussed.
Tr. 1504 f 125, Tr.
2162-63.
Distorted as only complete duplication, Option e was found to be impractical.
Tr. 1931, 1965, 2006.
Option d sug-gested HL&P establish an independent QA/QC organization to conduct "the current B&R QA/QC functions."
(emphasis added)
Staf f Ex. 46, Order to Show Cause at 13.
Yet this option was construed to mean the third party would perform the current QA/QC functions of both HL&P and B&R.
Tr.
1504 f 125, Tr.
1605-06, 1608.
The Applicant findings recognize the actual Commission directive on option e.
App. F0F 84 1 8-9 at 83.
7.3.7 With Options b, c, and d eliminated by prior condition, See 7.3.4, and e eliminated by distortion, the only remaining option was a, the organizational arrangement which did not work.
Staff Ex. 48, Ex.
1, Attachment A at A-1, item 1.
In fact, the criticism of this option as creating an illu-sion could be applied to the entire " study."
Id.
7.3.8 The reason given for eliminating options reducing B&R's responsibility for quality assurance was that the construction orgarnization's commitment to quality work might be impaired.
Staff Ex. 46, Attachment 1 at 1-6.
The proposition was that a construction organization answerable to either utility or third party inspection would be less likely J
104 to do quality work than the same organization answerable to inspection by employees of the same company.
Id.
This propo-sition was not based on any sociological studies of the work place.
Tr. 2115.
The arguments given to explain the proposi-tion and its supposed results were so lacking in reason that HL&P/Bechtel witnesses had great difficulty explaining and justifying their position.
See e.g.
Tr. 1619-32, 1637-72, 1907-11, 2014-31, 2034-38, 2114-19, 2152-55.
The analysis ultimately rested not on reason but on claims of authority, Tr. 1632 1 23-24, which had no foundation in expertise.
Tr.
1675-79.
Amaral even observed that it is difficult to serve a master interested in getting the job done perhaps not in accordance with how the inspector would like to see it done.
Tr. 1698, Cf. Tr. 8417.
Even the words used to make the argu-ments had trouble keeping their meaning.
See e.g. Tr. 1504 f 122
(" doers" both do and control), 1696 1 21 - 1679.
7.3.9 In fact, the history of this project has been that having construction and QA/QC in the same company reduced the company's commitment to quality because the company could exert pressure on the inspectors.
The company management improperly placed cost and schedule responsibilities on QA/QC personnel and encouraged construction personnel to challenge QC inspectors.
Staff Ex. 46, order to Show Cause at 9-10 and
. at 3, 4,
5, 7, 9.
A highly qualified quality assurance manager was f rustrated in his ef forts to implement
105 en effective quality assurance program inside the construction company.
Tr. 1595-96.
Construction personnel felt free to intimidate and harass the inspectors rather than dedicating themselves completely to quality work.
Staff Ex. 46, Order to Show Cause at 9.
7.3.10 The use of Criterion 2 to eliminate options ruled out the selection of options which would have given QA/QC more independence from the types of pressures set out in 7.3.9.
Staff Ex. 48, Ex. 1, Attachment A at A-7 and A-10, Tr.
1778.
Independence of QA/QC from cost and schedule pressures was. precisely the guiding principle of Criterion 4.
Id., at (1-7).
Amaral ranked Criterion 4 as being higher than or equivalent to Criterion 2 in importance, Tr.
2287.
Obviously this criterion was of most importance to the Commission.
See 7.3.1.
But Bechtel did not look into intimi-dation and harassment, Tr. 1744.
Nor did Bechtel do any more to systematically assess QA/QC independence than looking at the organizational structure.
Tr. 1816-19.
Amaral actually testified that the method of insuring QA/QC independence was to have QA/QC report to someone other than construction.
Tr.
2059, 2072-73.
Once the organizational chart showed QA/QC not reporting to construction, independence was assured and the criteria satisfied.
7.3.11 But none of the options suggested by the Order to Show Cause suggested QA/QC report to construction.
Staff Ex.
106 46, Order to Show Cause at 13.
Nor did HL&P consider such an alternataive. Tr. 1504 f 3'.
Criterion 4 is little more than a restatement of 10 C.F.R. Part 50, App.
B, Criterion I which requires QA/QC independence from cost and schedule.
By reduc-ing this requirement to the " don't report to construction" level of simplicity, HL&P/Bechtel avoid a true assessment of how such independence could be achieved at this project given its history.
The independence criterion ends up being satis-ficd by all the options.
This HL&P/Bechtel formulation merely serves to mask the fact that a precondition on the study oper-ating through Criterion 2 had predetermined the outcome of the study.
7.3.12 Maximum independence for QA/QC from B&R cost and schedule pressures would be achieved by removing QA/QC from B&R, a fact which HL&P recognized, Tr. 2135-2138.
Amaral claimed such independence would lead to a "sub-rosa" organiza-tion to make sure the work was right before the outside inspector arrived and that the existence of such an organiza-tion was reason not to create an independent QA/QC.
Staff Ex.
48 Ex.
1, Attachment A at A-8.
Once again the rationale pro-vided by the study ignores the history of a project where more inspection by construction prior to inspection by QC would have been beneficial.
See Staff Ex. 8 at 4, item 8; Staff Ex.
2 at 2.
Anything which encouraged construction to inspect its own work would have been beneficial to this project.
The only
107 negative result, assuming later QA/QC inspection, Amaral can articulate is the informal inspector having construction rip out something which was done right.
Tr. 1654.
Obviously, the
.mpact of such an event is on cost, not quality.
Id.
The cause would "a management permitting such an organization to develop and would, there fore, reflect on the character of man-agement in not being able to foresee and prevent something Amaral says is guaranteed to happen.
Tr. 1667.
If such an organization was bound to develop, the solution is to formal-
)
ize that organization without giving it QA/QC responsibil-ities, much like the current HL&P Engineering Assurance organ-ization.
Tr. 10471-72.
I 7.3.13 The hidden agenda behind the HL&P/Bechtel study produced numerous contradictions in the study and relat-ed testimony.
At one point, Amaral states that quality assur-anca has nothing to do with cost and schedule.
Tr. 1733.
Yet other testimony by Amaral presented cost as one factor to be weighed.
Tr. 1735, 2141-42.
The study itself clearly includ-ed cost and schedule.
Staff Ex. 48, Ex.
1, Attachment A at A-8, item 3; A-11, item 4; A-14, item 4; A-15, item 1; A-16, item 5.
Elimination of cost considerations supposedly would have changed the balance of pros and cons, ignoring for the l
moment the prior restriction on the study, Tr. 1738-39.
The Commission was particularly concerned with Q A/QC organization-l al freedom from cost and schedule pressures.
See 7.3.1.
HL&P
108 wanted to keep the same organizational structure.
See 7.3.3.
Bechtel used cost and schedule to justify HL&P's desired selection.
7.3.14 For the ASLB, Amaral actually went through ranking the five criteria for selection of an option.
Tr.
2287.
Of highest importance was " owner control and visibil-ity."
Examining the pros and cons of each option shows that every option other than the one chosen gave greater control and visibility or involvement to the owner.
Staff Ex.
48, Ex.
1, Attachment A at A-3, A-6,
A-10, and A-12.
7.3.15 The Bechtel report itself was written after the decision to keep the current organizational structure had already been made.
Tr. 2293.
7.3.16 Throughout the report and throughout the hearing, the choice of Option a is continually portrayed as a product of deliberation and study with the guiding criteria all weighed in making a decision.
See e.g. Staff Ex. 48, at 1-5; Tr. 1782, 1911-12, 1930-31, 2039, 2182, 2261.
The contradiction between what was done in the " study" and what was represented as having been done raises a serious question as to the integrity of the licensee.
7.3.17 In the Notice of Violation, item A-19 docu-ments.the failure of B&R to properly perform audits.
Staff Ex. 46, Appendix A, at 17.
The Order to Show Cause, item V. A.
(9) ordered HL&P to develop and implement an approved audit
1 109 system.
Id.,
Order to Show Cause at 17.
On May 23, 1980, HL&P filed its response to the Notice of Violation including a response to item A-19.
Staff Ex. 47 a't 61.
The response l
noted corrective actions to be taken and committed to achiev-ing these corrective actions by July 23, 1980.
Id. at 61-62.
On July 28, 1980, HL&P filed a response to the Order to Show Cause including a response to item V.A.
(9) on audits.
Staff l
Ex. 48, Attachment 1 at 9-1.
In its response, HL&P represent-l l
ed to the Commission that o&R had "substantially revised and l
l improved their audit system," Id. at 9-2, that B&R had increased the number of audit personnel, Id. at 9-3, that B&R would increase their site audit staff, Id.,
and that the required improvements had largely been accomplished including an expanding B&R audit staff.
Id. at 9-5.
But in late July, the Resident Reactor Inspector (RRI) found that the July 23 deadline commitment had not been met and that the statements by HL&P on July 23 were in fact not true.
Staff Ex. 64 at 4.
B&R had not hired additional auditors and most, if not all, of the B&R civil auditors with'a2 :e experience had quit.
Id.
The July 28 HL&P resporSc y&r
'iled under oath by Oprea.
Staff Ex. 48 at 16.
In response to the RRI's observations, Oprea had no comment.
App. Ex. 13.
He made no attempt to correct his prior sworn representation to the Commission.
As late as March 1981, the May 1980 statement by cprea was not correct and had never been correct.
Staff Ex. 119 at 4.
110 l
7.3.18 In his prepared testimony, Jordan stated he assigned Oprea to " essentially full time service" on STP "as part of our response to the NRC's Order."
Tr. 1223 f 7.
When asked during the hearing if he had in fact assigned Oprea to STP full time as a result of the Order to Show Cause, Jordan replied he had not.
Tr. 1341 1.
4 to 1342 1.
17.
Later he again changed his testimony to say changing Oprea's position was indeed done to squarely face the underlying causes which produced to Order to Show Cause.
Tr.
1384.
In their findings under "HL&P's Response to the Show Cause Order," p.
79 et seq., HL&P says Jordan did assign Oprea full time to STP as part of that response.
App f of 88 at 88.
7.3.19.
In testifying that the Order to Show Cause 1
l limited the exploration of options to those options within the scope of B&R's contract, 73.3, Oprea was either deliberately misconstruing the Order or was tailor making his own reality.
In distorting Option e and rewording Option d, HL&P was either deliberately making these options impractical or demonstrating an inability to read simple instructions.
In offering non-sense rationales which ignored the realities of this project, HL&P was either trying to fool the Commission or itself.
In portraying the choice of Option a as a product of deliberation, study, and weighing all the options by applying all five cri-teria, HL&P was either creating a smokescreen to prevent the ASLB from seeing the truth or deluding itself.
In f ailing to
111 correct its misrepresentations to the Commission, HL&P either hoped that the Commission would overlook the false, sworn statement or that having discovered the misrepresentation, the Commission would take no action.
The weight of the evidence points to a deliberate attempt to deceive the Commission.
In the alternative, HL&P is incapable of perceiving reality accurately.
In either case, these events alone are disqualifying.
8.0 Values 8.1 The greatest challenge for an NRC license holder is to internalize the values represented by the Atomic Energy Act and the policies, rules, regulations, and license provi-sions of the NRC.
For most* corporations, a concern for public health and safety must be part of their daily process.
But for a nuclear license holder, this concern is elevated to an absolute mandate, taking precedence over all other concerns, such as costs, schedules, and profits. See e.g.
Tr.
- 9452, 9726.
This concern for public health and safety translates into placing the highest priority on the quality of work per-formed.
Such quality is achieved through careful planning, highly qualified personnel, clear understanding, and direct management involvement on a daily basis.
8.2 The failure to meet the challenge of internaliz-ing quality as the absolute priority produces mixed signals
112 from top management to subordinates, selection of less than totally qualified personnel, confusion, and inadequate man-agement control.
Such a failure has potentially disastrous ef fects in the nuclear context.
An unambiguous commitment to quality must be demonstrated by an NRC license or license applicant.
8.3 The accident at Three Mile Island enhanced the importance of the existing NRC quality mandate.
An accident which shocked the nation and destroyed a reactor made the most forceful statement to date of the need for licensees to demon-strate the highest standards of excellence in nuclear plant construction and operation.
8.4 As noted above in 1.30, regulation of nuclear power is almost exclusively a federal matter.
The federal agency charged with assuring quality is the NRC.
The quality mandate is embodied in NRC rules and regulations, primarily 10 C.F.R. Part 50, Appendix B.
The primary reliance is placed on the licensee's quality assurance program.
This program is the l
only regulatory scheme to verify and document that the work done is done properly.
The work done by Q A/QC personnel and the documentation of that work is the proof that all safety-l related work has been done according to approved designs, l
l specifications, and procedures.
Absent an aggressive and thorough Q A/QC program, there is no means of assuring that the l
113 quality of work meets the standards of excellence required.
This program is designed to prevent problems or catch problems when they occur and before they become integrated into the structure beyond detection.
Public concern for health and safety was first embodied in the Atomic Energy Act by Con-gress, then codified by the NRC, and finally given specific form in the QA/QC programs of individual licensees.
The licensee's values are, there f ore, measured in part by the level of compliance with Appendix B as shown in the implemen-tation of the QA/QC program.
8.5 One manifestation of a licensee's failure to internalize the quality mandate is a tendency to treat the QA/QC program as having importance only because the NRC says it does.
Rather than embracing the goal of quality, this goal gets reduced to satisfying the NRC..
In the Applicant's Findings of Fact, there is the following statement:
"The ultimate responsibility that every licensee must retain and cannot delegate is the responsibility to answer to the NRC when it is found that the licensed activities are being conducted in violation of NRC requirements."
App. FOF 354 at 315.
Such a statement is an excellent example of HL&P's failure to put itself in the place of a concerned public.
The ulti-mate responsibility of every licensee is to protect public health and safety by assuring that no condition adverse to s
114 safety arises.
That responsibility is manifested by the licensee always performing in a manner demonstrating the high-est character and deepest commitment.
As discussed above in 2.20 - 2.22, " answering" to the NRC af ter being found in vio-lation of NRC requirements reveals little, if anything, about the licensee's character.
The real test of character is whether the licensee values quality so highly that any defi-ciency becomes a matter of concern, whether the NRC finds it or even recognizes it.
For example, under the " ultimate responsibility" formulation provided by the Applicant, a licensee who thought that an existing design requirement might be inadequate would have no responsibility to investigate the potential inadequacy as long as the NRC had previously approved the existing design requirement.
By merely follow-ing the approved requirement, the licensee would remain in compliance, not have to " answer" to the NRC, and have met its
" ultimate" responsibility.
But minimal compliance is not good enough.
The most important attitude of an NRC licensee is one of constant questioning and skepticism; a licensee must at all times be willing to challenge even the NRC's most fundamental assumptions.
Otherwise, the licensee risks being lulled into a false sense of complacency because someone else has approved a given course of action.
With a nuclear reactor, such complacency can lead to disaster.
115 8.6 An examination of HL&P's performance reveals an absence of the values critical to the character necessary for receiving an NRC license.
8.6.1 HL&P was aware of the accident at Three Mile Island, but for HL&P the accident only meant the NRC might become more vigorous in its enforcement activities.
Tr.
1504 f 18.
The expectation of heightened NRC scrutiny led HL&P, for the first time, to give serious consideration to hiring a consultant to evaluate the QA program at STNP.
Tr. 883, 2222, 2251.
Even then, six months passed with no decision to hire the consultant.
Tr. 2221.
The decision was made only af ter the NRC began revealing the problems in the QA program found by the NRC's special investigation.
Tr. 1504 f 18-19.
The gap between the seriousness of the Three Mile Island accident and the lack of any concrete response to that accident by HL&P is a measure of the gap between a truly concerned and commit-ted applicant and the applicant in this proceeding.
When a trend of more noncompliance findings by NRC developed in early 1979, HL&P used the effect on the NRC of the accident as an explanation to avoid recognizing a significant deterioration in HL&P's own program.
Tr. 1504 f 18.
8.6.2 As far as HL&?'s QA/QC program being imple-mented in accordance with Appendix B, the Order to Show Cause provides an unequivocal condemnation of that implementation.
116
"[T]he results of the investigation establish that the QA/QC program at the South Texas Project is deficient and does not meet the standards required to assure the STP will be constructed to NRC requirements."
Staff Ex. 46, Order to Show Cause at 9.
Both the past history of STNP and the special investigations findings reflected " widespread noncompliance by the licensee...with 10 CFR Part 50, Appendix B of the Commis-sion's regulations."
Id. at 11.
8.6.3 Even af ter the Order to Show Cause, HL&P failed to act independently and forcefully to assure quality.
In their Systematic Assessment of Licensee Performance for the period July 1, 1980 through June 30, 1981, the NRC found HL&P's performance to have "a combination of attributes which demonstrates achievement of only minimally satisfactory safety performance." Staff Ex. 133.
This same assessment found HL&P's management attention or involvement to be only
" acceptable," as opposed to " evident" or " aggressive."
Id.
HL&P's management attention or involvement showed HL&P
" considers nuclear safety," as opposed to " concerned with nuclear safety" or " aggressive and oriented toward nuclear safety."
Id.
The NRC found " weaknesses are evident" in HL&P's management.
Id.
HL&P's resources appeared to be
" strained or not ef fectively used," as opposed to " adequate and reasonably effective" or " ample and effectively used." Id-HL&P's " minimally satisf actory safety performance" e
'+
i 117 i
contrasted with " satisfactory performance" or "a high level of performance."
Id.
If an NRC licensee is performing at only minimal levels, there is no assurance that an adequate margin
.of safety exists; the risk of accident or unsafe construction is significantly increased.
i 8.7 From the record, the conclusion is inescapable that HL&P did not internalize the quality mandate but instead viewed quality assurance as a lesser activity and the NRC as a regulator to be placated while a power plant was built.
8.7.1 Prior to being asked to respond to the Order to Show Cause option, Bechtel contracted with HL&P to do a
" top to bottom" evaluation of the HL&P QA program.
Tr. 1504 f 23.
In this instance, HL&P apparently placed no restrictions on the scope of Bechtel's assignment.
Again the Bechtel con-sultant was Amaral.
Id.
After completing the Bechtel review, Amaral felt it necessary to put in his final report the following statement:
i "No amount of corrective action to the individual findings will have a lasting effect unless HL&P management adopts and promulgates a ' quality first' philosophy with only the safety of the work force having a higher priority."
Staff Ex. 48, Ex. 1 at 6, Tr. 1752-54.
Even while deferring to HL&P directives on selecting QA/QC organizational options, Amaral could not avoid stating that an argument against Option a was that:
s 118
" Maintaining the present organizational structure will not attack a primary weakness or root cause of the STP dif ficulties, i.e. attitudes toward quality by Management and the heads of departments."
Staff Ex. 48, Ex. 1 at 6, Tr. 1752-54.
By " Management," Amaral meant from executive management on down.
Tr. 1591-92.
Amaral found the absence of an internal-ized quality motivation so serious that only. an evangelical teacher of quality motivation could provide a solution.
Tr.
1706.
While other teachers of quality assurance were availa-ble, they lacked the evangelical characteristic Amaral per-ceived HL&P needed.
Tr. 1709-10.
The need was to convert, not to educate.
The absence of quality motivation was so widespread, Amaral recommended that all STNP managers receive the evangelical indoctrination.
Tr.
1504 f 124, item b.
Such a system-wide program would be the first in Amaral's experience.
Tr. 1713.
Amaral's recommendation stemmed from his recognition that low quality nuclear reactors are unacceptable.
Tr. 1718.
8.7.2 The " root cause" Amaral pointed to traces l
right to the top of the HL&P management structure.
The com-1 mitment to quality of HL&P President Jordan is questionable.
Prior to 1980, Jordan had not attended any seminars on the philosophy of quality assurance or had any technical training in the quality assurance discipline.
Tr. 1281.
The first formal training Jordan received resulted from his encountering
119 a quality assurance consultant while working with a B&R offi-cial after the Order to Show Cause.
Tr. 1279.
Thus, this course did not result from Jordan deliberately seeking out such training.
Apparently, it also did not result from Mr.
Oprea conveying Amaral's suggestion that the course be taken.
Tr. 1706.
Such training was widely available to Jordan. Tr.
1709-10, 1842.
The " Quality College" program Jordan took con-sisted of one long day.
Tr. 1345.
He did not participate in the more intensive and extensive training offered.
Id.,
1707-08.
Up until the May 1981 day he testified, this one full day was Jordan's only formal training in quality assurance.
The evangelical approach apparently could not achieve its purpose in one day because Jordan testified that his perception of quality changed only a little bit and his philosophy of qual-ity not at all between 1974 and 198.1.
Tr.
1278-79.
After his company received an NRC fine of $100,000 and an NRC threat to shut down construction of potentially the company's largest generating unit, Jordan saw no need to gain an in depth understanding of the concepts providing the basis for the NRC actions.
8.7.3 In early 1979, HL&P recruited a highly quali-fied technical consultant to evaluate the STNP construction l
program and to make recommendations for improvements in the area of cost and schedule.
Tr. 5105-06, cf. CEU Ex.
5.
HL&P l
hoped the consultant would remain to oversee the HL&P nuclear
o'.
120 program.
Tr. 5106.
In early 1980, the consultant left to work elsewhere.
Tr. 5107.
HL&P then hired a placement firm to recruit someone for the job the consultant declined.
Tr.
1324.
The outside firm did the major work in identifying potential candidates with HL&P then reviewing a small number and interviewing still fewer.
Id.
In October 1980, NL&P picked their new vice president, Jerome Goldberg.
Tr. 860.
The search did not look for a person particularly expert in quality assurance.
TJ. 1453.
The new vice president was not responsible for overseeing the quality assurance program.
Tr.
1301.
Nor was he brought in to respond to problems in HL&P's QA department.
Tr. 1075.
His responsibilities were to manage design and construction, Tr. 1504 f 43, particularly cost and schedule issues.
Tr. 945, 1084.
The record contains a very different history regarding the recruitment of a highly qual-ified person to serve in an executive capacity overseeing the QA program.
For the nuclear QA program, Frazer is the equiva-lent of Goldberg.
He retained his top QA position from 1975 until mid-1981.
Tr. 906 f 15, 5063.
Frazer's position was that of a manager, not an executive officer.
While conducting a nationwide search to find Goldbert, HL&P never even consid-cred replacing Frazer even af ter the Order to Show Cause, Tr.
1275, 1445.
After the Order to Show Cause, Frazer was sent to the site.
Tr. 906 f 16.
As of May 1981, HL&P was recruiting a qualified, experienced person to replace Frazer.
Tr. 1504 f l
. s 121 42.
During the time Frazer was on the site after the Order to Show Cause, HL&P provided an assistant to aid Frazer in his work and compensate for Frazer's lack of experience.
Tr. 1907.
The person HL&P brought in, however, had no QA experience in construction of nuclear power plants.
Tr. 2063.
While HL&P actively sought to strengthen the cost and schedule aspect of their management, there was little, if anything, done in the same period to strengthen the quality assurance aspect.
8.7.4 The differential treatment given cost and schedule, as opposed to quality assurance, is also reflected in HL&P executive management's treatment of Frazer.
When Oprea meets with Bechtel to discuss the evaluation of the quality assurance program, Frazer was not present, Tr. 1555, because the audit was called by " management" and there was no need for him to be present.
Tr. 2232-33.
While Jordan met regularly with Goldbert, he met less frequently with Frazer because Frazer was "not an officer of the company."
Tr. 1275.
In fact, Jordan met daily with Goldberg and only weekly with Frazer.
Id.
The positions of t 1 two subordinates and the time spent with each are a measure of Jordan's " quality first" attitude--a measure which only reinforces the conclusion that such an attitude is not present at the highest management levels of HL&P.
8.7.5 While Jordan is aware that, af ter the Order to Show Cause, HL&P asked B&R to remove people in the construction
122 area, he does not know if a similar request was made in the QA/QC area. Tr. 1401.
8.7.6 During the NRC special investigation preceding the Order to Show Cause, HL&P personnel, including Oprea and Frazer, met with Karl Seyfrit, Director of Region IV, NRC on December 28, 1979.
Tr. 1504 f 20.
As a re1 ult of that meet-ing, Oprea sent a letter to Seyfrit containing a nine point program to respond to the conditions found by the NRC.
App.
Ex. 1.
The first point in this program was a commitment that B&R would hold a seminar "to review with both Construction and QC personnel the fundamental philosophies and standards of STP QA program."
Id.
One purpose of this seminar was to emphasize the respective roles of construction and QC in assuring produc-tion of a plant which could be safely operated.
Id.
The semi-nar was held on January 4,.1980, in the presence of an NRC inspector.
App. Ex.
2.
In March 1980, the NRC conducted a special investigation regarding implementation of the nine point program.
Staff Ex. 52.
In the course of that investiga-tion, the NRC reviewed the presentations made at the January I
seminar.
Id. at 4.
The investigation found the presentation on the role of QC personnel overly emphasized QC responsibili-ties for cost and schedule and attempted to impress on the con-struction and QC personnel that QC did not have the final word l
on acceptability or unacceptability.
Id.
The NRC concluded l
the latter emphasis would lead to diluted QC authority, L
123 cause indecision, allow confrontations, and result in poor quality work.
Id.
See also Tr. 9576 f 42-43.
Subsequently, the NRC cited this lecture as further proof that QA/QC did not have organizational freedom, that management held QA/QC responsible for minimizing cost and maintaining construction schedules, and that construction was being encouraged to chal-lenge QA/QC decisions.
Staff Ex. 46, App. D at 10.
The NRC ordered the videotape of the lecture destroyed or revised and the brochure, Id., App.
5, which was part of the seminar, rescinded.
Id., Order to Show Cause at 15-16.
The NRC also ordered a new brochure prepared which would " reflect the fun-damental philosophies of 10 CFR Part 50, Appendix B" and new seminars conducted on those philosophies "with emphasis on the roles played by the respective personnel and the underlying purpose of the Program."
Id. at 16.
The NRC, thus, ordered HL&P to do what HL&P had promised was being done.
App. Ex.
1.
Prior to the January seminar, Oprea was not familiar with either the planned contents or the actual contents of the lecture.
Tr. 5234.
HL&P, however, did plan to use the video tape "in the future as part of the new employoo Indoctrination Program and the Supervisors Training Program."
App. Ex.
2.
Dr. Knox Broom, Senior Vice President of Brown and Root, had reviewed the brochure prior to the seminar and may have written parts of it.
Tr. 3646 f 39, 4023.
Dr. Broom had no objections to the brochure's content.
Tr. 4024.
In fact,
124 Dr. Broom saw the subsequent problems over the brochure as not the actual content but rather the NRC perception of the con-tent.
Tr. 3646 f 39-40.
Had the NRC not objected to the bro.-
chure, new employees and supervisors would have been told:
I "The Q A/QC organization... shares another Brown and Root team responsibility of completing the project on schedule within the projected cost estimate."
Staff Ex. 46, App. 5 at 3.
" Time of completion is of great importance to the owners [HL&P]..." Id.
"Q A/QC DECISIONS CAN BE CHALLENGED. "
Id. at 5.
"There is no room here for a QA/QC man who lacks confidence in the management or in his fellow workers on the Brown and Root team."
Id. at 7-8.
An Amaral observation not specifically addressed to the management through intimidation approach by Brown and Root is still appropriates j
"The result of such a situation is for the better, more competent, and conscientious people to quit and take their skills elsewhere."
Staff Ex. 48, Ex. 1 at A-5.
Cf. Staff Ex. 46, App.
D, at 8 6, item (2).
4
o '.
o III.
FINDINGS ON THE ISSUES 9.0 Issue A 9.1 This' issue, fully set out in Appendix A at A-1, launches the ASLB into unchartered waters.
See 1.46 supra.
The decision to be made is whether HL&P's performance, as documented in the record of this proceeding, provides an independent and suf ficient basis to deny the operating license on the grounds that HL&P lacks the necessary character and technical competence to receive such a license.
9.2 While the Applicants, in their findings of fact, have effered various NRC decisions and opinions as guides to making the decision in this proceedings, App. F0F at 295-298, these guides are not that helpful.
Never before has an ASLB been specifically charged with making a finding on character.
Decisions which are based on various dif ferent events do not provide good precedent when all those events are combined and multiplied in one proceeding.
9.3 Having framed the issue in this proceeding in 2.7 through 2.15 above, the ASLB must find the answer in the record of this proceeding.
HL&P has fallen far below the standards set by the NRC.
See e.g.
47 Fed. Reg. 9984, col.
3.
HL&P's performance is so far below that standard that HL&P should be embarrassed this application has not been withdrawn.
But HL&P has not seen fit to withdraw the application, so the 125
126 answer must be found.
Unquestionably and without equivoca-tion, the ASLB must find that the answer to Issue A is "Yes."
9.4 In one sense, this decision is difficult to make because HL&P has invested so much of its time, effort, and resources toward securing this license.
But the Power Reactor case makes clear that this investment was made at HL&P's risk and creates no advantage or entitlement where the operating license decision is concerned.
Power Reactor Development Co.
v.
Electricians, 367 U.S. 396 (1961).
9.5 In another sense, this decision is easily made because the record contains overwhelming evidence that HL&P has shown itself not to possess the necessary character or technical competence to be considered for an operating license.
10.0 Issue B 10.0 This issue, fully set out in Appendix B at A-1, raisos the question whether HL&P has taken suf ficient remedial steps to provide the ASLB with assurance as to HL&P's charac-ter and technical competence.
In their charge to the ASLB, the Commission did not request the ASLB to consider this issue.
To the contrary, the Commission raised the question whether the past record of HL&P formed "an independent and suf ficient basis" for denying the licenso application.
Tr.
202 f at 18.
The ASLB, however, believed the Commission
127 expected the Board to take evidence on remedial measures and, therefore, accepted Issue B in this proceeding.
Tr. 298-99.
10.2 Having fulfilled the perceived expectation of the Commission, the ASLB still must address the " independent and sufficient" charge from the Commission.
Taken on their face, these words suggest there is a point at which the acts and omissions of an applicant are dispositive, that is the acts and omissions are so unacceptable, the Commission will not even entertain an application from such an applicant.
The finding on Issue A can hardly be overstated.
The record of i
HL&P's acts and omissions is offensive to any concept of a character standard the Atomic Energy Act could have envi-sioned.
Despite all the signals, over a period of many years, that neither the quality assurance program nor the construc-tion program were acceptable, HL&P failed to act decisively and lost control of the project.
Such behavior is the worst possible behavior for operating a nuclear reactor.
The facts found under Issue A are dispositive of the issue with respect to the Applicant's character and competence.
There is no need to even reach Issue B.
l 10.3 Even were the ASLB to reach Issue B, the central issue of character remains.
The question would bei Has HL&P's character changed suf ficiently to conclude the past acts and omissions cannot and will not be repeated?
Even were the ASLB to entertain this question, the answor would be "No."
e-r-
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.m
-,e r--*--
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f 128 1
10.3.1 The character of HL&P is irremedial absent a change in ownership of the corporation--a highly unlikely event and certainly beyond the powers of the NRC.
As noted in i
1.7 above, the highest authority in the corporation is the owner.
iR%P is the principal subsidiary of Houston Industries Incorporated, and the members of the Board of D4. rectors of Houston Industries are members of the Board of Directors of HL&P.
R.
Hamilton, CASES AND MATERIALS ON CORPORATIONS INCLUDING PARTNERSHIPS AND LIMITED PARTNERSHIPS 1092 ( 2d ed.
1981).
As a publicly held corporation, Id. at 1091, Houston Industries is owned by the shareholders.
As of May 1981, more than one year af ter the Order to Show Cause, the shareholders had not exercised their power to change the members of the Board of Directors.
Tr. 1310.
By reason of their ownership status, the shareholders bear the utlimate responsibility for the acts and omissions of the corporation.
Their passivity in the face of the crisis at STNP demonstrates the shareholders, too, have either failed to remain informed or abdicated their responsibility.
There has been no. remedial measure taken.
10.3.2 The Board of Directors has similarly demonstrated a lack of the requisite character in fulfilling their duties.
See 1.8, supra.
Both Jordan and Oprea retain their positions.
The leadership which failed remains in place without remedy.
The Board, when provided copies of the Order to Show Cause, Tr. 1504 f 24, " asked questions" of Jordan and
129
- Oprea, Id., but issued no orders for any changes to be made in response to the Order to Show Cause.
Tr. 1311.
10.3.2 On the issue of technical competence, the functions of architect-engineer, construction, and QA/QC have changed so recently that there is no record from which to judge the adequacy of that competence.
Bechtel and Ebasco might have the best possible reputations, but this proceeding is not a construction permit proceeding.
The submission of an accepta-ble quality assurance program and the selection of acceptably qualified companies to design, engineer, construct, and per-form QA/QC on the South Texas Project are matters considered and ruled on in the past.
The selection of Bechtel and Ebanco at this pont cannot forestall the judgement demanded by past performance.
At be s t, the issue of remedial measures regard-ing technical competence must remain unanswered.
11.0 Issue C 11.1 Issue C is also fully set out in Appendix A at A-1.
Having concluded the answer to Issue A is "Yes" and Issue B is "No,"
Issue C, which called for a judgment on whether there is reasonable assurance HL&P would safely operate STNP, must be answered "No. "
12.0 Issue D 12.1 Issue D, set out in Appendix A at A-1 and A-2, contains the question whether there is reasonable assurance
130 that the requirements of 10 C.F.R. Part 50, Appendix B would be implemented during the remainder of construction.
- Again, having answered Issue A in the affirmative and Issue B in the negative, Issue D must be answered "No."
13.0 Issue E 13.1 Issue E, set out in Appendix A at A-2, raises the question whether the in-place structures at STNP conform to the construction permit and Commission regulations.
This issue raises questions which reach beyond the confines of the decision to be made in this proceeding. The disqualification of HL&P does ndt preclude another utility entering an applica-tion for the operating license.
The adequacy of the existing structures cou1d, therefore, be an issue at some later date.
13.2 As noted in 8.4, the QA/QC program is the only program for verifying and documenting that construction has been performed in conformance with all applicable require-ments. For this program to function properly, the inspectors must feel free to write reports when a nonconformance is iden-tified.
The record reflects that the inspectors at STNP were subject to cost and schedule pressures, as well as harassment, intimidation, threats, and assaults.
Turnover among the inspectors was very high.
Staff Ex. 4 6, App. D at 84-8 6.
The inspectors were.ess than vigorous and tended to sign of f rather than engage in confrontation.
The question is thus
ee.
131 raised whether the systematic obstruction of the QA/QC program leaves doubts as to the adequacy of in-place structures.
13.3 As the NRC Staff testified:
"The requirements of the NRC to have a quality assur-ance program and a quality control program are based on the fact that we realize there will be things that are hard to go back and find af ter a project is com-pleted.
That's why the control is exerted when
[during?] construction and when things are actually done." Tr. 9978.
When the NRC finds " widespread noncompliance" in the QA/QC program, Staff Ex. 46, Order to Show Cause at 11, the presump-tion must be that some deficiencies were overlooked.
When draft nonconformance reports are destroyed under these circum-stances, the presumption must be that at least some problems identified by QC never reached the documentation currently available.
Staff Ex. 46, App. D at 33.
When the issuance of noncompliance reports is deliberately blocked, there is cer-tainty that a deficiency seen by an inspector does not appear in the records.
Staff Ex. 46, App. D at 88.
If a deficiency is not reported, there can be no assurance the deficiency was corrected.
13.4 The record reflects that the NRC Office of Inspectiot and Enforcement was able to locate only 10 of 69 l
inspectors who had left the site prior to the order to show Cause.
Tr. 10094.
This means there are 59 inspectors whom l
L
."as 132 I&E never questioned regarding items of noncompliance the inspectors may have accepted rather than face abuse.
13.5 No ef fort at all was made to interview QC inspectors who still worked for the company but were no longer in QC.
Tr. 9623-24.
13.6 There also exists the problem that an inspector would be incriminating himself or herself to admit an inspec tion document falsely certified that the work was properly done.
Tr. 10010 f 15,17.
13.7 The Applicant did hire consultants and engage in reexamination of the existing structures.
App. FOF at 174 et seg.
While the reexamination provides some assurance that the items reexamined are in conformance, the results of the reex-amination only reinforce the concern for hidden defects.
For example, in the review of welding radiographs of a certain type, 15% were found to havo rejectable indications requiring repair, App. FOF at 215.
The question raised is how such a high percentage of visible defects could have passed inspec-tion.
Such a high percentage could be another indicator of inspectors accepting unsatisfactory work in order to avoid the consequences of reporting the deficiency.
13.8 The real dif fictity in this situation is that the ASLB is being asked to speculate on whether a particular deficiency or type of deficiency could have escaped undetected by the Applicant's reinspection program.
There is no evidence
's
'a f f o 133 i
on this matter and such an inquiry would have been fruitless; the types of deficiencies to be considered probably approach an infinite number and the inquiry would have ranged into very l
speculative areas.
13.9 In light of the history of the project and the j
dif ficulty of answering all doubts, the in-place condition of
)
the structures must be considered indeterminate.
Tr. 5541.
l l
l l
l I
i
t 46 o
IX.
FINDINGS ON THE CONTENTIONS 14.0 Contention 7e 14.1 Given the relative unimportance of most of the intervenor contentions in light of the larger issues in this proceeding, no findings are offered for Contentions 1, 2, 3, 4, 5, 6, 7a, 7b, 7c, or 7d.
14.2 Contention 7e. states in relevant part:
"There has [ sic) been and continues to be assaults on the Applicant's quality control inspectors, continual threats of bodily harm to those inspectors, firing of those inspectors, and othec acts constituting a pattern of behavior designed to intimidate the inspectors."
Clearly, this contention, filed long before the special investigation preceding the Order to Show Cause, is the most important of the intervenor contentions.
Also clear is the fact that this contention has been proven beyond any doubt.
Staff Ex. 46.
14.3 Findings on Contentions 8a. through 8d. and Contention 2 would also not contribute materially to the record.
6 134
i kw$
r V.
CONCLUSIONS OF LAW Based on the foregoing findings of fact and upon consideration of the entiro evidentiary record in this pro-coeding, the ASLB must conclude that (1) HL&P's record of perfonnance providos an indepen-1 i
dent and suf ficient basis to conclude HL&P lacks the character
)
and technical competence necessary to be granted licenses to operate the South Texas Project.
l (2) Given the record of HL&P's performance, there can l
1 be no reasonable assurance that future construction work at l
STP will be in compliance with the construction permits and applicable NRC requirements.
(3) There is no reasonable assurance that safety-related construction work thus f ar completed at STP is ado-quato, to perform its intended purposo or that appropriato repairs can be made to make such construction work adequate to perform its intended purpose.
135
64 VI.
ORDER IT IS ORDERED, in accordance with 10 CFR SS 2.760, 2.762. 2.78 5, and 2.78 6,. that this Partial Initial Decision shall constitute the final action of the Commission thirty (30) days after the date of issuance hereof, subject to any review pursuant to the above cited rules.
Exceptions to this Partial Initial Decision may be filed by any party within ten (10) days af ter service of this Partial Initial Decision.
Within thirty (30) days thereafter (forty (40) days in the l
case of the Staff) any party filing such exceptions shall file a brief in support thereof.
Within thirty (30) days of the filing and so"rvice of the brief of the appellant (forty (40) days in the case of the Staff), any other party may file a brief in support of, or in opposition to, the exceptions.
THE ATOMIC SAFETY AND LICENSING BOARD Ernest E.
Hill, Administrative Judge Dr. James C.
Lamb, Administrative Judge Charles Bochhoefer, Chairman, Administratie Judge
)
136
9
.e
' ' i *-
y 3
APPENDIX A List of Issues and Contentions I.
Issues J
{
Issue A.
If viewed without regard to the remedial steps taken by HL&P, would the record of HL&P's compliance with NRC requirements, including:
(1) the statements in the FSAR referred to in
)
Section V.A.
(10) of the Order to Show Cause; i
(2) the instances of non-compliance set forth in i
l the Notice of Violation and the Order to Show l
Cause; 1
(3) the extent to which HL&P abdicated responsibil-ity for construction of the South Texas Project (STP) to Brown & Root; and l
l (4) the extent to which HL&P failed to keep itself
/
knowledgeable about necessary construction j
activities at STP, be sufficient to determine that HL&P does not have the necessary managerial competence or character to be granted licenses to operate the STP?
Issue B.
Has HL&P taken sufficient remedial steps to provide assurance that it now has the managerial competence and character to operate STP safely?
i Issue C.
In light of (1) HL&P's planned organization for operation of the STP; and (2) the alleged deficien-
)
cies in HL&P's management of construction of the STP
{
(including its past actions or lack of action, revised programs for monitoring the activities of its architect-engineer-constructor and those matters i
set out in Issues A and B), is there reasonable I
assurance that HL&P will have the competence and l
commitment to safely operate the STP?
Issue D.
In light of HL&P's prior performance in the con-l struction of the STP as reflected, in part, in the Notice of Violation and Order to Show Cause dated A-1 l
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t UNITED STATES OF AMERICA NUCLEAR REGULATORY COM'!ISSION BEFORC THE ATOMIC Sc.FETY AND LICENSING DOARD Certificate of Service I hereby certify that copies of CITIZENS CONCERNED ABOUT NUCLEAR POVER, INC. (CCANP) PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LW have been served on the following individuals and entities by deposit in the United States mail, first class, postage prepaid; Expres s Mail
- or by courier **, on this 20th day of September 1982.
Charles Bechhoefer, Esq.
William S. Jordan. Esq.
Chief Administrative Judge Harmon and W'eiss Atomic Safety and Licensing 1725 I Street, NW Board Panel Suite 506 U. S. Nuclear Regulatory Commission Washington, D.C. 20006 Washington, D.C. 20555
- Jack R. Newman, Esq.
Dr. James C. Lamb, III Lowenstein, Newman, Reis &
Administrative Judge Axelrad 313 Woodhaven Road 1025 Connecticut Avenue, NW Chapel Hill, NC 27514 Washington, D.C. 20036 Jay M. Gutierrez, Esq Ernest E. Hill Administrative Judge Office of the Executive Lawrence Livermore Laboratory Legal Director University of California U. S. Nuclear Regulatory P. O. Box 808, L-123 Commission Livermore, CA 94550 Washington, D.C.
20555 Mrs. Peggy Buchorn.
Atomic Safety and Licensing Board Executive Director U. S. Nuclear Regulatory Comm.
Citizens for Equitable Washington, D.C. 10555 Utilities Route 1, Box 1684 Atomic Safety and Licensing Brazoria, Texas 77411 Appeal Board U. S. Nuclear Regulatory Comm.
Brian Berwick, Esq.
Washington, D.C. 20555 Assistant Attorney General for the State of Texas Docketing and Service Section Environmental Protection Office of the Secretary Division U. S. Nuclear Regulatory Comm.
P.O. Box 12548. Capitol Station Washington, D.C.
- Tom Hudson p
Baker and Botts LannW Sinkin T
One Shell Plaza Houston, Texa s 77002 1
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