PAGENO="0001" ~t~O!~7~i CLINCH RIVER BREEDER REACTOR HEARING BEFORE THE SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS OF THE COMMITTEE ON ENERGY AND COMMERCE HOUSE OF REPRESENTATIVES NINETY-SEVENTH CONGRESS FIRST SESSION JTJL~ 20, 1981 Serial No. 97-79 Printed for the use of the Committee on Energy and Commerce * 0 U;S. GOVERNMENT PRINTING OFFICE 89400 WASHINGTON: 1982 PAGENO="0002" CONTENTS Testimony of: Page Brewer, Shelby T., Assistant Secretary for Nuclear Energy, Department of Energy 31 Caffey, Lochlin W., Director, Clinch River Breeder Reactor Plant Project.. 31, 50 Fitzgerald, A. E., Deputy for Productivity Management, Office of the Assistant Secretary of the Air Force for Financial Management 31, 54 Rolf, William, general manager, Project Management Corp 31 Staker, Robert, Director, Office of Reactor Research and Technology, Department of Energy 31 Wolpe, Hon. Howard, a Representative in Congress from the State of Michigan 73 Material submitted for the record by: Energy Department: Bibliography of reports of investigations on the Clinch River Breeder Reactor Project 44 Letter dated September 19, 1975, from General Electric to the Foster Wheeler Energy Corp. re awarding of steam generator contract 83 Material submitted in response to a request by Congressman Gore 112 Revenue and operating costs of Clinch River project, 1990-95, table 78 Summary cost estimate of Clinch River project, table 75 Total plant cost estimate, Clinch River project, table 106 Oversight and Investigations Subcommittee: Memorandum, May 12, 1975, from E. A. Wright, plant components branch, to D. R. Riley, acting assistant director, Clinch River proj- ect, re steam generator procurement 93 Miscellaneous documents related to the Clinch River Breeder Reactor investigation 337 Staff memorandum, July 16, 1981, re preliminary findings-the Clinch River Breeder Reactor Project 4 (III) PAGENO="0003" PAGENO="0004" e CLINCH RIVER BREEDER REACTOR MONt~AY, JULY 20, 1981 HOUSE OF REPRESENTATIVES, COMMITTEE ON ENERGY AND COMMERCE, SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, Washington, D.C. The subcommittee met, pursuant to notice, at 10:30 a.m., in room 2123, Rayburn House Office Building, Hon. John D. Dingell (chair- man) presiding. Mr. DINGELL. The committee will come in order. Today the Subcommittee on Oversight and Investigations reviews the Clinch River breeder reactor project. The project represents the largest budget increase in the nonmil- itary segment of the fiscal year 1982 budget, from essentially zero in the Carter budget to over $250 million in the Reagan budget. Ironically, it was 0MB Director David Stockman who first con- vinced me that there were serious .problems with the CRBR project, a project he designated a "turkey" when he led a fight in the Con- gress in 1977 to kill funding for CRBR. One of Mr. Stockman's first acts as 0MB Director was to slash funds for the breeder, a cut that lasted less than 2 hours. Now my former dear colleague from Michigan has done a back- flip and is now attempting to support the breeder project with the same arguments he used to kill it just months before. In a year of severe budget austerity, when services for the truly needy are being cut back around the Nation, it is important to de- termine whether some big money projects are making a real contri- bution to our energy future. The Chair would like to observe at this point that the function of our hearing today is to not necessarily debate the merit of the proj- ect or debate whether or not we should engage in the use of breed- ers, but rather to analyze the impact of the Clinch River breeder reactor on a number of matters under the jurisdiction of the Com- mittee on Energy and Commerce, of which I also happen to be the chairman. In May of this year, I asked the Oversight and Investigations staff to take a preliminary look at the status of the CRBR project from a cost, technical, and schedule standpoint. This aspect, to the knowledge of the cammittee or the chairman of this subcommittee, of the program has never been examined by the Congress or the GAO. To aid in this effort the subcommittee borrowed the services of Mr. Ernest Fitzgerald, Deputy for Productivity Management in the Office of the Assistant Secretary of the Air Force~ (1) PAGENO="0005" 3 serve the industrial base of the nuclear industry and particularly for breeder component manufacturers. The top ERDA official who canceled the competitive bids for the steam generators certainly made a prophetic statement in a Sep- tember 2, 1975, memorandum to the Administrator: "Considering recent steam generator problems experienced by the Russians and British, it is apparent that success of the steam generator contract will be a key factor in the success of the Clinch River Breeder Re- actor." The steam generator contract has been a cost and technical fiasco. Based on the staff findings, the Clinch River breeder appears to be a project that is out of control. Therefore, I am asking the GAO to perform a technical audit on this project, as recommended by Mr. Fitzgerald. I am also asking the GAO to look into contracting irregularities on the project, including possible fraud and abuse. [Testimony resumes on p. 28.] [The following staff memorandum was submitted:] PAGENO="0006" 4 NINr~Y.sEvvITs CONORERS NIOMIIII JOHN D.OINSW.. MIcH..cNAIOMAN Pooo~*(*à) w-wi JOO JA~ROO~ OMV. MARC I. MARCO. PA. ~ ~ CONGRESS OF THE UNITED STATES ,oio,ou. p ~ jo. ONOLD N. MOTTt, VON COO ROVVO. PA. NVCP0000UL/VOAPPOIONTOO ~Y. ~.OOATO.C. HOUSE OF REPRESENTATIVES MI 0 MON 1, 00000*4*, 0.0. SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS INN W0OOO,0000. OPThE COMMITTEE ON ENERGY AND COMMERCE WASHINGTON, D.C. 20515 MEMORANDUM DATE: July 16, 1981 TO: John D. Dingell, Chairman, Subcommittee on Oversight and Investigations FROM: Subcommittee Stiff SUBJECT: Preliminary Findings - - The Clinch River Breeder Reactor Project: A.Cost and Technical Fiasco ~Because of the. Committee'.s jurisdiction over matters affecting electrical rates and national energy..polic~, you asked the staff of the Oversight and Investigations Subcommittee to review selected issues related to the Clinch River Breeder Reactor (CRBR) Project. The major focus of this preliminary staff review has been on the cost, schedule, and technical status of the project. It is interesting to note that despite the fact that over $1 billion has been spent on this project, neither the GAO or the DOE Inspec- * tor General has reveiwed the circumstances of the contract awards or contract performance. * PRELIMINARY FINDINGS -- The estimated cost of the: project has gone from $669 million * in 1973 to over $3.2 billion in 1981 -- a 450% overrun. The relia- bility of the current estimate is in serious doubt. -- The taxpayer's liability in this project has grown from about $100 million to about $3 billion -. more than 30 times the original estimate. PAGENO="0007" 5 -- In 1973, we were pvomised a breeder demonstratIon in 1979 -- after six years. In 1981, after spending over $1 billion, we are promised a demonstratibn in 1990 -- 9 more.years. Clearly, we are losing ground. If NRC licensing requires an alternative site, the project could be set back another four yea7s to 1994 and an additional $1.7 billion. This is anil to 15 year delay -* making the technology 30 years old. - - In 1977 when the NRC halted the safety component of the licensing process there were over 100 unresolved safety issues whiàh will have to be satisfied. - - The staff has learned that because of `an inability or un~ willingness to meet NRC safety requirements the DOE is considering an amendment to the Energy Reorganization Act to circumvent those safety requirements. As you know, earlier U.S. breeders suffered core meltdowns -- ERB-I and the Fermi Reactor outside Detroit. The Department will also be seeking an exemption from 1~heNatiomal `Environmental Policy Act (NEPA) to avoid the revising a~d updating of the Environmental Impact Statement (EIS). *A new BIS is required under CEQ regulations after 5 years. * -- The' project is far from the technical marvel DOE claims. Two critical components - - the steam generator and the sodium pumps - have experienced significant design and fabrication problems as a result of test failures. We are told that many technical problems *are yet to be solved. The steam generator has. been the most trouble- some component in both' the foreign and domestic breeder programs. In 1974, the Soviet BN-350 breeder suffered a serious sodium acci- dent when the.'steam generator exploded and burned. - - The staff also learned that CRBR chose an exotic aet~ospace alloy ?.18 for the upper internals of the reactor over the common PAGENO="0008" 7 The staff found documents in DOE files which indicate that the top DOE reactor scientist responsible for the Liquid Metal Past Breeder Reactor (LMPBR) `program admitted that contrary to DOE's official position CRBR is not a neces~ry step in the LMPBR program. The stiff found a draft letter from Al to DOE suggesting coi~tinued funding of the steam generator so Al co'uld sell this advanced system to the Russians --. at the expenie of U.S. taxpayeis. - - Staff found that several utility officials - - off the record -- seriously question the justification for funding CRER at this time when safety and reliability improvements on Light Water Reactors (LWRs) are of higher priority. These same officials indicate their corporate policies have shifted and they no longer support financing the CRBR with their money only taxpayers'. STAPP COMMENDATIO?~ 1. Cancel existing prime contiacts 2, Perform a technical audit of the project to determine: A. Current technical status. B. Technical outlook, including a clear definition of technical questions needing ai~swers before defiiiitive, binding fixed-price contracts are written for a working, licenseable power plant. C. Which component development efforts should be continued. D. Whether purchase of foreign components and technology should be purmued as am option, * 3. If feasible, prepare bid packages for competing definitive contracts. * PAGENO="0009" 8 4. Evaluate alternative nuclear reactor programs: A. Perform technical audits on major potential alternative programs including improvements' in the uranium efficiency of LWRs which could reduce uranium consumptinn by over 40%. B. Estimate the cost to keep technology development alive for alternatives. C. Estimate the cost tocarry each' alternative forward to demonstration; 5. Renegotiate cost sharing on CRBRP so that taxpayers' share is no greater than 50% (the case prior to 1976) `and so that first priority for funding use is carrying out' recommendations 1-3 above. 6. When requirements set forth in recommendations 1-5 are met, advertise for competitive, fixed-price bids for a working licenséable power plant. A SEIGE MENTALITY * DespIte the lack of cooperation and time constraints, we believe we have deveioped evidence that theproject is not the technical mar- vel DOE claims. Indeed, it is, a' good deal sicker than imagined. The staff has reviewed numerous documents ,in the Office of Nuclear Energy in Germantown, Md. DOE officials have played games with the staff on the location of certain files. Generally, the claim has been that'if the requested documents are not in Germantown, they are at the CRBR Project Office In Oakridge, Tennessee. `The Subcommittee then requested that the GAO seize certain files relat- ing to the cancellation of a competitive bid and the decision PAGENO="0010" 9 to give a sole source contract to the high bidder for a critical component of the project. However, GAO could not find the files in the Project Office, Both'DOE Headquarters and the Project Office are currently investigating the suspicious disappearance of these files. In addition, some DOE officials in staff interviews have claimed ignorance of events that appear in their own files. For example, the Project Director, Lochlin Caffey, claimed he was unaware of any allegations~ of fraud and abuse on any contracts despite the fact that the FBI had met with him the previous week concerning their 9 month investigation of a Westinghouse official. In attempting to locate auditors with knowledge of the project, we were referred from one person to*a~other until we finally reached a project officer who said he had been instructed not to talk to the Subcommittee staff and that all communications would have to be handled through headquarters. However, this was not a useful reference either.. Headquarter officials at one point refused to provide access to any documents and have rather consis- tently expressed "confusion" over what was requested, where infor- station was stored, and who the knowledgeable experts were. Opposi- * tion to talking to the staff softened somewhat as time went on. However, a key ftrmer technical person on the project said that he had been told to be very cautious in talking to the Committee staff. In particular, he had been instructed not to volunteer information. The staff also found that the staff of the national * labs were muzzled. B~cause of time constraints on this review, the staff has been unable to visit Oakridge for further file reviews and interviews. There appears to be a siege mentality both at the Project Office .and in Headquarters on the breeder program. This same mentality extends to the national labs. - PAGENO="0011" 10 500% COST OVERRUN -..-. AND RISING The CRBR was sold to Congress in 1973 on the basis of an over- all cost of $669 million. The estimate grew rapidly to $l.736 billion in 1974, then to $l.950 billion in 1975. DOE now considers the $l.950 billion as the "original baseline" for the program, conveniently ignoring the $669 million figure on which the project was sold to Congress. The present estimate for the project is $3.2 billion -- an estimate made in 1980. There are millions of dollars in hidden costs on CRBR which are being subsidized by other programs. For example, DOE is building the Hot Experimental Facility at Oakridge to reprocess the CRBR spent fuel, The cost of fuel fabrication.,.~wa~te disposal,.ahd dec~mmissioning are other examplei. The LMFBR base program and the nation~a1 labs are also heavy contri- butors to CRBR. The staff has not had adequate time to detern Inc the extent of. these hidden costs. Due to problems growing out of the lack of contract defini- tion and enforcement described elsewhere in this report, the full extent of project cost overruns is not evident from an examination of the project on a contract-by-contract basis. Many contracts appear to be written in reaction to stituations which evolved long after the project was authorized. Furthermore, according to DOE officials, the contracts themselves are adjusted easily and .rou- timely through a process documented in Contract Budget Baseline Change Notices. From. the description given to the staff, this process seems to be a formalization of the "rubber baseline" made famous in DOD contracts. . PAGENO="0012" 11 NO LIMIT TO TAXPAYERS' LIABILITY When the project ~as originally sold to Coi~gress in 1973, the Atomic Energy Commission (AEC) claimed that the limit of the government's liability would be about $100 million. Later in 1974, a new arrangement was negotiated which provided for the government to pay $100 million plus no more than 50% of the remainder of the project cost. Then., in 1975, the sharing arrange- ment was turned on its head. Rather than limiting the government's liability, contributions from'the industry were limited to about $250 million and the government was saddled with an open-ended commitment to pay fo.r the remainder of the project, including cost overruns. In staff discussions with DOE officials, it appears that the industry has actually paid in only a little over $100 million of its $250 million commitment. Currently, the utilities are 3 years behind in their payments for the project. In summary, the taxpayers' commitment to this project has increased from the original ceiling of about $100 million to;the current estimate of over $3 billion -- * more than IQ ~ the original estimatet SCHEDULE DELAYS - - LOSING GROUND When Congress first approved the CRBR in 1973, we were promised that a demonstration of the breeder would begin in 1979 - - approxi- mately six years after go-ahead. Now, 8 years later and after spending over $1 billion, we are promised a breeder demonstration in 1990 - - 9 more years. Clearly, we are los~ng ground. . PAGENO="0013" 18 2. Ni~c Sãfet3r Review Could Add Bilico~s One of the.most critical unknowns is the impact the NRC * safety licensing process could have on the cost of the project. * The NRC terminated their licensing effort in early 1977. On November 9,. 1978, NRC sent a letter to the CRBR Project * Office with an attached 31-page document "NRC Staff Review of *CRBRP Summary of Outstanding Items". *The document, which is attached, summarizes and documents about 100 issues on CRBR safety stemming from the NRC licensing process for that project. The unresolved safety issues range from vulnerabil- ity to melt-downs, and reactor explosions to sodium leaks, fires and ~chemica1 explosions to vulnerability to. sabotage. Some important CRBR deficiences and unresolved safety Issues aresuinmar- iiid herb (numbeis in parentheses refer to pages of the NRC document) o SusceptibiTity ~to Hunian' ~rro~ Many valves (6) and safety systems (9) would require manual operation in case of accident.. "The staff is concerned that reliance `solely on manual initiation for (some safety systems) can potentially degrade (other safety systems) if inadvertent or erroneous decisions are made." (9) Relatively fast action is required by operators in an accident~ NRC found that a heat removal system required "operator action within 10 minutes" whereas "it is the (NRC) staff's opinion that, in an accident of that magnitude in whIch several, actions are required by the operator * under emergency. conditions" larger heat removal systems * are required to give the operator much more time to aàt. (26-27) ~9-4O5 O-82--2 PAGENO="0014" 14 o Lack of !nforijtation During Accident NRC issues include CRBR's lack of certain instruments to follow the course of an accident and thereby to permit cpntrolling measures. In an accident a CRBR operator might not get adequate information on failed fuel (23), loose parts (11), sodium leaks (16), and pressures and radiation levels inside the containment (3O~3l). o Protection of Control Room Durin~g Accident NRC staff is not satisfied with "the adequacy of control room design to limit radiation does received by operating personnel" nor with "the adequacy of control room design for events associated with core melt." (1) o Vulnerability to Meltdowns and Reactor (Explosions) fCoré Disruptive Accidents) in serious accidents the decay heat removal system can be crucIal to prevent fuel meltdown or damage to the point where an explosion can occur. NRC delivers some of its most extensive criticism to this system in the CRBR. The decay heat removal system "is not redundant to the other heat removal systems" (25) and therefore might fail when they do. Relatively minor accidents could undercut the system: "For two-loop operation, the staff has stated that the current design is not adequate... The decay heat removal system cannot function unless the sodium level is at its normal operating level.". (24) Should these systems fail, cooling by natural circulation is not PAGENO="0015" 15 acceptable. (10) If an upgraded or alternate system is required by NRC, a substantial cost. impact to the decay heat removal system can result and changes to the reactor vessel could be necessary. Failure to remove decay heat could result ma meltdown. NRC requires that a meltdown be heldwithin the reactor containment for 24 hours to permit evacuation of nearby population. CRBk may not have the capability.to do this, and CRBR's applicant disagrees that 24 hours "is necessary or appropriate." (8*9) In a breederreactor, a meltdown can result in a core disruptive accident - albeit with a total yield equiva- lent to less than one ton of TNT.. NRC staff requires that CRBR must be able to withstand a* core disruptive accident of 1200 megajoules energy, but the design of CRBR falls at least 45% short of this4 (6-7) Thereactor vessel may not be able to contain the Y~core dis~ruptiye.accident,, (i;e.,.expl.osjon), and "no.fallback optiàns have .b~n s~ig~ested by t]~e ap~liéan~" t~ p~event a re~ctor e~E~I~ston fiom breaking open ~he containment. (7-8) Agreement iust be reached with NRC On the amount of structural margin to be included in the design of major CRBR components and systems to accommodate postulated energetic loads. Achieve- ment of these higher safety margins will require significant designchanges in the primary system components including the reactor vessel and head. PAGENO="0016" 17 purge concept is not considered to be a conservative or appropriate iiieans for assuring a low risk to public health and safety." (28) o Vulnerability to Sabo~g~ The "susceptibility of principal design features (such as the reactor shutdown system) to sabotage" is still unknown. (2) In 1978 and 1979, DOE officials, in internal memos, raised questions about the risk of moving ahead with the fabrication of components without NRC safety reviews. It is conceivable that some of these major components, for which theproject has spent over one-half billion dollars, will have to be refabricated if they don't meet safety requirements. This could add substantial costs to the project. The $3.2 billion current estimate also assumes that the NRC will continue the process where they left off in early 1977 with no significant impact on cost. That is a~ bad assumption. ~3 NRC May Bai~i Clinch River Site: Another $1.7 Billion The staff has learned from NRC officials and DOE internal documents that NRC's acceptance of the Clinch River site was predicated on the urgency of maintaining project schedule stated in the ERDA Administrator's findings on the EIS fortheLMFBR. Those findings assumed that CRBR.o'perating experience was essential to a 1986 ERDA decision point on commercialization of the LMFBR. Since the 1986 decision point is no longer operative, it is quite possible that if licensing were resumed, NRC would require CRBR to be located on another site. The approved EISwas also. PAGENO="0017" 18 time sensitive to the 1986 decision point. CEQ regulations require an updated ETS after a S-year delay. The following is a quote from a June 23, 1977 GAO report: * .ERDA may be required by the Nuclear Regulatory Commission (NRC) to locate the plant at a different site if projected plant operation is delayed. Such a relocation appears to be a distinct possibility based on past NRC proceedings on the Clinch River Project. In fact, the Deputy Director, Division of Site Safety and Environmental Analysis, NRC, told us that if the CRBRP is delayed for two years or more it would be very difficult, if not impossible, for the NRC staff, in its analysis, to conclude that it is cost- beneficial to locate the demonstration reactor at the Clinch River site." The cost of relocation is severe. Last month the DOE made estimates for moving the plant to the following locations: -- Hanford $l.577 billion -- Idaho $l.6S4 billion - - Savannah River $824 million Therefore, if the site has to be changed to Hanford or Idaho, the estimated cost of CRBR would go over $5 billion at a minimum. In addition, DOE estimates that plant relocation would delay the project at least 43 months -- to 1994. ADMINISTRATION MAYTRY END RUN AROUND NRC SAFETY LICENSING AIID NEPA ~EQUI!~FS~ The staff has learned that the Administration is consider- ing an amendment to the Energy Reorganization Act to avoid NRC safety licensing of the CRBR plant. Ironically, one of the major objectives of the CRBR Project was to demonstrate the licenseability of a breeder reactor. The staff has also learned that the Administration will PAGENO="0018" 19 attempt to obtain a NEPA exemption in order to avoid the environmental impact statement process. According' to an NRC official, this would require a finding of a critical need for power in the Tennessee area. it would be rather bizarre if indeed they could find a critical need for a 350 megawatt plant in an area with a current excess of electrical generating capacity. THE PRIME CONTRACTS ARE BIZARRE- THE GOLDEN HANDSHAJç~ The principal prime contracts have been written without binding provisions for cost, schedule or specific technical performance. It is not clear whether this bizarre practice is a symptom or a cause of the state of disarray in the project. It is clear, however, with these contracts, the prime contractors have no necessity to perform, much less to excel- - so they have not. As long as they can be assured of taxpayer support, there is no compelling business reason for the contractors not to "preserve the problem." Indeed, there is a compelling reason to continue to milk this "cash cow" as long as possible. Regardless of other problems- -fuzzy contracts, national policy debate, etc. --the pacing items on the project would have held up completion of the project. Examples of these pacing items are the steam generators and sodium pumps, described elsewhere in this report. These golden handshake prime contracts have also led to unconscionably huge claims against the government. For example, it should be made clear at the outset that PAGENO="0019" 21 FAILURE TO FIG~T_ UDAND ABUSE One of the most disturbing aspects of the staff investiga~ tion was the discoverythat no one seems to be looking for or much less' investigating contract irregularities, waste, fraud and abuse. Based on staff interviews, the project auditors appear to be concentrating on checking legal allowability of eosts;included in forward pricing and billing rates. This procedure has little or no chance of uncovering the kinds of abusesthe staff discovered in their brief.investigation. The staff found that the Inspeàtor General had never conducted any audits or investigations of this billion dollar project despite its obvious difficulties. As you know, the staff has found that in investigations of synfuels `projects that the most flagrant examples of waste of taxpayers' monies occur when contractors are allowed to deal on behalf of the g'overnjnent without indepóndent auditing~hecks.' Another disturbing Einding is that `potential abuses' that cone to th.e attention ç~.the Project Director are not reported to the Inspector General on a timely basis. The Subcommittee has directed the Inspector General to conduct interviews and review the files of both the Project Office and the contractors and subcontractors to determine whether there have been other unreported allegations of wrongdoing. Staff interviews have revealed several clear cases of fraud and abuse. Atone point, the Project Director told the staff he was not aware of any such allegations - - despite the fact that the FBI had discussed one of the cases with him a week earlier. ` `* PAGENO="0020" 22 In the spring of 1980, an allegation cane to the attention of the Project Office that the Chief of Computer Operations for Westinghouse was misusing the CRBR computer. He apparently engaged in a number of activities, including running an outside business on the computer - - an allegation he had previously denied. Although nunerous directives from theSecretary of Energy required DOE officials to report allegations of wrongdoing to the. IG, the Project Director instead asked a Project Management Corporation (PMC) employee to investigate the alle- gation. He. found no evidence of wrongdoing. It then turned out that he was, a friend of the Westinghouse official. The Project. Director again did not report the allegation to the IG, but asked Westinghouse to look into the matter. The FBI then began an investigation. It took the Project Office over five months to report the matter to the 1G. The IG investigator told the staff that he and the FBI agent considered investigating the PMC official for possible obstruction of justice. However, in.the meantime, thePMC employee quit and Westinghouse fired their Chief of Computer Operations, . In the spring of 1980, the FBI began an investigation of two Atomics International contracting officials who setup phony companies to which they awarded contracts at wildly inflated prices. For example, the FBI found One of the companies had a contract to'aupply tubing to Al worth $22 and $36 and charged-the gov- ernment . $185 and $305 per unit. This scheme went on for over a year before it was discovered. Both off-icials were fired by Al. The FBI is still investigating the scam.. Another Al contract official ~admitted he had accepted. a $1,000 interest-free loan from a subcontractor salesman and allegedly `had been offered a $5,000 bribe by an official of PAGENO="0021" 23 the same company for inside information on bids. The Al official admitted he had given inside information to the sub- contractor and was fired. This incidence was not reported to the IG until months later. THE STEAM GBNBRAT'O~ CONTRACT - - CONTRACTING IRREGULARITIES The most fundamental contracting problem the staff has detected in reviewing CRBR is the DOE propensity to turn on the taxpayers' money and let it run while they decide what they intend to buy. This was evident in the review of the basic Westinghouse contract. As indicated earlier, the Statement of Work is vague and subject to continual change. For specifics, the reader of the contract. is referred to an appendix which when read,~in effect, called for the contractor to define his technical scope of work. The contractor is committed primarily to "utilization of its best efforts." The July 1973 secret Burns ~ Roe document referred to earlier contended that the project was still in the conceptual design stage at the `time of contract go-ahead and that the conceptual design period kept, growing longer. There are indica- tions that we may still be in the conceptual design stage. The staff spent most of the, time allotted in reviewing contract irregularities and attempting to collect information on the steam, generator contract. This effort was severely hampered by the lack of cooperation and persistent bureaucratic deraying tactics on the part of DOE. `It is easy to see why DOE wants to keep this project covered up. In fact, DOE officials went so far as to deny in staff inter~'iews that there are any major pioblems with the steam generator or other sub-systems of the PAGENO="0022" 24 The staff was told that the original approach to acquiring the steam generator involved a competition in which Poster- Wheeler Corporation and Atomic International (Al) were competitors. Al submitted a bid of $26.4 million; Foster-Wheeler submi~tted a bid of $20.3. million. Foster-Wheeler's low bi.d was made up of a cost plus incentive fee (CPIF) of..$6.7 million for the prototype and 7.4 million fixed price for the plant units. Even though (or perhaps because) Al had lost out in the competition, Mr. r. A. Nemzek, Director of Reactor Research and Development, directed in a Sept. 18, 1975 telex that "both competitive bids should be rejected and that award of a CPIF contract for both prototype and plant unit steam generators should be directed to Atomic International." This bizarre maneuver overruled the recom- mendations of both GE.and Westinghouse on source selection.. ~In a Septembei2, 1975 memo, Mr. Nemzek informed both~r*.-Richard W. Roberts, Assistant Administrator for Nuclear Energy, and Dr. Robert C. Seamans, Jr., Administrator of ERDA, of his inten- tion to cancel the competition andaward a sole source cost- plus contract to the apparent loser. There is no record that either Mr. Roberts or Dr. Seamans objected. Foster-Wheeler officials told the staff that they had not been informed about any of these ludicrous transactions. Instead, they had been led to believe that they simply lost the competition. A retired ABC contract expert told the staff that he was "shocked" at the apparent lack of ethics in this trans action. PAGENO="0023" 25 The initial estimated cost of the Al contract which could have been obtained for $20.4 million, of which $13.7 million was fixed price, was $56.9 million -- nearly three times the low competitive bid - - for 11 steam generators, This figure has subsequently grown to an incredible $143 million for only two steam generators, At the same time, the delivery schedule for the prototype has slipped three years and technical problems abound according to DOE reports. An internal memo of October 22, 1979 obtained by the staff sug- gested that the technical problems on this procurement were possibly severe enough to warrant termination. When the staff *attempted to pursue the possibility of default, they were met with deception, obfuscation, runarounds, and delays. After many unsuccessful attempts to obtain documentation and straight answers on this subject, the staff director requested that GAO seize the files of this procurement at the location DOE officials claimed they were stored. As recounted elsewhere in this report, the files were incomplete. DOE headquarters and the project office are now supposedly investigating to determine what happened to the missing files. After much addi- tional runaround the staff was told on June 22 that the steam generator contract with Al will be terminated after delivery of the prototype and possibly one plant unit. The staff fears that this termination will be for the convenience of the govern- ment to protect an obviously favored contractor from the results~ of their own failure which would materially flow from termina- tion for default. PAGENO="0024" 27 designers would complete their work in the very near tern and the bulk of the future money spent would be on brick and mortar. To retain the experience they have accumulated and assure continued viability.of the LMFBR, these key designers would have to be put to work on designing the 1000 MWe LMFBR developmental plant. Apply- ing experienced designers to the next plant is as import- ant to its technical success as is the construction and operation of CRBRP and, further, that if our goal were to maximize our international competitive position in breeder design along with maintaining our LMFBR techni- cal infrastructure, thCn I conclude that we must leapfrog to the Conceptual Design Study (CDS) Size plant. * Al PROPOSES TO GIVE ADVANCED ST ,,~ 9RTO SOVIETS In reviewing DOE files, the staff found a draft letter from a Vice President of Al to a DOE official? Robert Staker, the Director of Reactor Research and Technology, dated January 24, 1979. In 1978 and 1979, the Carter Administration was attempting to terminate the project. The `Al. official describes the steam gener- ator as a technical marvel and suggests that even if CRBR is killed, the government should, continue to fund the steam generator contract so Al could finish building the plant units -- so they could'sell them to the. Soviets for their breeder program: "The (J,S,S.R. first approached the U.S. 3 years ago about the possibility of utilizing a hockey stick steam generator in one of the BN3SO loops. There has been an exchange of meetings and documents outlining the technical requirements and costs for such a program which would be a part of the U.S./U.S.S.R. LMFBR exchange program. The concept is currently on hold while the U.S,S.R. upgrades BN350 to more nearly match'CRBRP secondary sodium temperatures.",. * In other words, the US taxpayer should continue to fund'the * development of the most overrun procurement in the CRBR program so Al could sell it to the Russians for their breeder program. Considerations of national security apparently have no significance - - even though the principal product of the breeder is plutoniun, the material of nuclear weapons. It is interesting to note that the letter indicates no technical or cost problems with the steam generator contract. By early 1979,. the sieam generator was in deep trouble with both serious design and overruns. PAGENO="0025" 28 Mr. DINGELL. The Chair recognizes Mr. Marks for a short open- ing statement. Mr. MARKS. Thank you, Mr. Chairman: I would also like to welcome our witnesses this morning. We ap- preciate your testimony. The Clinch River breeder reactor has been controversial for some years now. Nevertheless, it does represent this nation's research effort in a field where we have been long preeminent. Unfortunate- ly, it is perhaps the case that we now are losing our lead to the Germans and the French, among others. Of course, whether this project is funded by Congress and al- lowed to continue is a separate question from allegations of mis- management, fraud, and abuse that may have occurred at the proj- ect in the past. Mr. Chairman, the Department of Energy has taken the position that allegations of mismanagement laid to project management are greatly exaggerated, if not untrue. Today s hearing should allow DOE to refute or explain these charges on the record. I also question the article that appeared in the Washington Post which is entitled: "Panel Calls Breeder Reactor a Management Fiasco." That ~article stems from a leak from the majority staff, I might say, of this committee, to the newspapers, and would indicate that in fact this committee has in fact made a report that of course is not true. None of us at least on this side of the aisle, and I question whether any of the other members ~n your side of the aisle, have had the occasion to read or to make such a report and the record ought to indicate that at this time. Mr. DINGELL. Just so that the record is straight, the staff briefing document was submitted to all members of this subcommittee. The Chair is not prepared to discuss with anyone how by that action the document referred to got to the press, nor is this sub- committee prepared to discuss with the gentleman whether or not the article in the Post represents a factual or unfactual statement as regards the findings of the staff. The Chair will observe, the Chair read the article and I find myself incapable of quarreling with it in any of its major particulars. Mr. MARKS. The importance of the statement I just made, Mr. Chairman, is the fact in reading the article it would indicate that the Subcommittee on Oversight Investigations has in fact made such a report. That is not so. We have a report from the staff which is not a report of this committee, and until we as members have OK'd it, it should not have gone out nor should it have been indicated that it was a report of this panel. Mr. DINGELL. The Chair thanks the gentleman. The Chair recognizes now our good friend and colleague from Tennessee for a brief opening statement. Mr. GORE. The Clinch River breeder reactor is a process develop- ment and demonstration project intended to provide the engineer- ing and scientific foundation for the breeder concept. The engineer- ing problems which must be solved are unique and not previously encountered. PAGENO="0026" 29 They include, first, large thermal gradients in key reactor com- ponents. These gradients pose unique design and fabrication prob- lems not associated with pressurized and water reactor system. Second, the development of an absolutely 1eak~free heat exchang- er, the steam generator. Sodium is used as the heat transfer medium in the CRBR concept, and it is used to heat water in the steam generators. Obviously, the sodium water interface problems have not been previously encountered in pressurized water reactors since the heat exchange process is water to water. These problems have not been easy to solve, and the Congress has had a difficult time wrestling with the Clinch River project over the years; Debate up until now has been a macroeconomic debate. Is the project a good one? Is it needed? Is it a logical step in the develop- ment of this technology? But today this subcommittee's investiga- tion focuses on what are said to be serious problems in the manage- ment of the project. It would be surprising, Mr. Chairman, if there were no problems whatsoever in a project of this magnitude which has lasted more than 10 years, during a 10-year period that has included the OPEC revolution, changing the price of oil, a time of raging inflation, a period in which four separate administrations came into power, a raging battle between the legislative branch and the executive branch over whether or not this project should continue, a battle which caused the past administration to call it to a halt while the Congress debated, and a changed environment for nuclear power generally during the last 10 years. But, Mr. Chairman, this project does have a role to play and should, go forward in spite of the tu- multuous period which has characterized its existence. We face as a nation and as a civilization massive uncertainties with respect to energy, massive uncertainties with respect to our continued ability to use fossil energy. Shortly after the turn of the century we may have to reevaluate our energy sources in a hurry, and in spite of the lower demand projections for energy use by the year 2000, electricity use is still growing quite rapidly. There have been a number of charges made in the press, Mr. Chairman. My colleague from Pennsylvania referred to some of them earlier, but in the Tennessee press, we have become familiar with essentially 10 separate charges. There have been a number of stories based upon the statements of the staff for the subcommit- tee, and there are essentially 10 charges. My staff and I have prepared responses to each of the 10 charges, which I will make available to my colleagues. First, the cooperation charge; Second, the cases alleged of known fraud and abuse; Third, the increase in the total Clinch River Project costs; Fourth, the so-called open-ended nature of the contracts; Fifth, the role of the Project Management Corporation; Sixth, the selection of Al to supply the steam generators and how that was done; Seventh, the choice of the 718 alloy for the upper internals;' Eighth, the controversy surrounding the site selection and licens- ing; 89-405 O-82---3 PAGENO="0027" 30 Ninth, the cost increases for the steam generators and; Tenth, why claims were allowed on the Westinghouse contract. There are detailed responses for all 10 of those charges. I am making them available to my colleagues here and for others who might be interested. I hope to refer to those during the questioning today, Mr. Chair- man, and at the appropriate time to put that material in the record to form a response to each one of those charges. [See appen- dices 1 through 10, beginning on p. 112.] I thank my colleague for the way in which our friendship has been handled over the years and during this investigation I par- ticularly appreciate my chairman's courtesy and understanding and with that I will conclude my opening statement. Mr. DINGELL. The Chair now calls as a panel Mr. A. E. Fitzger- ald, Deputy for Productivity Management, Office of the Assistant Secretary of the Air Force for Financial Management. We are particularly appreciative of your kindness to us. Mr. Shelby, T. Brewer, Assistant Secretary for Nuclear Energy, the Department of Energy, and Mr. Lochlin W. Caffey, Director, Clinch River Breeder Reactor Plant project. Do any of you desire to have counsel at the table today? Mr. BREWER. I would like to introduce Mr. Bill Rolf, who is not the counsel but he is the general manager of the Project Manage- ment Corp. Mr. DINGELL. You may have counsel at the table. We will be happy to have him present at the table as he desires. He is going to appear to assist you? Mr. BREWER. To assist me, and also Mr. Robert Staker, the Direc- tor of the breeder program. Mr. DINGELL. If you would like to have him present at the table you may do that and that would be quite appropriate. Any others desire counsel or additional persons at the witness table? The Chair hears none. Gentlemen, in view of the character of our proceedings today, the Chair thinks it will probably be necessary to swear, in accord- ance with the rules of the committee, not only those who are sched- uled as witnesses, but also those others who have joined at the table in view of the fact they may be giving testimony. Is there any objection on the part of any of our panelists to taking the oath? Mr. BREWER. No, sir. Mr. DINGELL. The Chair hears none. The Chair notes you have no objection to being sworn. The Chair observes copies of the rules of the committee and rele- vant parts rules of the House are there before you at the table. If you will each rise, we will administer the oath. [Witnesses sworn.] Mr. DINGELL. Very well; you may consider yourselves each under oath. We will hear our witnesses in this order. First, Mr. Shelby T. Brewer; second, Mr. Lochlin W. Caffey; and third Mr. Ernest Fitz- gerald: PAGENO="0028" 31 For the assistance of our reporter, before we proceed with the testimony, give your names to the reporter for purposes of the record starting with Mr. Rolf on your left and on my right. Mr. ROLF. My name is William F. Rolf. `I am the General Man- ager of the Project Management Corporation. Mr. CAFFEY. I am Lochlin W. Caffey, the Director of the Clinch River Breeder Reactor Plant Project. Mr. BREWER. I am Shelby T. Brewer, Assistant Secretary for Nu- clear Energy, the Department of Energy. Mr. DINGELL. Mr. Staker? Mr. STAKER. Robert G. Staker, Director, Office of Reactor Re- search and Technology. Mr. FITZGERALD. I am A. E. Fitzgerald, Deputy for Productivity Management of the U.S. Air Force. Mr. DINGELL. Mr. Fitzgerald, Mr. Staker, Mr. Brewer, Mr. Caffey, Mr. Roif, we thank you all for being with us, and we recognize Mr. Brewer for such statement as he wishes to give. TESTIMONY OF SHELBY T. BREWER, ASSISTANT SECRETARY FOR NUCLEAR ENERGY, DEPARTMENT OF ENERGY, ACCOMPANIED BY ROBERT STAKER, DIRECTOR, OFFICE OF REACTOR RE- SEARCH AND TECHNOLOGY, AND WILLIAM ROLF, GENERAL MANAGER, PROJECT MANAGEMENT CORPORATION; LOCHLIN W. CAFFEY, DIRECTOR, CLINCH RIVER BREEDER REACTOR PLANT PROJECT; AND A. E. FITZGERALD, DEPUTY FOR PRO- DUCTIVITY MANAGEMENT, OFFICE OF THE ASSISTANT SECRE- TARY OF THE AIR FORCE FOR FINANCIAL MANAGEMENT Mr. BREWER. To establish a framework for this discussion, I pro- pose that I provide a very brief oral statement, followed by Mr. Caffey. If that is satisfactory, I will proceed. I am accompanied today by Mr. Robert Staker, Director of the Office of Reactor Research and Technology, Mr. Lochlin Caffey, Project Director for CRBRP and Mr. William Roif, General Man- ager of the Project Management Corporation. The Liquid Metal Cooled Fast Breeder Reactor-LMFBR---con- cept offers an electrical energy `option resting on an essentially in- exhaustible resource base. The fast breeder program has been a major element of our national nuclear development strategy for over 30 years. A sequence of plant projects of increasing power rating should provide the organizing principle and schedule re- quired for a well-focused, mission-oriented program. The project sequence in the 1976 LMFBR program plan included Experimental Breeder Reactor 11(1963), the Fast Flux Test Facility (1980); the Clinch River Breeder Reactor (1983); and, later on in the 1980's, a large prototype plant. In 1977, this scale-up sequei~ice was interrupted. It is the position of this administration that it should be resumed. The Department of Energy believes that in order to resolve the technical uncertainties associated with the breeder, which at pres- ent preclude the private sector from judging its commercial feasi- bility, it is necessary for us to move ahead with the basic research and development work represented by the Clinch River project. It is our conclusion that we must complete this work in order to PAGENO="0029" 33 cerned by, the past difficulties associated with the Clinch River project. Over the past 10 or more years, the CRBRP management has faced acute challenges from forces beyond its control, unparal- leled in a large and complex industrial development project of this type. These challenges have included an evolving and uncertain regulatory climate, massive escalation in the general economy, and debilitating policy debate. As President Reagan's appointed Assistant Secretary for Nuclear Energy, I will do everything in my power to bring CRBRP on line as promptly as technically possible. The project is severely off base- line schedule due to the policy impasse of the past several years. Further delay would diminish the value of the project to the overall U.S. breeder program and would increase costs. In my recent confirmation hearing before the Senate Energy Committee, I pledged to promptly review and rebaseline all aspects of CRBRP-management structure, schedule, cost, project technical objectives, and licensing activity-with an aim toward streamlining the project. I would like to take this opportunity to make the same pledge to this committee. Although I am not prepared at this time to outline the details of this review, my colleagues and I will be happy to answer any questions or provide you with additional information regarding the past and current management activities of the pro- ject. [Testimony resumes on p. 50.] [Mr. Brewer's prepared statement and bibliography referred to follow:] PAGENO="0030" 35 Let us consider the outlook for nuclear power today, in terms of these four major strategic elements. LWR Commercialization Institutional, financial, and regulatory forces, coupled with the general inflation in the economy and uncertainties in electrical demand growth, have resulted in a utility retrenchment from nuclear power. There have been essentially no light water reactor orders since 1974 and plants in the pipeline have been cancelled at an alarming rate. The problems facing the LWR business today are primarily institutional and financial in character, rather than technological. We must streamline and discipline the licensing process. There is no valid reason why reactor lead times in the U.S. must be so long and unpredictable, varying between 10 and 15 years, when plants in France and Japan can be licensed and constructed in about 6 years. The utilities and theirinvestors simply cannot cope with such uncertainties. The Vice President's Task Force on Regulatory Reform offers an opportunity to correct this problem. A second crisis facing the utilities is their inability to form capital for projects which offer lower life-cycle energy costs. This is not a problem unique to nuclear; it also impacts other capital intensive options such as coal. Allowed or realized rates of return are simply not commensurate with risks inflicted by uncertain Federal regulation. In many cases, equity rates of return are below not only the general inflation rate, but interest rates which the Government pays for secure, no-risk investment. At issue is the financial viability of the electric utilities -- an issue which goes to the PAGENO="0031" 36 heart of our economic security. The President's Economic Recovery Plan and his regulatory reform objectives will create an investment environment more favorable to utility capital formation. Waste Management Consider next the current status of the U.S. high level waste management system. The urgent near term need is to relieve spent fuel storage congestion now building up at power reactor sites -~ a situation which will become critical in about 1986. The urgent long term requirement is to fulfill the U.S. Government responsibility to manage high level wastes. The policies of the past four years have tended to obfuscate the technical issues associated with waste management, and thus have effectively delayed implementation of a coherent, practical, engineering approach that I believe can meet the concerns as to public health, safety, and environmental impact. These policies placed the search for the "perfect" geological medium for ultimate disposal on the critical path for the solution of the waste issue, and indeed, on the critical path for the survival of nuclear power. The ban on reprocessing established unreprocessed spent fuel as the reference waste form. This policy, which implied throwing away the residual energy value of spent fuel, would create a waste form less stable than separated and immobi- lized fission products. It also led to the spent fuel storage congestion I referred to earlier. After encouraging a private sector investment of over $100 billion in LWR plants over the last two decades, the U.S. Government has yet to fulfill its commitment to provide for the management of high level wastes. PAGENO="0032" 37 We must proceed expeditiously to meet our waste management responsibilities. We can solve the problem; we should not expand and perpetuate it. The West Valley project, now legislated, offers an opportunity to provide a timely and convincing demonstration of high level waste immobilization technology, which was invented In the U.S. and placed Into practical service abroad. Barnwell, if and when it comes on line, offers another opportunity to demon- strate waste immobilization. We can then prove through actual demonstration -- by 1990 -- that high level wastes can be emplaced safely and effectively in the ground. Reprocessing Consider next the current status of U.S. commercial reprocessing. Repro- cessing represents a critical linkage between the other strategic elements -- LWRs, waste management, and breeder reactor systems. Spent fuel reprocessing, first developed here and currently in practice in other countries, has not occurred in the U.S. Three Government-encouraged attempts at commercial reprocessing -- West Valley, Morris, and Barnwell -- have failed. In two of these cases, West Valley and Barnwell, the failures are traceable to unstable Federal regulatory and developmental policy. There are five major national Incentives for reprocessing: The first, and most near term, is that reprocessing will relieve spent fuel storage congestion; Second, reprocessing and immobilization results in a more stable waste form for ultimate disposal; Third, recovery of light water reactor-generated plutonium Is needed to provide plutonium inventories for the breeder R&D program and, ultimately, to provide Initial inventories to start up a breeder economy; PAGENO="0033" 39 Prior to 1977, the project sequence was: the Experimental Breeder Reactor II (on line in 1963); the Fast Flux Test Facility (on line in 1980); the Clinch River Breeder Reactor (on line in 1983); and a~ large prototype plant (on line in 1988). This progression of plant scaleup was interrupted in 1977. It should be resumed. The Presidents FY 1982 budget requests funding to continue the Clinch River Breeder Reactor project. If confirmed, I will do everything in my power to bring CRBR on line as promptly as technically possible. When a Congressional and Executive Branch consensus is reached that CRBR should go forward, this mandate should include a charge that the plant be constructed and placed in operation on the most expeditious schedule. This project is severely off baseline schedule due to the policy debate of the past four years. Further delay would diminish the value of the project to the overall U.S. breeder program and increase project costs. If confirmed, I would promptly review and rebaseline all aspects of the project -- management structure, schedule, cost, project technical objectives and licensing activity -- with an aim toward streamlining and fast-tracking the project. We should also accelerate the design and Institutional planning for a larger project beyond CRBR. Pressures to reduce Federal expenditures on energy development and production make it unlikely that a follow-on plant will be a predominantly Government undertaking. Hence, innovative financial and institutional arrangements should be examined with an objective of maximizing the participation of the utilities and industry. One could argue: why not wait until the breeder is needed, to finish develop- ing it? Quite frankly, I am not smart enough to pinpoint the year, month, PAGENO="0034" 40 day, and hour that the breeder will be needed because of uranium resource and economic constraints. We have been inundated in the past decade with highly refined, but highly uncertain, studies and analyses of the timing of the need for the fission breeder. Small changes in basic assumptions can shift the need date by several decades. Furthermore, development lead times are long, and unc,ertain. We have at least another 20 years of work before large commercial-size units can be purchased by utilities with technological and financial confidence. At the same time, the breeder concept is the only essentially inexhaustible option which is well beyond the proof-of-principle and engineering feasibility stages. My view is that we should complete the development of the breeder while we have the standing capability to do so. When the job is finished, private industry can phase commercial deployment and market penetration to match economic conditions. If, however, we are late, the consequences could be very large. Summary To summarize: o the LWR option, the first commercialized nuclear enterprise in the U.S., has been severely handicapped by institutional paralysis -- a combina- tion of financial and regulatory factors; o commercial reprocessing has been defeated, for the same reasons, in two out of three attempts since the l960s; o the U.S. Government has yet to fulfill its responsibility to provide timely disposal services for high level nuclear wastes; PAGENO="0035" 41 o the U.S. breeder development program has lost its previous impetus and is now substantially behind that of other nations; o the U.S. Government is perceived as an unreliable partner with industry and as an unreliable supplier of nuclear technology abroad. In all of these cases, a root cause is regulatory and policy instability. The general inflation in the economy and uncertainties in electrical demand are other causative factors. But the major failure transcending all of these maladies is the lack of hational resolve. Our priority goal must b,e to stabilize nuclear policy for per(ods of time commensurate with the long leadtimes characteristic of nuclear technology. The U.S. Government role should be to create and sustain a policy environment in which long term objectives beneficial to the Nation can be achieved by the native genius in the private sector, which in turn must be a partner in defining and achieving these objectives. Nuclear power development should not be regarded indefinitely as the ward -- the responsibility -- of the Federal Government. The Federal Government should be a reliable partner, but not an indulging or nagging parent. Where a Government role in research and development is necessary -~- as in long term, high risk, high national benefit programs beyond the normal plan- ning horizon of the private sector -- it should be conducted in accordance with the doctrine of "management by objective." That means that we should know where we want to go and when we want to get there before we set out on the journey. It means that all costs and effort charged to that objective must be relevant to that objective. It means that Federal programs and PAGENO="0036" 43 As to ~y personal qualifications for this position, I have 20 years of diversified experience in private industry, military, academia, and the Federal Government. I hold BA and BS degrees from Columbia University, and MS and PhD degrees in engineering from the Massachusetts Institute of Technology. I have served as Director of the Office of Plans and Evaluation, DOE Nuclear Programs, since 1977. In this capacity, I have been responsible for strate- gic, implementation, and fiscal planning for the nuclear programs which I would be managing as the Assistant Secretary, if confirmed. Prior to my Federal experience, I have been: o a consulting engineer at the Stone and Webster Corporation; o Director and Chief Project Engineer, Organic Reactor Project, Massachusetts Institute of Technology; o Research Associate, Fast Reactor Test Facility, Massachusetts Institute of Technology; o Director of the Departments of Nuclear Reactor Physics and Nuclear Reactor Engineering at the U.S. Naval Nuclear Power Staff in New London, Connecticut, and Bainbridge, Maryland; and o Division Officer aboard the aircraft carrier USS Randolph (CVS-15). If I can provide you with additional information as to my background and views or answer any questions, I would be happy to do so at this time. PAGENO="0037" 44 A Bibliography of Major LMFBR and/or CRBRP Program Reviews Department of Energy, July 20,' l9~l November 1962 "Civilian Nuclear Power - A Report to the President-1962," U.S. Atomic Energy Cormiiission February 1967 "Civilian Nuclear Power - The 1967 Supplement to the 1962 Report to the President," U.S. Atomic Energy Commission April 1969 "Cost-Benefit Analysis of the U.S. Breeder Reactor Program." U.S. Atomic Energy Commission, Division of Reactor Development and Technology, WASH 1126 April 1970 "Report of the Edison Electric Institute," Edison Electric Institute, EEI-70-30 July 11, 1969 Congressional debate on the merits of the proposed program & dune 2, 1970 resulted In Authorizing Legislation for the first U.S. Lt4FBR De~ionstration Plant: Public Law 91-44, Project Definition Phase (POP); and Public Law 91-273, Definitive Cooperative Arrangement Phase (DCA) January 1972 "Updated (1970) Cost-Benefit Analysis of the U.S. Breeder Reactor Program, U.S. Atomic Energy Commission. Division of Reactor Development and Technology, WASH 1184 March 1972 "LMFBR Demonstration Plant Program. Proceeding of Senior Utility Steering Committee and Senior Utility Technical Advisory Panel for the Period April 1971 thru January 1972," prepared for U.S. Atomic Energy Commission, WASH 1201 August 7, 1972 Memorandum of Understanding signed by Project Management Corporation, Breeder Reactor Corporation, Tennessee Valley Authority, Commonwealth Edison Company, and U.S. Atomic Energy Commission; Resulting from & review to establish the intent and needs to be fulfilled by the Project. Presented to and approved by the U.S. JCAE following public hearings before the Committee on September 8, 9, and 12, 1972 September 25 Contractor Selection Evaluation Panels, Project Management thru Corporation/United States, Atomic Energy Comission/ October 17, 1972 Comonwealth Edison Company. Convened to evaluate contractor proposals for accomplishing the objectives of the Project, including technical ideas PAGENO="0038" *45 Annually from Project Management Corporation Annual Reports to the Breeder 1973 to Reactor Corporation, Project Review Committee, Present R. Jortberg and D. Keeton, Project Management Corporation December 1973 "LMFBR Program Plan' 10 volumes, U.S. Atomic Energy Commission, compiled by Argonne National Laboratory, LMFBR Program Office, 2nd Edition "Element 1 Overall Plan," WASH 1101 "Element 2 Plant Design," WASH 1102 "Element 3 Plant Systems and Components,1' WASH 1103 "Element 4 Instrumentation and Control," WASH 1104 "Element 5 Sodium Technology," WASH 1105 "Element 6 `- Reactor Systems and Components," WASH 1106 "Element 7 " Fuels and Materials," WASH 1107 "Element 8 Fuel Recycle," WASH 1108 "Element 9 u Physics," WASH 1109 "Element 10 Safety," WASH 1110 December 1973 Report of the Cornell Workshops on the Major Issues of a National Energy R&D Program. Included: Workshop on the Short~Term Nuclear Option, A. M. Weinberg, Chairman, and the Workshop on Advanced Nuclear Power, H. Bethe, Chairman December 12, 1973 "The Nation's Energy Future, A Report to Richard M. Nixon, President of the United States," submitted by D. L. Ray, Chairman, U.S.. Atomic Energy Commission, WASH 1281 June 1974 CRBRP Reference Design Report (Vols. 1 & 2), Baseline Cost Estimate (Vols. 1 & 2, the "White Book"), and Baseline Schedule; compiled for Project Management Corporation as part of the U.S. Energy Research and Development Administration LMFBR program with input from the Contractors. In support of these documents, the following reviews transpired: October thru Review of Initial Conceptual Design, Cost, and Schedule December 1973 Estimates by U.S Atomic Energy Commission, Project Management Corporation, Contractors January thru CRBRP Re~Design and Cost Reduction Task Forces, a total March 1974 of eight groups including the short~shaft pump and steam generator building task forces April thru Independent Cost Review by U.S. Energy Research and Development May 1974 Administration (other than Division of Reactor Development and Technology), including the Comptroller, Construction, and Contracts Divisions, and the Project Cost Review by U.S. Energy Research and Development Administration/Division of Reactor Development and Technology 89-405 O-82-----4 PAGENO="0039" 47 April 28, 1975 The Liquid Metal Fast Breeder Reactor Program~Past, Present and Future, Comptroller General of U.S. General Accour~ting Office, RED~'75~'352 April 30 thru Fast Breeder Reactor Program,' Hearings before the Joint May 8 1975 Economic Committee, U.S. Congress May 1975 Independent Reactor Development Program Review, Manson Benedict et. al.., review convened at Tampa Airport May 20, 1975 "The LMFBR~Its Need and Timing," Energy Research and Development Administration, Division of Reactor Research and Development, ERDA 38 May 22, 1975 "Cost and Schedule Estimates for the Nation's First Liquid Metal Fast Breeder Reactor Demonstration Power Plant," Comptroller General of U.S. General Accounting Office, RED~.75~358 June 2, 5, 6, 1975 "Oversight Hearing on Nuclear Energy: Nuclear Breeder Development Program," Part 2, Hearings, Subcommittee on Energy and the Environment of the Conmrittee on Interior and Insular Affairs, House of Representatives June 5, 1975 CRBRP Preliminary Safety Analysis Report docketed by the U.S. Nuclear Regulatory Commission following extensive acceptance review July 31, 1975 "The Liquid Metal Fast Breeder Reactor: Promises and Uncertainties,' Comptroller General of U.S. General Accounting Office, OSP"76~l August 1975 CRBRP Current Cost Estimate (Blue Book), Project Management Corp. August 1975 CRBRP Revised Cost Estimate (Green Book), Project Management Corp. November 1975 "Liquid Metal Fast Breeder Reactor: Decision Processes and Issues," Electric Power Research Institute, EPRI SR~20 December 15, 1975 "Liquid Metal Fast Breeder Reactor Program~Overal1 Plan," U.S. Energy Research and Development Administration, Division of Reactor Research and Development, compi'ed by Argonne National Laboratory, Breeder Reactor Evaluation Office, ERDA'~67 December 1975 `Final Environmental Statement. Liquid Metal Fast Breeder Reactor Program," 3 volumes, U.S. Energy Research and Development Admi ni strati on "Vol. 1. Summary and Supplemental Material" "Vol. 2, Comment Letters and ERDA Responses" "Vol. 3. Comment Letters and ERDA Responses" ERDA'l 535 PAGENO="0040" 49 April 5, 1977 `The Fission Breeder - Why and When,' A Report to the LMFBR Steering Committee, U.S. Energy Research and Development Admi ni strati on April 6, 1977 "LMFBR Program Review," Majority opinion by T. G. Ayers, M. T. Benedict, F. L. Culler, Jr., J. L. Everett, III, R. V. Laney, C. Starr, C. Walske. Coninittee convened by President Carter, U.S. Energy Research and Development Administration July 25, 1977 "An Evaluation of the National Energy Plan," U.S. General Accounting Office, EMD'~77~-48 October 1978 "Oversight. Alternative Breeding Cycles for Nuclear Power: An Analysis," Report prepared for the Subcommittee on Fossil and Nuclear Energy Research, Development and Demon- stration of the Committee on Science and Technology, 95th Congress, 2nd Session, Volume VI May 7, 1979 "The Clinch River Breeder Reactor Should the Congress Continue to Fund It?," Comptroller General of the U.S., General Accounting Office, EMD-79-62 May 11, 1979 "The Clinch River Breeder Reactor Project. An End to the Impasse," a White House White Paper prepared for the Congress May 23, 1979 "Nuclear Reactor Options to Reduce the Risk of Proliferation and to Succeed Current Light Water Reactor Technology," Comptroller General of the U.S., General Accounting Office, EMD~79-15 July 10, 1979 Comments on the Administration's White Paper "The Clinch River Breeder Reactor Project; An End to the Impasse," U.S. General Accounting Office, EMD-79-89 December 25, 1979 "Energy in Transition 1985-2010. FInal Report of the Com- mittee on Nuclear and Alternative Energy Systems (CONAES)," National Research Council, National Academy of Sciences January 1980 INFCE Summary Volume, Final Report of the International Nuclear Fuel Cycle Evaluation, INFCE/PC/2/9 March 1980 Assessment of the Status of the CRBRP Project and Update of the Total Estimated Cost to Complete the Project (the Rjzzo Task Team Review), U.S. Department of Energy June 1980 "Nuclear Proliferation and Civilian Nuclear Power, Report of the Nonproliferation Alternative Systems Assessment Program," U.S. Department of Energy, Assistant Secretary for Nuclear Energy, 9 volumes, "Executive Sum- mary," DOE/NE-0001 Vol. 1: Program Summary Vol. 2: Proliferation Resistance Vol. 3: Resources and Fuel Cycle Facilities Vol. 4: Commercial Potential Vol. 5: EconomIcs and Systems Analysis Vol. 6: Safety and Environmental Considerations for Licensing Vol. 7: International Perspectives Vol. 8: Advanced Concepts Vol. 9: Reactor and Fuel Cycle Descriptions September 22, 1980 "U.S. Fast Breeder Reactor Program Needs Direction," Comptroller General of the U.S., General Accounting Office, EMD~.8O-81 PAGENO="0041" 51 Additional contingency, $173 million, for a total of $553 million added to the 1972 estimate and adding escalation factors beyond the original estimate, an additional $484 million, for a revised total project cost of $1.736 billion. As a result of this increase in the estimate of the cost of the pro- ject, in 1975 Congress authorized a change in the arrangement among the four parties to the basic contract, establishing that the Federal Government would manage the project with support and assistance from the PMC within an integrated project office com- posed of representatives of the Federal Government and of the util- ity industry. This change in arrangement became effective on May 1, 1978, after extensive hearings before the Joint Committee on Atomic Energy in April 1976 as to the detailed way in which the integrat- ed office would function and the actual authority and control over the technical decisions and the use of project funds, whether utility industry or Federal funds. There is absolutely no doubt in the minds of any oZ the project participants that the Department of Energy is in full control of the use of project resources and of all decisions made which affect the use of those resources. I would like to speak about our custodianship of the use of those resources. In 1975, as the result of delays imposed upon the project from re- ductions in budget needed to maintain the schedule developed in 1974-$90 million added cost-delays in the licensing process partly caused by litigation against the LMFBR program-these delays added $78 million-and a further reassessment of the cost to do the job-$46 million added cost-the cost was reassessed at $1.95 billion with a further delay of 15 months to October 1983. This was the cost baseline and schedule in August 1975. Since that date, the estimate has increased to $3.2 billion, caused as follows: From causes internal to the project-$243 million; from causes external to the project-licensing, $140 million-and some of that has been experienced and some has been allowances for future licensing considerations-funding reductions, $27 million; and this national policy debate over whether to continue the pro- ject to completion or not, $837 million; for a total increase of $1.4 billion since 1975, no, I am sorry, $1.004 billion for the external causes for a total increase in changes since August 1975 of $1.247 billion. Altogether, since the project reference cost estimate of August 1974, 20 percent of the cost increases are attributable to causes in- ternal to the project; 80 percent are the result of causes external to the project over which the project had no authority to manage. The current assessment of an achievable initial criticality date is now February 1990. We use a number of standard management techniques in the project in order to control the project work. For instance, the com- mittee staff has been provided a copy of our booklet which outlines these overall management control systems and an update of that, section 2.5 of our "Management Policies and Requirements," which describes the management control sytems, in our meeting on June PAGENO="0042" 52 One of these is the same system which is used extensively in the Department of Defense after it was developed in the Department of Air Force. This system is patterned exactly after the Department of Defense system. It details the work into tens of thousands of work packages, each with its own schedule and estimated cost. These details are aggregated into increasingly larger packages which, in the ultimate, compose the entire project into a single package. As a part of the performance measurement system, we control by milestones. There are upward of 3,000 events that are scheduled by the four design contractors-this does not include the events scheduled by the construction contractor-against which they report perform- ance and for which the schedule dates cannot be changed without approval at the level of management above the subcontractor or prime contractor, as appropriate. The contractors report their performance against their schedule and cost objectives monthly; the reports which we receive monthly amount to some 600 or more pages, which express the degree of success the contractors are having in meeting their technical, cost, and schedule objectives, and above certain minimum thresholds of variance, all .variances must be explained. These explanations are critically reviewed in the project office. If the contractor had not taken or been able to take remedial action and remedial action can be taken or assistance can be given at the project office level, it is so done. The success of this perform- ance measurement system can be seen in the fact that in the ag- gregate the variance from performance measurement schedule over the years in terms of cost performance has been within 2½ percent cumulative variance; and the variance from schedule has fluctuat- ed in the favorable and unfavorable directions. In spite of performance well ahead of schedule in many areas, the delays in the steam generator program have made the overall schedule variance increase to about 5 percent behind schedule in the sense of expenditure of dollars by the dates scheduled for those expenditures. Last summer we rescheduled all the contract work, including the steam generator scheduled work, in order that the performance in accordance with schedule would better reflect the performance of the project as a whole, not including the severe accumulation of behind-schedule work in the steam generator. Since last summer, we have been running less than 1 percent behind in the schedule achievement. Each year at the beginning of the year we make an accrued cost budget for that year. In terms of actual expenditure, the project has been highly successful: It has underrun its planned expendi- tures for the year every year except for fiscal 1976 in the transi- tional period, when it exceeded the spending plan by twelve ten- thousandths of 1 percent, which would be equivalent to 60 cents on a family income of $50,000, and except for fiscal 1980, when we ex- ceeded the spending plan by five one-hundredths of 1 percent. We shall slightly underrun our cost budget again this year. In order to assure technical performance is in accordance with the fundamental project design requirements and satisfies all of the codes and standards which the project must meet, we have a PAGENO="0043" 53 highly structured arrangement for prescribing the requirements and then for verifying that the requirements are being met pro- gressively at designated states of the design. Design reviews are held; the four different design contractors participate in all reviews which affect their own areas of responsi- bilities. As a matter of fact, we have identified nearly 6,200 design interface points among the four design contractors; these points are placed on their schedules, and we in the project office review the performance every 2 weeks. For several years we have consistently been within 1 or 2 per- cent of schedule delivery of interface data. For the last 12 months we have been off schedule on the average of not more than two pieces of interface data at any one time. There are about 500 to finish. This method of management among several design contrac- tors on the same job was said by these large and competent design firms to be utterly unique in their experience. It has been enor- mously successful in assuring a very close interrelationship among the design contractors. Another way in which we manage the technical performance is by a very vigorous and structured configuration management con- trol process which we adopted in November 1975. When design has reached a certain stage of completeness, it is "baselined," or estab- lished as design which is subject to the configuration management process. Any change to that design made after that time must be in ac- cordanôe with the configuration management procedures. Each design contractor has a certain low level of latitude for making changes and reporting them to the project office right away; above the thresholds, the project office makes the decision as to whether to make the change or not. Cost and schedule consideration of each change must be ad- dressed before the change can be approved. To date, there have been over 4,100 changes made through this controlled process, at an additional cost to the project of about $130 million, of which $92 million is the result of changes induced by interaction with the NRC, and which reflects nearly $50 million of cost reductions made in the project. As a matter of fact, actions taken to reduce costs outside of the configuration management process, such as improvement in fabri- cation techniques, improvement in construction schedule and con- structability of the plant, and design changes made before design is baselined, have resulted in approximately $100 million additional costs savings to the project. We also manage the contractors' procurement activities. Above certain thresholds the contractors must provide to us for review and approval their proposed. contracts. Their degree of authority is derived by delegation from me. This delegation is granted only after a formal contractor's procurement system review, which is conducted by teams composed of representatives of the Defense Contract Administrative Services, Defense Contract Audit Agency, the DOE operations offices, and a member of the project office pro- curement division. The leadership of the team is always under one of the other agencies, not under the project office. This review is held on about PAGENO="0044" 55 fectiveness of contracting aspects of the Clinch `River breeder reac- tor project. The Secretary of the Air Force has permitted me to spend time with the subcommittee staff, both to advise the staff and familiar- ize myself with the project. As predicted by the response to Chairman Dingell, my testimony probably does not represent the views of the administration. Mr. DINGELL. Mr. Fitzgerald, just so the record is clear, one, at the request of the chairman and the subcommittee, you have indeed worked with us in detail on this particular matter. Two, you are here by request of the subcommittee, specifically stated to you to respond to us on questions which relate to the in- terests of the subcommittee in the work that you did and in the project and, three, you are here under oath not only to give us your own views in response to the general requests of the committee and the subcommittee staff, but also to respond to us giving us your own thoughts and not the views of the administration, that is pre- cisely why we like having somebody like you here. Mr. FITZGERALD. Thank you, Mr. Chairman. The project was sold to Congress in 1973 on the basis of an over- all cost estimate of $669 million. The estimate grew rapidly to $1.736 billion in 1974, then to $1.95 billion in 1975. The Depart- ment of Energy now considers the $1.95 billion as the original base- line for the program, disregarding the $669 million figure on which the program was sold to Congress. The present estimate for the project is approximately $3.2 billion, an estimate made in 1980. I believe there are millions of dollars of hidden costs on the Clinch River breeder reactor project. The staff has not had an ade-' quate time to determine the extent of those hidden costs. Total life cycle costs, modifications, maintenance costs and operating subsi- dies should be determined. Due to problems growing out of lack of contract definition and enforcement, the full extent of project cost overruns is not evident from examination of the project on a contract-by-contract basis. Many contracts appear to be written in reaction to situations which evolved long after the project was authorized. Furthermore, according to DOE officials, the contracts them- selves are adjusted routinely. There appears to be no limit to the taxpayers' liability. When the project was originally sold to Con- gress in 1973, the Atomic Energy Commission claimed that the limit of the Government's liability would be about $100 million. Later, in 1974, a new arrangement was negotiated which provided for the Government to pay $100 million plus no more than 50 per- cent of the remainder of the project costs. Then, in 1975, the sharing arrangement was turned on its head. Rather than limiting the Government's liability, contributions from the industry were limited to about $250 million and the Gov- ernment was saddled with an open-ended commitment to pay for the remainder of the project including cost overruns. I would like to suggest to the committee and staff at this point that they might study the history of the supersonic transport subsi- dy program which I was on the periphery of in the early 1970s, and I think it is a useful parallel because I think the final question that PAGENO="0045" 56 had to be answered there was not necessarily whether the project should be built or not but whether it would be paid for or subsi- dized by the taxpayers. I submit to you that this would be a useful question to consider in reviewing this program. A fundamental flaw in the management approach to the Clinch River project is the fact that principal prime contracts have been written without binding provisions for costs and schedule perform- ance or for meeting specific engineering specifications. I am speaking of the prime contractors here. This situation pre- vails in spite of the fact that project definition was begun in May of 1969, according to documents we obtained from the Department of Energy. It is not clear whether this practice is a symptom or a cause of the state of disarray in the project. However, it is clear that with these contracts, the prime contractors have no need to perform, much less to excel, and they have not. As long as they can be as- sured of taxpayer support there is no compelling business reason for the contractors not to "preserve the problem," which is a phrase used commonly in the nuclear development industry. Regardless of other problems, the fuzzy contracts, national policy debate, et cetera, the pacing items on the project would probably have held up the completion of the project in any event. A prime example of these pacing items is the steam generator which I shall discuss later. Because of the looseness of the descrip- tion of the scope for the Westinghouse contractual work, it appears that Westinghouse was able to argue that many of the actions DOE felt were necessary to carry out the project were outside the con- tracted scope of Westinghouse's work. I should add here that Westinghouse was one of the prime con- tractors. Even though their costs are reimbursed, Westinghouse claimed they were due additional fees or profit. The accounts of the size of the Westinghouse claims and settlements vary. One group of DOE officials provided the staff the following account. In 1979 Westinghouse put in claims for additional fees of $157.3 million. These claims were for work through fiscal year 1986. The Government settled those fee claims through 1979 for a total of $23 million. Department of Energy then paid Westinghouse $7.4 mil- lion in additional fees for the next 15 months between October 1, 1979 and December 31, 1980. Between January and June 30, 1981, the DOE agreed to another $3.2 million in fees for Westinghouse. A June 24, 1981, paper from the Clinch River Breeder Project Office gives another account. The writer of this paper claims: "As a result of work added to contracts, a $16.424 million fee has been added. Claims by Westinghouse were settled for $8.3 million. There are no outstanding claims from Westinghouse." I would suggest that the staff reconcile the conflicting stories on claims. Mr. GORE. Mr. Chairman? Mr. DINGELL. We will ask Mr. Brewer to describe that at the ap- propriate time. PAGENO="0046" 57 The Chair does not recognize the gentleman at this time. The witness will finish his statement and members will be recognized for questions in appropriate order. I am sure the gentleman wants to adhere to the regular order. The witness will continue. Mr. GORE. Point of order. Mr. DINGELL. The gentleman will state the point of order. Mr. GORE. I don't wish to do so. Mr. DINGELL. The gentleman has been recognized to state a point of order. Mr. GORE. Well, I am trying to find-- Mr. DINGELL. The Chair has recognized the gentleman to state a point of order. Mr. GORE. Where is the statement? Mr. DINGELL. The Chair has recognized the gentleman to state a point of order. Mr. GORE. Under the rules of the subcommittee, witnesses are supposed to have statements 48 hours in advance so that members can follow the statements. I don't want to make a big deal about it. Where is the statement? I got a draft and I appreciate the courtesy, but this is not in the draft. Mr. DINGELL. The Chair overrules the point of order. The Chair thanks the gentleman. The witness is recognized. Mr. FITZGERALD. May I continue, Mr. Chairman? Mr. DINGELL. You may indeed. Mr. FITZGERALD. The contracting peculiarities do not stop with the prime contracts. During the review, the subcommittee staff and I jointly concluded that a pacing item in the entire program was the steam generator. Consequently, we spent most of the time allot- ted to reviewing contract peculiarities attempting to collect infor- mation on the steam generator contract. During the review, staff was told that the original approach to acquiring the steam generator involved a competition in which Foster-Wheeler and Atomics International were competitors. Al submitted a bid of $26.4 million; Foster-Wheeler, according to infor- mation we received, submitted a bid of $20.3 million. Foster-Wheeler's low bid was made up of a cost-plus incentive fee of $6.7 million for the prototype and $7.4 million fixed price for the plant units. Even though Al had lost out in the competition, Mr. T. A. Nemzek, director of reactor research and development, directed in a September 18, 1975, telex that "both competitive bids should be rejected and that award of a CPIF contract for both prototype and plant unit steam generators should be directed to Atomic In- ternational." This maneuver overruled the recommendations of both GE `and Westinghouse on source selection. 1n a September 2, 1975 memo, Mr. Nemzek informed both Mr. Richard W. Roberts, Assistant Administrator for Nuclear Energy, and Dr. Robert C. Seamans, Jr., Administrator of ERDA, of his in- tention to cancel the competition and award a sole source cost-plus contract to the apparent loser. PAGENO="0047" 58 There is no record that either Mr. Roberts or Dr. Seaman object- ed. The staff tells me that Foster-Wheeler has told them that they had not been informed of these transactions. Instead, they had been led to believe that they simply lost the competition. A retired Atomic Energy Commission contract expert told the staff that he was shocked at the apparent lack of ethics in this transaction. The estimated cost, initially, of the AT contract, which could have been obtained for $20.4 million, of which $13.7 million was fixed price, was $56.9 million, nearly three times the low competitive bid for 11 steam generators. The Department of Energy claimed that the $56.9 million figure included $8 million to $10 million of costs not included in the rejected bid. This figure subsequently has grown to $143 million for only two steam generators. I should like to add at this point, Mr. Chairman, that the staff and I learned of the $143 million figure from the Wall Street Jour- nal. We had previously been told that the figure was $115 million, presumably for all 11 steam generators, although I must admit the people we talked to were somewhat fuzzy on that point. At the same time, the delivery schedule for the prototype slipped for 3 years, and technical problems abound, according to DOE re- ports. An internal memo of October 22, 1979, obtained by the staff, suggested that the technical problems on this procurement might be severe enough to warrant termination. The staff has attempted to pursue the possibility of default, but has not yet gotten clear an- swers on that possibility. It seems clear to me that the steam generator fiasco-and I think it is a proper term-would have held up the program regard- less of the so-called national debate. In fact, the senior technical official on the project admitted to staff and me that it was a good thing that all the units scheduled to be built were not constructed. I want to give you an outline of suggestions for improvement of the continuing management of the program. Based on the findings to date, I believe that a complete restructuring of the contractual approach is needed to establish a basis for contractual discipline and to protect the public interest in general. I recommend: (1) Cancel the existing prime contract; (2) perform a technical audit of the project to determine: (a) current technical status; (b) technical outlook, including definition of technical ques- tions needing answers before definitive, binding, fixed-price con- tracts can be written for a workable, licensable powerplant; (c) which component development efforts should be continued; (d) whether purchase of foreign components and technology should be pursued; (e) whether it is now feasible to write definitive, binding fixed-price contracts for the project; (3) if feasible, prepare bid pack- ages for competing definitive contracts; (4) evaluate alternative nu- clear reactor programs: (a) perform technical audits on major po- tential alternative programs; (b) estimate the cost to keep technol- ogy development alive for alternatives; (c) estimate the cost to carry each alternative forward to demonstration; (5) renegotiate cost sharing on the Clinch River Breeder Reactor Project so that the taxpayers' share is no greater than 50 percent, and so that first priority for funding use is carrying out recommendations 1, 2, and PAGENO="0048" 59 3 above; and (6) when the requirements set forth in recommenda- tions through 5 are met, advertise for competitive fixed-price bids for a working, licensable powerplant. Thank you, Mr. Chairman. Mr. DINGELL. Thank you, Mr. Fitzgerald, and also for the assist- ance you have given to this committee in analyzing the rather diffi- cult technical questions which lay before it insofar as the contract- ing process is concerned. Mr. Brewer, do you or Mr. Caffey have any comments at this particular time on the comments of Mr. Fitzgerald? Mr. BREWER. No, sir. Mr. CAFFEY. I have no comments. Mr. DINGELL. Mr. Roll? Mr. ROLF. No, sir. Mr. DINGELL. Mr. Staker? Mr. STAKER. No, sir. Mr. DINGELL. The Chair advises that in view of the time prob- lems we have, and in view of the fact there are lengthy questions to be directed to the panel by members of the staff, the Chair will commence by recognizing members in the order of their appear- ance, in accordance with the tradition of the subcommittee, for the period which is set forth in the rules, which is 5 minutes, at the conclusion of which time the Chair will recognize staff for ques- tions. The Chair advises we have a colleague from another committee who has considerable interest in this and has requested permission of the Chair to sit with us this morning, and he will also be recog- nized at the conclusion of members of the committee. Mr. GORE. A parliamentary inquiry. Mr. DINGELL. The gentleman will state it. Mr. GORE. Will supporters of the project from the Science and Technology Committee also be given an opportunity to join us? Mr. DINGELL. I have received no requests from such persons to be here, but we will, of course, hear them if they desire to be here. Mr. GORE. It is not a formal procedure to ask other members of other committees to come and join us. Mr. DINGELL The Chair has not invited any other than members of this subcommittee to sit. If other members desire to sit with us, the Chair will consider the courtesies usually afforded by this com- mittee to members other than members of the committee. The Chair is very sensitive to the gentleman's responsibilities in these matters and will observe priority with care. The Chair recognizes now for 5 minutes, according to the rules, the gentleman from Tennessee, Mr. Gore. Mr. GORE. Thank you, Mr. Chairman. Mr. Fitzgerald, I want to thank you for showing me the courtesy of providing a draft copy of your statement before appearing here today, and the altercation a moment ago developed because you de- parted from the prepared statement somewhat, and, as I say, that is no big deal, but let me start with that point. On page 6 of your statement, you say, "The Government settled these fee claims through fiscal year 1979 for a total of $23 million." PAGENO="0049" 61 gressman Gore, have come from the project. I didn't make them up. Mr. GORE. It is unfortunate that all of the charges that have been given such wide circulation can't also be changed when you find out from the other side that some of the charges are mistaken. In fact, a lot of this has come from the people at the project. You cite in your prepared statement cases of fraud and abuse. Then you say the FBI is investigating. The implication is that you went down there, or got involved in investigating the project, and uncovered some cases of fraud and abuse, and, as a result, the FBI got involved, and it is certainly lucky that somebody has looked at it. In fact, you were really told by the project people about these cases of fraud and abuse. They were the ones who initiated the in- vestigation. Isn't that correct? Mr. FITZGERALD. No, sir, and I see no implication. I think what you have there are excerpts from the staff draft report that I in- cluded for your review. It is not part of my prepared testimony. There was no such implication, there. I had no part in the fraud review. Mr. GORE. Other people caught it and initiated the investigation, and that is how you found out about it. Isn't that correct? Mr. FITZGERALD. No, sir. I found out from staff. Mr. GORE. Staff of the subcommittee? That is how they found out about it. Mr. `FITZGERALD. I couldn't say that, but let me tell you what we did find, to get from the project people, and the Department of Energy people, at the one meeting I attended where it came up. A staff member and I met with three officials from the Depart- ment of Energy, at which time the staffer asked if there had been any instances of fraud and abuse encountered in the program. Mr. Caffey, I believe, answered there had been none. The staff member asked the question again and received the same answer. The third time he asked, he was told by Mr Caffey that, yes, he did recall one. Subsequently, the staff member and I walked to the headquarters of the Inspector General of the Energy Department and asked him the same question He said there had been no such discovery. That was our starting point. Who discovered them, I couldn't say, and it wasn't part of my testimony, Mr. Gore. You may imply that, but it wasn't part of my testimony. Mr. GORE,' You used two figures as the original cost, and I am a little confused You say that originally the Government share was limited to $100 million Then at another point, you say the original Government share was $699 million. You talk about a big change in 1975, making the Government's contribution open~ende4 and putting the limit on the utilities contribution, and you talk about turning it upside down. However, again, it.is just wrong, Mr. Fitzgerald. I want to refer you to testimony before the Joint Committee on Atomic Energy, dated September 7, 1972, where the initial agree- ment was discussed and the contribution from `the utility partici- pants were to be fixed and all openended risks were to be'borne by the Government. ` 89405 0-82--S PAGENO="0050" 62 Let me just quote to you from the testimony of the Commissioner of the AEC, Mr. James Ramey, as he responded to questions from Senator John Pastore, who was chairman of the committee. Mr. RAMEY. Under the arrangement the contribution by each of the principal par. ticipants other than the AEC will be fixed. AEC will have the burden of open-ended risk subject to congressional authorization. Chairman PASTORE. In other words, to put it in simple English, the responsibility on non-Government contributions will be up to $250 million and that is fixed as a ceiling and above that will have to be public money? That is back in 1972 at the very beginning. Were you aware of that testimony? Again, I sympathize, because it is a voluminous record to review and get into, but, again, the record seems to be just at variance with the charge that you have made there. Mr. FITZGERALD. Yes, sir, I did read that. I read various state- ments on the same point. Let me clarify a comparison you made between the $100 million and the $699 million. I never said that those were comparable fig- ures. The $699 million, as I read the record, was the total estimate for the cost in 1973. The $100 million was the Government's liabili- ty-the estimate of the Government's liability when it was sold to Congress. That is my recollection of reading it. Those are not com- parable figures, and the fact that they are different numbers does not mean that they are inconsistent. They are entirely consistent. Mr. GORE. Here is what I regard as another completely inaccu- rate charge. You say on page 3-- Mr. DINGELL. The Chair advises the gentleman's time is up. Mr. GORE. Thank you, Mr. Chairman, for your courtesy. You say there are millions of dollars in hidden costs on CRBR, "For example, DOE is building the hot experimental facility at Oak Ridge to reprocess the CRBR spent fuels." Well, Mr. Fitzgerald, there is no hot experimental facility in Oak Ridge, and DOE~ is not building it there: It is not a reprocessing fa- cility just for CRBR, and it is true that according to the original agreement, some elements of the project were to be supplied by the LMFBR parent project, but some of those costs have been switched over to the CRBR project. Let me just ask you, Mr. Caffey, is it correct that the hot experi- mental facility was switched from-maybe Mr. Brewer would be best to answer that. Can you clarify that matter? Mr. BREWER. Mr. Gore, the hot experimental facility, which is in the conceptual design stage, is not being built. It has not been built, authorized, or planned, and it is not needed for Clinch River. Mr. GORE. Thank you very much. Mr. FITZGERALD. Could I respond, since my credibility has been called to question again? I did not give any such testimony, Mr. Gore, and I will submit for the record my revised draft to show that. Mr. GORE. I am sorry. Mr. FITZGERALD. I accept your apology. Mr. DINGELL. The time of the gentleman has expired. Mr. GORE. Mr. Chairman, may I clarify one point? Mr. DINGELL. The gentleman has exceeded 5 minutes over his 5 minutes. The Chair is aware of the gentleman's interest in this. PAGENO="0051" 63 The gentleman has been given an abundance of time to inquire into the matters. Mr. Fitzgerald has told you what he has said. I will be glad* to have him read it again, but the time of the gentle- man has expired. The Chair now recognizes the gentleman from Pennsylvania, Mr. Marks, for 5 minutes. Mr. MARKS. Thank you, Mr. Chairman. I yield to the gentleman from Tennessee. Mr. GORE. Thank you very much. I was given, in a very courteous act by our witness-also, in ac- cordance with the rules of the subcommittee-a copy entitled "Tes- timony of A. E. Fitzgerald." I won't read the rest of the title page. On the front page, it says, "First Draft." And you even gave me your telephone number to call you, and so forth. In your first draft-everything I read from was written by you for your draft testimony, and let me just read it again. "There are millions of dollars in hidden costs on CRBR"; then you depart from your prepared statement, and as I remember your oral statement-this is why I made the point of order earlier, Mr. Chairman, or tried to, because it is hard to follow it, and it is hard to hit a moving target. At that point, you changed, and you said, "The staff hasn't had time to find all these hidden costs," and just left it hanging. Again, I sympathize. It is hard. Again, let me read from the prepared part of it. "For example, DOE is building the hot experimental facility at Oak Ridge to reprocess CRBR spent fuel." Now, it is just inaccurate. Mr. DINGELL. Wait just a minute. Mr. Fitzgerald-- Mr. GORE. I will be glad to yield to the Chairman, if-- Mr. MARKS. I want to make sure these 8 minutes he is taking from my time, that you are not taking some. Mr. DINGELL. I just want to make sure what Mr. Fitzgerald said. I will wait and ask the question on my own time, but in the inter- est of the record the Chair has the duty of seeing that it is clear. Mr. GORE. Will the gentleman from Pennsylvania yield for 30 more seconds? Mr. MARKS. It will be a pleasure. Mr. GORE. I thank my colleague. I think Mr. Fitzgerald is really a folk hero in this country, and I applaud the work that he has done over the years. In working with him I found him to be courteous and forthcoming, and I really be- lieve he is trying to fulfill a public service, but I think with all due respect that the subcommittee has asked him to take on an almost impossible task, and I think it is quite understandable that he would inadvertently commit some oversights, and I think it is com- mendable that he evidently found a couple of them just over the weekend. Unfortunately, there are a lot of others that are yet to be cor- rected, and I hope he will be able to correct them. Mr. MARKS. If the gentleman will permit me, I will reclaim my time. PAGENO="0052" 64 Mr. DINGELL. Mr. Fitzgerald, what did you tell the committee in your oral statement? Mr. FITZGERALD. I said-and I will read you my second draft, I believe there are millions of dollars in hidden costs on the Clinch River Breeder Reactor. The staff has not had adequate time to determine the extent of these hidden costs. Total life cycle costs, including modification and maintenance costs and operating subsidies, should be determined. Mr. DINGELL. Thank you. The Chair recognizes the gentleman from Pennsylvania. Mr. MARKS. Thank you, Mr. Chairman. Mr. DINGELL. The Chair recognizes the gentleman for an addi- tional minute and a half, because the Chair used one minute of the gentleman's time. Mr. MARKS. This gentleman is very grateful. I appreciate that very much. Mr. Fitzgerald, when were you called upon first to make this in- vestigation which you are now reporting on? Mr. FITZGERALD. On May 14, 1981. Mr. MARKS. May 14, 1981? Mr. FITZGERALD. Yes. Mr. MARKS. Thank you. Mr. FITZGERALD. That is not my complete answer. Mr. MARKS. Could you just give me the date? Mr. FITZGERALD. That was the day the chairman requested it. On May 21, 1981, the secretary's office told Chairman Dingell I could work on the project. Mr. MARKS. Were there others you worked with other than our majority subcommittee staff, the people doing this investigation? Mr. FITZGERALD. I had a meeting with Congressman Gore and his staff and a number of telephone conversations with them, during which time we were promised we would get the "why's" of this project. We could see what had been done, but we were searching for why. Mr. MARKS. You mentioned very serious charges concerning offi- cials of DOE and the Clinch River project officials as well-their lack of cooperation with you. I would expect, as an experienced investigator, that you would come here today, with dates, prices, and times to back up those charges. If you have them, I would like to have them now. Mr. FITZGERALD. I am willing to do that. The only thing I would like to request of the chairman is if we get into names of individ- uals, that we have an executive session to protect those individuals; but I have my notes from conversations with various people-one, in particular, who told me he had been ordered not to talk to me. Mr. MARKS. I would suggest that you answer my question. Mr. DINGELL. The Chair will advise the names of persons in- volved will be taken in executive session in order to protect the persons involved. If it is the wish of the gentleman, we will pursue this matter-- Mr. MARKS. Can you answer the question, Mr. Fitzgerald? Mr. FITZGERALD. The question was, am I prepared to do it, and the answer is yes, I am. * Mr. MARKS. All right; let's do it. You have made the charges, and they have become public. PAGENO="0053" 65 By the way, could I ask you something in the meantime? Did you have anything to do with the article that appeared in the Washing- ton Post today? Did you give that information to any of the news- paper people before you ~testified here today. Mr. FITZGERALD. I gave the explanation from which I was quoted, the direct quote. I gave them nothing else. Mr. MAR1~S. When did you meet with the press? Mr. FITZGERALD. I didn't meet with the press on it. Mr. MARKS. When did they call you or contact you? Mr. FITZGERALD. Yesterday. Mr. MARKS. Was that by phone or for a personal meeting? Mr. FITZGERALD. By telephone. Mr. MARKS. Did you advise them at any point in time that you would prefer first testifying and then giving them information con- cerning what you were going to say today? Mr. FITZGERALD. No, I did not, and I didn't tell him what I was going to say today, entirely. I talked, as I recall, mostly about the contractual matters. Mr. MARKS. Did you talk with the subcommittee about getting permission or asking whether or not it was reasonable for you to give information to the press before you came before us? Mr. FITZGERALD. I talked to them previously, and they said we should be completely open, as they always are, with the press. Mr. MARKS. Give the press anything? Mr. FITZGERALD. I don't recall that they said "Give the press any- thing," but they said don't hold back in talking with the press; don't appear to be covering anything up~ Mr. MARKS. Now, would you go ahead and answer the question I asked you before, with regard to the lack of cooperation that you said you experienced with DOE and the Clinch River project memo- randum? Mr. FITZGERALD. Leaving off the names for the moment. When we first began making inquiries about the project, I wanted to talk with some auditors. I was referred from one auditor to another until finally I was referred to an individual in the project office, I believe, who was apparently the person with oversight responsibil- ities. This individual to]~d me in a telephone conversation that he could not talk to me, that his instructions were that Mr. Bartell was the spokesman on this matter for the Department of Energy. When we went back to the headquarters we still did not get any- thing substantial on audits We eventually found out from an audi tor in the field that the audits primarily were done to assess for- ward rate and pricing projections which really didn't touch upon the performance of the project. Mr. MARKS. All week you say that you made a telephone call to whom at what place and on what date? Mr. FITZGERALD. Shall I give the names, Mr. Chairman? Mr. MARKS. What date and what place? Mr. FITZGERALD. I have a group of notes clipped together. I be- lieve they were made all on the same day. The top one is dated May 28, 1981. As I mentioned, this is when we first started. Mr. MARKS. What time of day? Mr. FITZGERALD. I don't have the time of day. Mr. MARKS. Where did you call? The project office where? PAGENO="0054" 66 Mr. FITZGERALD. The project office in Oak Ridge, or in Tennessee; 615 area code is all I have. Mr. MARKS. You asked for an auditor and. you were told that the auditors you wanted to talk to were somebody else and you were passed along the way? Mr. FITZGERALD. No sir, there were preceding calls to auditors. I called auditors in Pittsburgh, I believe I called one in Chicago, but I am not certain, but I was eventually referred to the Clinch River location, wherever that is, in Tennessee. I have the phone number. Mr. MARKS. The person you talked to there said he couldn't talk to you about this, that you were to talk to somebody else, is that right? Mr. FITZGERALD. That is right. Mr. MARKS. To whom did he refer you? Mr. FITZGERALD. Mr. Bartell. Mr. MARKS. What is Mr. Bartell's position? Mr. FITZGERALD. I don't know. Mr. MARKS. Did you ever talk with Mr. Bartell? Mr. FITZGERALD. I talked to him several times. Mr. MARKS. Did he give you the information you asked about? Mr. FITZGERALD. My recollection is Mr. Bartell said they did not have the audits there. We were essentially led back down to Clinch River. Mr. MARKS. Did you get-by a circuitous route, did you essential- ly get that information? Mr. FITZGERALD. The information I got with regard to audit was, as I already recited to you, that the audits were primarily on for- ward rate and pricing projections, which would have not been of much use to us at that stage of the inquiry. I could have been told that right off the bat and it would have saved a lot of time. Mr. MARKS. You wasted some time but you got the information on the particular point that you were asking Mr. Bartell for? Mr. FITZGERALD. I essentially learned not much had been done. This stack of audits I saw here I presume includes those forward rate projections, pricing projections? Mr. MARKS. You made this call and you were sent to various people. What is the next lack of cooperation that you received, if any? Mr. FITZGERALD. I spoke to one individual who told me-this was after the resistance to talking to us had softened somewhat after extensive discussions between staff and officials at the Department of 1~nergy. I called an individual in, I believe the National Lab, who told me he had been told to be very cautious in talking to us and not to volunteer anything. Mr. MARKS. Could you answer my question? Did you ask him for some information? Mr. FITZGERALD. Yes. Mr. MARKS. And he gave it to you? Mr. FITZGERALD. Not everything I wanted, no. He professed igno- rance on some of it. Whether it was true or not, I don't know. Mr. MARKS. So he said he didn't know? Mr; FITZGERALD. Yes. Mr. MARKS. But he answered that which he said he knew? Mr. FITZGERALD. Some of it. Essentially--~-- PAGENO="0055" 67 Mr. MARKS. Go ahead, sir. Is there more lack of cooperation? Mr. FITZGERALD. Now let me emphasize these individuals whose names I have kept, the reason I have notes from them is that they essentially did give me something. If what. they are telling me is true, someone told them not to cooperate with me and that is what I am getting at. There was another individual I talked to who told me that, if re- quested, his posture should be "you don't know nothing." And this is a very knowledgeable individual. This is what I have received, Congressman Marks, and I think-- Mr. MARKS. You mentioned three times now. The last time was a rather-I can well understand the first two examples you gave were extraordinary but the last one I don't quite understand. Mr. DINGELL. It doesn't sound like good cooperation with the committee. Mr. FITZGERALD. I am not characterizing them, I am just telling you what they said. Mr. MARKS. The point is you got the information after a circu- itous route. What is the last one, did you ask for some information from somebody and you didn't get, it all or did they just tell you they were told to be careful what they said? Mr. FITZGERALD. The first instance I gave you, as I told you, as I have told you several times, the individual just absolutely refused to talk to me. Just refused to talk to me. Said he had been ordered not to. Mr. MARKS. That is the third example? Mr. FITZGERALD. That is the first example. Mr. MARKS. Let's go back to the third example. What was the problem there? Mr. FITZGERALD. The third example was an individual that we had been referred to-- Mr. `DINGELL. One of the reasons that we are concerned about the names of these persons is that one of them supposedly has voiced that you be fired. S Mr. Brewer, you appear here as the Secretary and Mr. Caffey, you appear as the project man. Is anybody going to be fired if their name comes up in this hearing? Mr. BREWER. No sir. Mr. CAFFEY. `No sir. Mr. ROLF. No sir. Mr. DINGELL Mr. Stacker. Mr. STACKER. No Problem. Mr. DINGELL. Go back through the' whole business again. Go ahead, and give the names. Mr. FITZGERALD. The individual who told me he was not to talk to me was John Reeve, according to my notes.' Mr. MARKS. What date did you talk with Mr. Reeve? Mr. FITZGERALD. As I testified previously, this was in a stack of notes, the top of which is dated May 28, 1981. I believe they are all the same day. The series of calls I made in finally getting ré- ferred-- S Mr. MARKS. Now, you have made some very, very serious charges. Very serious charges initially. I have heard three exam- ples of what you classify as serious charges and quite frankly, I am PAGENO="0056" 68 not sure I agree, but be that as it may, you are an investigator. Now, do you mean to tell me that you are using that some one of the examples and you really don't know whether it was on May 28, you don't know approximately what time you made it, you don't have any list whatsoever? Mr. FITZGERALD. I didn't say that, Mr. Marks. Mr. MARKS. You have certainly given us the. impression from what you are saying that you are really not sure it was on the 28th, you don't have any other notes as to the time or anything of that nature? Mr. FITZGERALD. I am sure of what he told me and I believe it was on May 28. I am under oath and I am not going to guess just to try to narrow it down. The essential point is this is what he told me, that he could not talk to me. He referred me to headquarters. Mr. MARKS. What is the next one? Mr. FITZGERALD. The next individual I talked to was a Mr. Ken Dziedzic. I talked to him on the 29th of May. Mr. MARKS. Please spell that for us. Mr. FITZGERALD. D-Z-I-E-D-Z-I-C. Mr. MARKS. That was on the 28th also? Mr. FITZGERALD. No, sir, my notes show it was on the 29th. Mr. MARKS. What did you ask this gentleman now? Mr. FITZGERALD. Well, I asked him quite a bit. Mr. MARKS. What were you trying to find out from him? Mr. FITZGERALD. 1 was trying to find out why the project was per- sisting at this late stage with contracts that had no prices or no binding commitments to pricing and schedules in them. After he told me that he had been cautioned by someone above him-he didn't say who it was-I think he tried to be helpful. He couldn't tell me why, though. This is the same question that I have tried to work with Congressman Gore and his staff. Why? Mr. MARKS. What is the next call? Mr. FITZGERALD. The next call that I made was on this past Friday. The next one I have notes on. Mr. MARKS. July-what date? Mr. FITZGERALD. Seventeenth? Mr. MARKS. You are asking me a question and you don't recall? Mr. FITZGERALD. I don't have my telephone notes here with me but I have the document I was discussing. Mr. MARKS. Who did you call, sir? Mr. FITZGERALD. In this instance I called Mr. Horak. Mr. MARKS. Where did you locate him? Mr. FITZGERALD. In Knoxville-615 area code. I presume that is Knoxville or Oak Ridge, one of the two. Mr. MARKS. You don't have it marked down there? Mr. FITZGERALD. It didn't matter. I had his phone number and I called him. Mr. MARKS. What did you ask him? Mr. FITZGERALD. I was asking Mr. Horak about some of the design problems, the selection of material. I might add that the reason I was doing it as late as Friday is that we had had some difficulty getting documents that related to experience on it, early on. PAGENO="0057" 69 Mr. MARKS. What was it Mr. Horak. said to you or didn't say to you-- Mr. FITZGERALD. Mr. Horak told me that he had been told if he was requested, his position would be "You don't know nothing." Mr. MARIS. Did he tell you who told you that? Mr. FITZGERALD. No. Mr. MARKS. Did you ask him? Mr. FITZGERALD. No, I did not. Mr. MARKS. You just let it go at that? Mr. FITZGERALD. I asked him to tell me what he could and he was very helpful, too. Mr. MARKS. Mr. Fitzgerald, I would like to read tO you a memo that was made of your telephone call of May 28 to John Reeve. I want to ask you, sir, whether or not this is in fact what took place. "Mr. Fitzgerald introduced himself as a special investigator for Congressman Dingell, who asked questions about audit reports per- formance reviews of the CRBRB----- Mr. FITZGERALD. Could you read that last part again? Mr. MARKS [continuing]. "Mr. Fitzgerald introduced himself as a special investigator for Congressman Dingell to ask questions about audit reports and performances, representative views of the CRBRB." . The following represents the writer's recollection of the tele- phone conversation: "Question: How many audit reports and performance review re- ports have been received? "Answer: Hundreds of audit re~ports. I don't know about perform- ance reports. "Question: Who would know about performance reports? "Answer: Probably Mr. Caffey. "Question: Who is Mr. Caffey? "Answer: The project director." That is May 28, 1981. You didn't know who the project manager was at that time on this investigation? Mr. FITZGERALD. It slipped my mind, if I said that. I don't recall saying that. I don't acknowledge I said any of those things. Mr. MARKS [reading]. "Question: How many audit reports, 100, 1,500? "Ansycrer: I haven't counted them. I can only guess. "Question: 1 have been calling all over the country for. informa- tion. Why are you obstructing.justice? "Answer: We are not. Mr. Bartell is spokesman for DOE on this matter. In order to get a proper official answer, some information that~ doesn't~ get misinterpreted, garbled or is incomplete, please call him. . "Question: What is his number? "Answer: I don't have it right here." Is that the conversation that took place that day, sir, with Mr. Reeves? Mr. FITZGERALD. That is not exactly what my recollection is but it is fairly close. He did tell me he couldn't talk to me and I would have to refer my questions to Mr. Bartell. Mr. MARKS. You come before us today and you say they were ob-. structing justice by the information that he gave by telling you PAGENO="0058" 70 that you ought .to go to the source, telling you who the project man- ager was? Mr. FITZGERALD. I never said he was obstructing justice, I deny it and I resent your putting words in my mouth. Mr. MARKS. I am not putting words in your mouth, I am reading from exactly what he said took place at the time of the telephone call. Mr. FITZGERALD. That part is untrue. Mr. MARKS. That part is untrue? Mr. FITZGERALD. Yes, sir. Mr. MARKS. But you are telling us that you said-this is one of the major examples of noncooperation. Is that it? This telephone call I just read back to you? Mr. FITZGERALD. No, sir, my testimony on that call. Mr. MARKS. How does your testimony on `this call differ from what I just read to you? Mr. FITZGERALD. I don't recall saying I was a special investigator. I don't recall using the phrase-I am quite sure I didn't-"obstruct- ing justice." I asked at one point after he had refused to answer some of my questions, if he was stonewalling and he said he was not. So I then asked him if anyone had told him about obstructing the work of congressional committees-that is quite a different Smatter from the technical term of obstructing justice, I believe. `Mr. DINGELL. You have ~consumed 18 minutes more than your 5 minutes. The Chair, for the continuity of the record, would say you had some problems with regard to the files of DOE being located in the place where they were supposed to have been located and you also had some problems with regard to the completion of the files when requested, is that right? Mr. FITZGERALD. This is what I am told by the subcommittee staff, Mr. Chairman. I didn't personally make those calls. I dis- cussed it extensively with staff and looked at their records and notes. Mr. DINGELL. The Chair recognizes our colleague, Mr. Coats. Mr. COATS. Thank you, Mr. Chairman. I would like to ask Mr. Brewer a couple of questions on a broader issue that faces us as Members of Congress. According to your statement, the Clinch River project, is certainly off schedule and further delays would diminish the value of the project in the over- all U.S. breeder program. Is it possible, in light of all the delays that we have experienced, that we have rendered Clinch River obsolete or at least brought it to the point where it would not be collectively feasible to proceed with it? Should we direct our efforts and our money and our funds into other breeder-type programs or nuclear development pro- grams? Mr. BREWER. Mr. Coats, I feel it is regrettable that Clinch River has slipped so drastically. The original schedule was for an online date, I believe it was 1979, and then it was 1983, and so forth. I believe Clinch River is the next logical step beyond the FFTF-.size plant, that we should complete it and complete it as promptly as possible. PAGENO="0059" 71 Mr. COATS. Are YOU familiar with testimony of Robert Staker, Di- rector of the Office of Reactor Research and Technology-I believe the chairman alluded to that in his opening statement-which indi- cates if we proceed with Clinch River, we will have a 350-megawatt plant in 1988-45 years after the French and Soviets had the same thing. The testimony indicates that we must leapfrog Clinch River if we want to maintain our position. Is there any credibility to that statement? Mr. BREWER. At the time that Mr. Staker made that assertion, I believe there was. Mr. Staker is on my right. I would like to ask him to answer the question. Mr. STAKER. The article was written around a very narrow ques- tion asked at the time. This was during a previous administration. Mr. COATS. What date was that article written? Mr. STAKER. October 22. Mr. COATS. Have you changed your position since? Mr. STAKER. In a broader context, yes. In the previous administration, the question was: We can only build one reactor in the upcoming decade and the question was what was the best reactor to build. The new administration has a more balanced view of the reactor program and, indeed, we are not faced with that one reactor issue. As Dr. Brewer mentioned, the program plan is to follow EBR-II with the FFTF, the CRBR, and the large developmental plant. So it is no longer a one-reactor-during-the-decade issue. The program calls for us to complete Clinch River and to start work on the 1,000-megawatt size plant. The 1,000-megawatt plant has two very relevant points. No. 1, we plan to maximize the private sector involvement in that facility We are hoping that perhaps it might even be totally funded in the private sector, with the Government providing the base program research and development. The importance of finishing Clinch River is to reestablish the Government as a reliable partner with the industry and, in that context, I have changed my position on Clinch River in that it is the next logical step if we are going ahead with the large develop- mental plant. Mr. CoATs. Mr. Brewer, do you agree? Mr. BREWER. I do. Mr. COATS. If Congress deletes funding in fiscal year 1982 for Clinch River, will there be other funds available for continuation of fast breeder technology research and development? Mr. BREWER. Yes sir, the research and development base pro- gram is quite adequately funded The mission of ~hnch River and, in fact, the whole project sequence from EBR-II to FFTF to Clinch River to whatever, is that it focuses the program, schedules the base program, and without some central organization theme, you don't have a well-focused, mission-oriented program. Mr. COATS. You see Clinch River as an essential step in this orga- nized scheme of development? Mr. BREWER. Clinch River is a desirable step in the sequence of scaling up the technology to sizes of commercial applicability. Without Clinch River, one incurs high technical risk and financial risk in scaling from the FFTF size to a larger plant. PAGENO="0060" 73 Mr. COATS. So that rationale still exists in August of 1981? That is the question. Mr. BREWER. Yes. Mr. COATS. So nothing changes between 1976 and 1980-- Mr. BREWER. With regard to the rationale for the program. Mr. COATS. Or the timetable or cost or the development of tech- nology, That goes back to my first question. Mr. .DINGELL. The time of the gentleman has expired. The Chair recognizes the gentleman from Michigan, Mr. Wolpe. STATEMENT OF HON. HOWARD WOLPE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN Mr. WOLPE. Mr. Chairman, I would first like to~thank you for the courtesy you have extended to enable me to participate in the hear- ings this morning. As a member of the Science and Technology Committee, I have been involved for quite sometime in the Clinch River issue. The committee this year voted to reverse its longstand- ing support for the Clinch River breeder reactor. The decision was not an easy one to make and it was hotly contested within the com- mittee. We voted to deauthorize the Clinch River breeder reactor, though, very largely because of many of the cost considerations that have also risen in the course of your committee's inquiry into the cost overruns and scheduling of the Clinch River breeder reac- tor. I just want to commend you, Mr. Chairman, and the staff of the committee for what I believe has been a very important service. I would like to pursue the issue of cost for a moment with Mr. Brewer. We have been talking this morning of the acceptance of the overall DOE cost estimate for design construction of the ERBR project at $3.2 billion. Can that be the present cost estimate of the Department? Is there any modification or request you would like to make to that figure at this point? Mr. CAFFEY. Mr. Wolpe, that is indeed the total cost estimate. Mr. WOLPE. Does this figure include any cost following the actual startup of the reactor? Mr CAFFEY Yes sir, this figure includes the operation of the plant after startup for a 7~month interval test run and a 5-year run for demonstration performance. It includes the cost of operations and maintenance, fuel reload and the net revenue from sales to TVA of the electricity generated during that 5-year, 7-month period. Mr. WOLPE. How many years do you anticipate the plant will be in operation over its total life cycle? Mr. CAFFEY. It has a design lifetime of 40 years. How long it may be in operation, of course, depends upon the degree of success it achieves. We believe it will achieve the full lifetime and beyond. Mr. WOLPE. What are specifically the annual operating and maintenance costs expected to be? Mr. CAFFEY. If you will give me a moment, I will look at my papers here. Mr. WOLFE. While you are searching for those, I would be inter- ested in knowing also the cost and the source of fresh fuel for the Clinch River Breeder Reactor. PAGENO="0061" 74 Mr. STAKER. The source of plutonium for Clinch River is the re- sponsiblity of defense programs. They are part of the Department of Energy and they have indicated they have a requirement and they will provide the material. Mr. WOLPE. Do we have an estimated cost of the program for the reprocessing of Clinch River fuel? Mr. BREWER. There are no plans at the moment to reprocess the Clinch River fuel. Mr. WOLPE. No plans whatsoever? Mr. BREWER. There are various options being examined, Mr. Wolpe. Mr. WOLPE. There is an assumption at some point the fuel will have to be reprocessed, is there not? Mr. BREWER. Yes sir. Mr. WOLPE. You do plan to reprocess? Mr.. BREWER. We are examining options for reprocessing Clinch River fuel. Mr. WOLPE. What are the estimated costs of the decontamination and decommissioning of the plant at the end of the 40-year period? Mr. CAFFEY. I am still trying to find an answer to your question. I did not hear your last question. Mr. DINGELL. Would the gentleman yield? Mr. WOLPE. Surely. Mr. DINGELL. Did those plans include reprocessing the fuel out- side this country? Mr. BREWER. No, sir. Mr. DINGELL. They did not? Mr. BREWER. No, sir. Mr. WOLPE. I guess the question I would put to you by way of a summary question-perhaps you could supply specific details for the record-does the $3.2 billion figure that you have outlined in- clude the cost of decontamination of the plant, the decommission- ing of the plant? Does it include the cost of reprocessing of the fuel? Are those indeed full life-cycle costs incorporated within the $3.2 billion? Mr. CAFFEY. The $3.2 billion estimate is the cost to bring the pro- ject through the 5-year demonstration period. The cost of decom- missioning or putting the plant away at the end of its lifetime is not included in that. [The following additional information was received:] PAGENO="0062" 75 CRBRP Project Sumary Cost Estimate ($ in Bill ions) o Engineering o Fabrication/Manufacturing o Construction o Development1 Fuel Operations Revenue Contingency Total Project Estimated Cost Thru Cost to FY 80 Complete .22 .21 .19 .55 .02 1.01 .53 .30 .20 .96 2.24 Total .43 .74 1 .03 .83 .29 .20 3.202 1lncludes research and development, prototype and procurement, and project management. 0 0 a 0 0 .29 .36 (.68) (.68) first-of..a~kind design and 2Costs include 5 years 7 months of operation after initial criticality. At the end of this period, it is contemplated that TVA will purchase the plant. Therefore, these costs do not include dismantling and disposal or reprocessing costs. PAGENO="0063" 77 The objective, sir, of the hot experimental facility was to scale that technology up in size ultimately to a size of commercial appli- cability. Just like the reactor, you have to develop the entire fuel cycle. We are developing the frond end of the breeder fuel cycle. The sequence of powerplant projects is developing and providing focus for the plant development program. In the back end at the central threat there is the conceptual design of the hot experimental facili- ty, but we would not contemplate building the HEF solely for the purpose of reprocessing Clinch River fuel, and we would not attri- bute the cost of HEF to Clinch River. Mr. STAKER. One clarifying comment on HEF, if I may. If the HEF were designed at its present capacity at 150 ton a year, you would run it 4 days a year to reprocess the CRBR fuel. Mr. WOLPE. Thank you very much. Mr. DINGELL. The time of the gentleman has expired. Mr. CAFFEY. Mr. Chairman, sir, I have found the answer to the question Mr. Wolpe asked. Mr. Wolpe, you asked about the cost of operating during the demonstration period of the plant. I have here a table which shows our spread on that, and it would be about $300 million for the cost of operating the plant and to reload fuel during the 5-year, 7- month run, offset by about $700 million of revenue. Overall, during the lifetime of the plant, in 1981 dollars we would expect about $2.6 billion in revenue. Mr. GORE. Can we put that in `the record, Mr. Chairman? That sounds very interesting.. Mr. DINGELL. It would be appropriate, without objection. [The table referred to follows:] 89-405 O-82--6 PAGENO="0064" 78 CRBRP Revenue and Operating Costs During Operating Run of 5 Years and 7 Months In Millions of Year of Expenditure Dollars (February 1990 Initial Criticality) Pp~r~ting Cost Reload Fuel Cost Revenue Capacity Factors and Revenue Amounts1 (In Millions of Year of Expenditure Dollars) FY Capacity Factor Revenue 1990 20.2% (19.9) 1991 38.2% (69.6) 1992 47.5% (93.5) 1993 65.0% (138.1) 1994 75.0% (172.1) 1995 75.0% ff86.0) [679.2) 1Revenue amounts are based on a rate of $23.60 per megawatt hour in 1979 dollars (escalated at 8% annually, compounded). PAGENO="0065" 79 Mr. CAFFEY. May I update this iSarticular table, because this is for September 1988 criticality date that I have* in hand. I do not have in hand the table for the February 1990 criticality date. Mr. DINGELL. Staff will review it. The Chair recognizes the gentleman from Pennsylvania, Mr. Walgren. Mr. WALGREN. One question. Would that table also include an in- dication of the assumptions upon which the revenue calculations are based? Mr. CAFFEY. Yes, sir. *Mr. DINGELL. The Chair recognizes the gentleman from Pennsyl- vania, Mr. Waigren. Mr. WALGREN. Thank you, Mr. Chairman. I wanted to ask about the override of the competitive bidding on the steam generator contract that was, as I understand it, awarded to Atomic International. Now, I would think, and would I be right, that any such change made by either the project or as it is approved by the Department of Energy would have a very complete discussion of and justifica- tion for changing from a competitive contract in which bids have already been worked up to one that was awarded without regard to that competition? Is that correct, and could I address that to the gentleman from the Department of Energy? Mr. CAFFEY. Yes; that is correct. The record is very careful on that whole question about the award, first the solicitation, then the evaluation of proposals, the negotiation with the contractor, the de- termination by the General Electric Co. as to how it saw the bid should be awarded, and the evaluation by the Energy Researôh and Development Administration as to the merits of one contractor in comparison with the other contractor. That record is really rather full, I believe, and I have a portion of it here in this book in front of me, if you would like me to detail some part of it. Mr. WALOREN. Mr. Fitzgerald, have we had access to that record and whether or not there is sufficient justification in the record for the change to sole source and the award of the contract to Atomic International? Mr. FITZGERALD. I don't know whether we have had access to all of those documents. We had a document from a Mr. Wright, two documents from Mr. Nemzek that I mentioned before, plus a docu- ment from the San Francisco office of the Atomic Energy Commis- sion, or ERDA, I suppose it was in those days. I believe Mr. Wright referred to some documents from General Electric and Westinghouse. I don't recall whether they got those or not. We did not find a document that I would expect to find, a find- ings and determinations document for sole source contract. Mr. WALGREN. That would seem to me, would that be the docu- ment that confirms the judgment that was made from the facts gathered by other input? Mr. FITZGERALD. I am not certain what it would be. Sometimes the findings and determinations documents are very good and complete. Sometimes they are superficial. We did not find that. PAGENO="0066" 81 Mr. DINGELL. I would like to have it answered for the record, but I would like to know right now, Mr. Brewer, where did it come from? This was the result of `some considerable attention between the committee staff, Mr. Fitzgerald, and the Department. Where does this document come from and why wasn't it made available to the investigators earlier? It is nice to say you are sorry but it is another matter to say why it comes to us at this particular minute, why you didn't have it and why it comes to us at this par- ticular minute. Is there a letterhead on the document? Mr. CAFFEY. Sir, the letterhead is not on the document. It is ap- proved by R. W. Roberts, Assistant Administrator for Nuclear Energy, Mr. T. A. Nemzek, Director, RRD, September 16, 1975. [The following response was received:] The Source JustificatiQn for "Selection of Atomics International for Design and Fabrication of One Prototype and Ten Plant Unit Steam Generator Modules for CRBRP," dated September 16, 1975, was located in a file of a retired employee* of the Office of General Counsel. Mr. CAFFEY. We reached Mr. Nemzek by telephone this morning to ask him whether he had ever discussed this with the head of the Energy Research and Development Administration, Dr. Seamans. He said he had not, that he concluded that Dr. Roberts had talked. with Dr. Seamans and it was between the two of them and Dr. Sea- mans had evidently told Dr. Nemzek he had sufficient authority to make the sole source justification. That is what Mr. Nemzek says was his assessment of the conver- sation between Dr. Seamans and Dr. Roberts. / Mr. DINGELL. It was his judgment that Dr. Seamans, on the basis of this document, had indicated that there was a sufficient justifi- cation then for sole, source, for sole source acquisition? Is that what you are telling me? Mr. CAFFEY. I think what I am trying to say to you, sir, is that Mr. Nemzek has told us this morning he does not know exactly the conversation between Dr. Seamans and Dr. Roberts. Dr. Roberts, unfortunately, is dead, and Dr. Seamans is no longer with the agency. He can probably be located and he may or may not have some particular recollection of the conversation that he probably had with Dr. Roberts. Mr. DINGELL. This was a document that was, in your view, the basis of the judgment that Dr. Seamans said in terms of making the judgment that he was going to go sole source with Al? Mr. CAFFEY. I believe so, sir. Mr. DINGELL. All righ't; would you hand that to our staff member there? We would like to take a look at it. The gentleman from Pennsylvania. Mr. WALGREN. It would seem that in the same process there would be direct communication with those who lost out on the bid- ding, who had spent substantial amounts of money like Foster- Wheeler in developing their bids only to find there wasn't going to be a competition `after all. Now, certainly you would expect that the Department would be able to put their hands on whatever communication was made to Foster-Wheeler of this change in approach. PAGENO="0067" 82 Do you have knowledge of that communication and how that could be found? Mr. CAFFEY. Mr. Waigren, I have really no feel for whether there may have been such a document, an advisory to Foster-Wheeler from the Department. There may or may not have been a letter from General Electric Co. which was the subcontractor responsible for procuring the steam generators at that time. We can examine their files to see if they gave Foster-Wheeler appropriate notice of the declination of their bid. Mr. WALGREN. If I could ask that you make that request, perhaps the committee could do it also, but maybe General Electric would be more cooperative if it came directly from the Department. Mr. CAFFEY. Yes, sir; I have no doubt that General Electric will fully cooperate. [The following was received:] The following is a copy of a letter, K. M. Horst, General Electric, to Frank Lee, Foster Wheeler Energy Corporation, CRP/892-FWEC--0954, dated September 19, 1975, which advised Foster Wheeler Energy Corporation of the Energy Research and Development Administration's decision with respect to the award of the CRBRP steam generator contract. PAGENO="0068" 83 GENERAL ~ ELECTRIC ~.$.tCT5I0 ~~5'ANY * 510 5SOu~I O~IWE ~? &ØI.S~ *ACTOn g1.iR,vg~7 $uk.WALL CAUPciNIA O41N. P~ (~Ø5~ $74550 CRP/S9Z-TW~C.09s4 $*pt~r 19, 1975 tosser Wbesl.r Zner~y Carpormtia* 110 $a~b Orcig. Av~nus &4'lajsseo, New Jersey 07039 ~ Mx. Preak 3me Preiidcit ~sz Mr. £me: Thi. sciuirms our talephon. convsrsst$oo Sf Thursdsy, $Optznb.r 11, at whisk Urns I SWarmed you ibM GZ has received the tollauisi$ message Item *~P 505tomser. ~ ho. complet*d so sva3votioi~ of t~se proposed veedar rolecties for the CR~&P .te~m g~sratore sod se a r~.ult of the ~DA staff avohistion~ both bids (AZ sod tester Wheeler) abould be roj.ct.d and the sword of a CP1.~' ostnct for both the prototype sod $sos side stasm $anerate*s should be directed so Atonge. . . ".,,. in addition, a meeting will be held during the weak of September U, 1975, La Mr. N.ntaek~s otfic. to discuss the baii* for Obs directed procurement, Attendees at this meeting should loc1u4~ the President ad Tooter Wh.1.,, or his derlgemt.d tuprssestatiys, and *. Richirds * Sf Osoersi LIuctric." I dsrotand that you will b. svei1abI~ for the meeting on Moidty, SeptemS,~' 22. Yes. will be bearing further r.gar4isi; specific srreng.n~sots. Vat1 truly years, K, hi, Uer.t, Manager *,a.der keast.r ssppert ~ermco. -t *4. fttehards, a~/TsaD T,N, Nsinsek flDAIRRD PAGENO="0069" 85 Mr. WALGREN. Then if I could ask Mr.' Fitzgerald the basis of those numbers that are stated in the staff workup that the commit- tee prepared, on page 17, where the committee report says that ad- ditional fees are the technical term for profit, and Westinghouse claimed $157 million in additional fees because of work that was done beyond the scope of the original contracts, and that they were then paid a certain amount of money in settlement of those fees, funds which would total $38.6 million. I read the committee staff report to indicate that that would be profit. Is that your undertanding, Mr. Fitzgerald? Mr. FITZGERALD. Generally speaking, in the absence of offsets, that would be profit. It is, not part of cost. Mr. GORE. That is a big difference, though. Mr. WALGREN. There may be offsets here. Mr. FITZGERALD. Well, the offsets, take an example in which this was the only business a company had, they would recover all of their recoverable, legally recoverable costs under the cost part of the contract. The plus fixed fee or plus incentive fee or whatever would be intended as the profit on that contract. It may not turn out to be net or gross profit for the corporation, because they may have expended some money that was not recoverable legally, such as interest expense or things of that sort. Mr. WALGREN. Then, let me ask, this $23 million figure was ne- gotiated down and apparently settled out for $6 million. How much of that was profit? Mr. CAFFEY. May I refer back again, Mr. Wálgren; the $23 mil- lion is the approximate amount of total fees under both contracts which was earnable by Westinghouse as of the end of-I think it is fiscal 1979, because the contract claims settlement included not on~~y settling the claim but for settling the fee for fiscal year 1979. There are two contracts under consideration here. One we call the PMC contract, because it was negotiated between Project Man- agement Corp. and Westinghouse, and the other is the AEC con- tract negotiated between Westinghouse and the Atomic Energy Commission. The PMC contract provides for $1 million of fees to Westing- house for the entire work to be done under that contract which was to design, furnish, test, and deliver an operating nuclear steam supply system, a piece of work worth several hundreds of millions of dollars for a $1 million fee, and against this Westinghouse obli- gated itself to make a $7.2 million contribution, therefore, its net wGuld be negative $6.2 million on that project on that contract. Under the AEC contract, `which was for developmental work under this project, there was a 5-year term expiring on July 27 or 28, 1978. This contract was fee-bearing and the fee was to be annu- ally negotiated in relationship to the amount of work to be done in accordance with the earlier, cost principles' and .fee schedules in effect at the time the contract was entered into. Now, each year since then we have negotiated with Westing- house the fee that would be appropriate for it to earn in accord- ance with the. amount of work it was to do for that year. The total fees which have been negotiated to Westinghouse under that contract to date, because it has been extended-if I can pause a moment, sir and look at a number here-the total fees PAGENO="0070" 86 through fiscal year 1981 under the AEC contract to which Westing- house has an entitlement is $25.9 million on a framework of $486 million of costs of work to be done. Under the PMC contract-that was the contract under which the claims settlement was made-the $8.3 million claims settlement was made under that contract because the claim by Westinghouse was that we had transferred work from the AEC contract, where it would have been fee-bearing to the PMC contract, where it would not be fee-bearing, but the PMC contract said if we did that we would have to make an equitable adjustment in the PMC contract fee. So as of now, Westinghouse has a total fee entitlement under the two contracts of $35.3 million on a framework of $886 million of work done or to be done through fiscal 1981. Mr. WALGREN. When you use the word "fee" in that sense, are you are talking about profit? Mr. CAFFEY. No, sir; I am talking about fee. Offsetting that still is the $7.2 million contribution which Westinghouse was obliged to make. That would be an offset against the total fees and, as a matter of fact, if Westinghouse were not to make that which it is obliged to make as a cash contribution, we would deduct it from the fees which they would earn. As to the profitability to Westinghouse of this job, another ques- tion which you asked earlier, we do not have any idea as to the profitability of this job to Westinghouse. That is a matter which is appropriate for them, but is not appropriate for. us to dig into unless you have a case of a contractor who is going broke and then you may, in some sort of termination action, examine whether you have done him damage and driven him to be broken. And the total fee which Westinghouse has earned through fiscal 1981 is 4.1 percent of the entire job, which is through fiscal 1981. Now, that percentage will go down in the future because Westin- gouse has, as we negotiated those extensions of contracts, agreed to deny itself the opportunity to take advantage of the changes clause of those two contracts. In other words, when we negotiated the fees we negotiated with Westinghouse an agreement that they will not submit any claims for any changes of work done prior to the end of that current fiscal year, so we have a bar from claims. Mr. DINGELL. The time of the gentleman has expired. Gentlemen, with regard to this AT sole sourcing, how long did the study go on that led up to the initial recommendations with regard to letting the contracts on, 15 or 18 months? Mr. CAFFEY. It went on over a long period of time, yes, sir. Mr. DINGELL. At the conclusion of that the recommendations were what? Mr. CAFFEY. May I frame it for you then, sir? The solicitation, the responses from vendors and going back and forth, and the negotiations and evaluation, took a great deal longer than had been expected it would take. It is a much more difficult marketplace activity going on because there were five vendors originally solicted. Three dropped out of the competition leaving two, Foster-Wheeler and Atomics Interna- tional. PAGENO="0071" 87 When they submitted their first bids, both of them gave bids which were quite nonresponsive, and there was extensive interplay between General Electric Co., which is subcontractor to Westing- house, between GE, and Westinghouse, ERDA, PMC, and San Fran- cisco operations office which had the responsibility for the General Electric Co. work because of the proximity of its location in Sunny- vale, Calif. to San Francisco. The Chicago Operations office had another role because of its proximity to Westinghouse. Mr. DINGELL. In any event, the San Francisco office chose some- body quite different than had been under contract prior? Mr. CAFFEY. Yes, sir; in January, I believe, let me verify the date. Mr. DINGELL. That was done on the basis of just a few days time, was it not? Mr. CAFFEY. No, sir, because this procurement had been going on for an extended period of time, and the various parties, including those in the review process, participated in the evaluation propos- als over this entire period of time from the initial solicitation to the conclusion, so it was not at all a rapid decision. There was a careful evaluation finally by the responsible people in the San Francisco operations office who forwarded a recommendation final- ly, signed by Mr. Reardon, the acting manager of the San Francisco operations office, recommending that AT get the job. Mr. DINGELL. Who is Mr. E. A. Wright? Mr. CAFFEY. Mr. E. A. Wright is the Chief of our Components Branch in the project office. At the time this whole negotiation was going on, the project office had not been created. It was brought into being on the first of September, 1975, so at the time Mr: Wright was a member of the Department headquarters staff. Mr. DINGELL. Mr. Wright was familiar with what was going on there, was he not? Mr. CAFFEY. Yes, sir. Mr. DINGELL. He said as follows about this in a comm~nication. which was about contemporaneous with it-and I will put the whole thing in the record. He said, It would be a vote of no confidence for G.E. to have the recommendation reversed by one week's assessment on the part of SAN's staff. It would be totally unfair to FWEC, who has been spending corporate funds in the past 10 months in pursuance of this contract, to deny it on the basis presented by SAN. Then he says, "Plant unit subcontracts should be awarded on a CPIF basis." Again, that is different with what was done. Mr. CAFFEY. May I address that point? Mr. Wright, as Chief of the Components Branch, was. examining from a technical viewpoint the quality of sufficiency of the potential suppliers The decision was made not on the basis of cost, but on the basis of an evaluation by the Department as expressed in the draft memorandum which Mr. Nemzek sent to Dr. Roberts, dated Sep- tember 2-alluded to earlier-and finally in the source justification document, which we have just presented to the committee. Mr. DINGELL. Al's contract in this matter was actually an unsoli- cited proposal, wasn't it, the one finally accepted from Al? PAGENO="0072" 89 Mr. CAFF'EY. I think Mr. Wright's characterization of a few days' time-- Mr. DINGELL. Sir? Mr. CAFFEY. I think Mr. Wright's characterization of a few days' time has to do with the final decision process, not with the decision process that had been going on over many months beforehand~ It was a culmination of the decision process. Mr. DINGELL. He says: "It would be a vote of No Confidence to G.E. to have their recommendation reversed by a one-week's assess- ment by part of SAN's staff. It would be totally unfair to FEWC." Here is a fellow who should know what is going on. He is writing a protest that is in your records. Mr. GORE. Will the gentleman yield? Mr. CAFFEY. I think it comes down to a determination of relative responsibility in an organization. I think it comes down to what their head of the organization finally says: This is what I believe we should do; I have listened to all the staff advice and counsel; I have listened to various responsible officials such as the head of the San Francisco operations office and his own staff and drew his conclusion as to what course of action he should take. Mr. DINGELL. Let's look at how Atomics International had pro- ceeded. They went out with a contract for 12 of these devices that were going to cost about $26 million. When they had concluded, they submitted then a contract for 2 on the order of something on the order of $140 million. I find myself curious as to how this is good contract procedure. Mr. CAFFEY. May I refer back to some of the history on the deci- sion process? Mr. DINGELL. Remember, now, while this is going on, at the same time, you are rejecting others-the Government-rejected not only other bidders, denied others opportunity to bid, rejected the recom- mendations of both GE and Westinghouse, and they took a compa- ny that had raised the cost of these devices from 12 for $20 million, to 2 for something on the order of $140 million or $150 million. It is hard to explain the event. I am delighted to hear you explain it, because it is one of my curiosities about this whole contracting process. Mr. CAFFEY. If I may refer to documents which have been fur- nished to the subcommittee staff on June 26, a memorandum from Mr. Robert M. Little, of the San Francisco operations office of the AEC, dated January 6, 1975, addressed to Mr. Don R. Riley, Assist- ant Director for Demonstration Plant Project, RRD, headquarters. I would point out at this point that Mr. Wright, of whom we have spoken, then worked for Mr Riley in departmental headquar ters. This is a memorandum transmitting a report of a task force com- posed of members of the San Francisco operations office and the reactor research and development office of departmental headquar- ters. Mr. Wright was a member of that task force, and so we can see that on January 3, 1975, when the task force signed its report, that the evaluation which finally culminated in that decision to award to Al really did have a very long history. Now, if we turn to section II of that task force report, we find this evaluation by the task force, of which Mr. Wright was a part, PAGENO="0073" 90 and Mr. Robert Little was the task force leader. Mr. Robert Little was in the San Francisco operations office. Under paragraph 8, dealing with failure to resolicit other bid- ders, the findings of the task force-I will quote from this: In the case of the steam generators, the generator procurement, there were five potential offerors, of which only two submitted offers. The other three potential of- ferors, in spite~of the fact the procurement of the production units-to distinguish that from the prototype-was to be on a fixed-price basis was either their main reason for not submitting an offer or one of several reasons for not doing so. When General Electric received the two offers and found at least one of them to be clearly on a basis other than fixed-price or fixed-price with escalation, it decided to negotiate with the two offerors rather than going back to all five of the potential offerors. Its apparent reasons for doing so were: (a) Schedule constraints; (b) belief that offeror, submitting a part-fixed-price, part-cost-type offer on the production units, could be persuaded to submit a fixed-price offer; (c) belief that the other three potential offerors could not be persuaded to submit fixed-price offers. Mr. DINGELL. But none of the other three were permitted to do so. Mr. CAFFEY. That is correct, sir. There was a decision then made that they believed they could heal the difficulty with the one pro- poser who had given a-and it was Foster-Wheeler, as a matter of fact, that had given a-mixed response for production units, partly cost-type and partly fixed-price-type for the production units, Mr. DINGELL. The reasons given in the document you have just made available to us today, which our investigators have sought to get but have not been successful in so doing, said that you wanted to establish a component vendor base, and that you were afraid of overconcentration. That is page 4. It said that based on previous experience to maintain until such time as the volume of LMFBR allows wide industry participation- and you go on and say that your judgment here is bottomed in part on the fact that the success of the steam generator contract will be a key factor in the success of CRBRP. In no place do I find any- where in that document the statement that the bid of AT is superi- or to that of anybody else, or that anybody else's bid has, in fact, been reviewed under the same criteria that the Al bid was re- viewed under. Mr. CAFFEY. That is correct, sir. In that particular paper you have, you don't find that. That is the culmination of all the staff work that preceded that. Mr. DINGELL. I assume that is the synthesis of the staff work, and nowhere do I find the staff work has considered those ques- tions. Mr. CAFFEY. Let me see if we can find these other documents. Mr. DINGELL. We have been asking for documents, but the reply can only be described as mixed. Mr. GORE. Will the gentleman yield? Mr. DINGELL. I will in just a moment. Now, the next question that I have to ask is, did anybody consid- er the fact the level of cost overruns that had already gone into the handling of earlier parts of this procurement by Al, and the differ- ence between what AT was going to get under this new contract which they got, and what AT had previously signed on to receive for the same work. PAGENO="0074" 91 Mr. CAFFEY. I am not sure I follow you, sir. Al had not signed on for the steam generator work until-- Mr. DINGELL. They were going to produce 12 for $20 million, and they wound up producing-your last contract was 2 for $140 or $150. Mr. CAFFEY. Perhaps I misunderstood you. Mr. DINGELL. There is a disparity. Mr. CAFFEY. Perhaps I misunderstood you. I thought you were trying to relate the solicitation in the award to Al to work which Al had done before then. Mr. DINGELL. This quantum leap in cost hardly strikes me as something in which I should repose vast confidence. Mr. CAFFEY. I am prepared to go into considerable detail, on that, if the committee would like to, or with the committee's investiga- tors if they would like to have that as a corporate investigation. Mr. DINGELL. I think we may, but in the meantime, we would like to get the papers our people asked for, and we would like to have them made available to them in a timely fashion rather than having to have these papers which we find to be critical, which you indicated were critical to this, delivered to us on the day of the hearing. What are your requirements as regards sole-sourcing contracts of this type9 Are there some specific requirements of law or rules and regulations within your agency with regard to those matters? Mr. CAFFEY. Certainly, sir. Mr. DINGELL. What are they? Mr. CAFFEY. There are prescriptions for how one goes about making a sole-source justification. What they were, in effect, at the time of 1975, when this one was made, I do not know. We can re- search that. Mr. DINGELL Will you submit what they are now and what they were then? Mr. CAFFEY. Yes, sir. [The material referred to may be found in subcommittee files.] Mr. DINGELL. The Chair yields briefly to my friend from Tennes- see. Mr. GORE. I thank the Chairman fOr yielding. I wanted to correct one thing. The decision to award the contract to A.I. was taken after a week's deliberation, a week or 2 weeks I believe was the phrase used. The documents speak for themselves. The first recommendation was on May 2, 1975. Five months later, the notice of intention to award the subcontract was dated September 15; so this was over a 5-month period. But beyond the simple arithmetic, to put the reason for the award in plain language, as I understand it-and I would ask you to tell me if I am wrong about this, Mr, Caffey-~-the feeling of the San Francisco-- Mr. `DINGELL. If the gentleman doesn't mind, I appreciate his tes- timony, but we have witnesses down here to do that for us. Mr. GORE. I am trying to shed some light on this by-- Mr. DINGELL. I really do appreciate the gentleman and his very helpful comments. If he wishes to give testimony, we will be glad to put him under oath and receive hiS comments. Mr. GORE. I am trying to ask a question, if I could. PAGENO="0075" 93 ~ 2 1975 D. R. Riley, Actg. lest. Proj. Dir. for rngineerin~, CRI3RP Proj. Office, RRD T~'RU: R. D. Eahn, Actg. Chief, PC CRBRP STEI~ C NE~A~OR PROCURZI4EN~ PURG.0003 Referencess 2) Letter, D. E~ Reardon to Robert 2. ~SAN Evaluation of GE Itecozendatjon for Subcontract Award for CRB1~P Steam Genera.. tore P13flG'0003, dated May 2, 1975 2) Appendix C to~eetinghouse (W) Project Z~!anagement Corp. (PZ~c) Contract t49~18~l2~3. This nemo docuinente my observations ~egarding the procurement aspects of the reference letter. While i recoqnize that Engineerjngs responsibilities only encompass the technical aspects of this procurement, ~ an obl tio~t&.brin~ ~ e~t~isagreent wT~$M~'s ~reconmendatjons to 1) Award the CRBPP Steam Gener~ átor Contr~ct to ~~or 2) Change the proposed contract for the plant t4nits from a Pixed Price (F?) to a Cost Plus Incentive Fee (CPIr) basis. ~The reasons for my disagreement axe as foUcwas 1. Award Contract to Atoixtos International (AX) instead of Poster Wheeler Energy Corp. (PwEc). On May 31, 1974 AX presented to the C~B~p participants an unsolicited proposal to design and fabriàate the CRBRP steam generators. `The proposal inc2ude4 a PP basis for the plant unite and both a PP plus CPIP basis for the prototype. GE, PMC and the CRBRP Proj act Office at R1~D endorsed the AX proposal and forwarded it to the Director of RRD and others in IEC headquarters for o~emt. Word came back from the Director of RED to the CR3?? Project to go out for competitive fixed price bids to all qualified vendors. Accordingly, RED directed GE to change their preprocuxe.. nent plan to solicit proposals from all qualified vendór~. 89-405 O-82--7 PAGENO="0076" 94 This solicitation was made iniJune and July 1974, and all potential vendors ntten6ed the prebid conference on July 31, 1974 at GE, Sunnyvale, Ca. Westinghouse (W) Tampa stated that they would not propose on a F? basis but would propose on a CPFF basis and would honor their 2~ppendix C offer under the W-PMC Contract $49~48~l2-~3. Combustion Engineering offered to bid on a CPYF or DPI? basis proW vided that the government provided some facilities. Eabcock and Wilcox (B&~r~) stated that they would not bid on a PP basis. F~tC cxpZ'e3sed great interest in bidding on these steam generators and acknowledged that they would make a PP proposal. The history of this action iB well-documented in PU1tG0003 and in the SAt~/P1~D Task Force report ~To Assess GE Actions ~elated to Procurement Of Steam Gener~ ators and Punpn~, dated January 3, 1975. FWC, acting ingood faLth,~, have ped~dperhaps2O to 3~oi~hi since July1974 (to the extent~p~ thejr own s~oney) in preparing theLr~ proposal and in negotiations with~GDuring~his time GE has spent perhapá~ 60 to-CO ai~n-mónths from the preparation of the RFO in June/Jnly 19.74 to the issuance of their recommendation on April 25, 1975. ~t, PflC, WARD and RED have also expended many mn-mont-na in pursuit of thase pz~oposa1s. GE has done a~very-~tb~o ba~COOPetenLjc?~Of evaluating the proponal~ ~1. ~&arivedat e.~Qn~y~ai~nd equitable ~ ~écomeendátion open to~ them. RPD/SAN had laid down the ~roun4 rules of competition and PP contracts for the plant units. PWEC'a roposal is clear], in the best int~e~of ~jthe CP.E so ~ç~and~Qu ~ `~ price is ..-~ ~~T~excèià~Of $6 million more than ~b?EC'1s and, in addition, FWEC has offered a aL ..k1~gp to the CRBRP whereas AX offered no direc~~bntribution. It should be noted that this contribution of about $240,000 is over and above the price difference shown in PURG-0003. If AX purchases the shell rnateri4 they will purchase forgings for t~e SG shells at an estimated cost of $5 million. PWEC has in ho-eec capability to roll and weld plate to the steen generator shell end save an additional a 42 to $3 million over AX's forgings. Ai.~ ,,- ~rf ~ ~ It would be a vote pf N0 COflF DEN .;to-GE--to..-haye their V ~ on~me 1o~iW~iied by a one week's assessment~by ( ~ /part of SAU'~ ~taff. Xt~w~u14 *totallYunfà~intO FWEC who 1 ~ their corper n o p 10 ~onthc in pursuit of this contract to deny it en the basis presented by SAN. PAGENO="0077" 95 2. The plant w~it subcontract be awarded on a c~ir basj~. In ~une of 1974 P.RD/SAN/CK directed GE to seek F?. con~ tract proposals for the CRflP2 steam generators. A fixed price contract was considered to be in the best interests of the project and would be batter than accepting the Appendix C to Contract Ro. 49'18-'2.2-3 between W and PI~C. This type o contract was obviously possible because of the Al unsolicited F? proposal. Also, as mentioned previously, the requirenent of fixe&~rjg~j~pp'a for these components eliminated two otential en hers (CE and W-Tampa) from d ng. If the SAN proposal to award on a CPU' basis is accepted, it would appear that the entire issue of the ~ "3 for the price of 2' offer should be fully re'-cvaluated as reconm~ended in the SAN/Rr~D Task Force Report of January 3, 1975. ~ vendors should be civon anopportur$t~ to ~ While SAN's reasons for recommending Alas the contractor and a CPU' basis for contracting have merit, the same~ reasons existed in June 1974 when Al's unsolicited pro posal was rejected by RBD and the design is considerably firmer.. In view of the foregoing, ~ a prudent anproach from both cost and usi~css~practices i~ii~t tô~reco~mend thit the proje~su~pport theJ~Z~e~pontendatjcn ~ PWEC The GE 1j~j~ the only course of action Zwould recommeM at this time. If you wish to discuss any of the points in this memo or the reference letter with me, please let me know. E. A. Wright I~.P~D:PC; 044 Plant Components Brunch, P cc: Actg. Dir., CRBRP Proj. Office DISTRXBVTION~ Actg. Chief, ~ Project Control, P24 ~ (1) (2) PCR6g BAN Mg RECORD NOTE: None required. QA Mg RP~D: PC *rtr~o: PC . Et~right: as RDBahn 1~2ZRZX~f 5f12175 5/12/75 PAGENO="0078" 97 and sellers together. He is not exactly a broker, but a sales repre- sentative, or something like that. Mr. BARRETT. So he was an agent of the subcontractor. Mr. CAFFEY. Whether at the time that he made the interest-free loan he was an agent of Joseph Oat Co. or not, I do not know. He worked for his own parent company. I don't know the timing rela- tionship. Mr. BARRETT. In May of 1977, he entered into an interest-free $1,000 loan with Mr. Dill. It was a 90-day note. That note came due in August of 1977. That note was not repaid as of April of 1978. Mr. BREWER. Mr. Barrett, could I interject something here? This is one of the cases which resulted from an internally generated in- vestigation by Mr. Caffey's office. It has been referred to the Attor- ney General. It is now in his hands. Mr. BARRETT. What I would like to know is what are the proce- dures for protecting against these kinds of activities, and what ac- tions are taken? In this case I guess Mr. Dill resigned. Mr. CAFFEY. Yes, sir. Mr. Dill left the employment of Atomics In- ternational. I believe he was discharged rather than resigned, but the U.S. attorney who had cognizance over the matter decided it was not a case which was prosecutable. Mr. BARRETT. Was there any evidence that this employee pro- vided information that was communicated to the Oat Co. regarding bids? Mr. CAFFEY. May I consult the FBI report for a moment there, sir? Mr. GORE. If counsel will yield while they are searching, I think perhaps they ought to be congratulated for properly discovering this matter, immediately referring it to the Inspector General, who, in turn, referred it to the FBI. I am told that U.S. attorneys in east Tennessee and Los Angeles have both reviewed the matter and concluded on their own there was no basis for prosecution, but it certainly appears as if the people at the project acted commendably. Mr. CAFFEY. May I read from the FBI report, Mr. Chairman? For proper identification, this is a report by the Federal Bureau of In- vestigation, Los Angeles, Calif., January 19, 1979, in the case of Donald Ray Dill, Edward Marinock, Al Plizka, on the charge of fraud against the Government, Department of Energy, in a pro- curement matter. Reading from the second page of this, the investigator got this sort of response from Mr. Plizka, who was the person who loaned Mr. Dill $1,000 in May 1977. He said, in response to a question if he ever received any special consideration or was given any infor- mation regarding competitive bids on the tubing, that he had never received any specific information from Dill re~arding the bid on the tubing, but he did receive "ballpark figures.' According to Plizka, Dill said that $1,800,000 would be a good figure to bid, and Plizka transmitted this information to the presi- dent of Renwick Associates. That was the company Mr. Plizka was employed by. Mr. DINGELL. The bid in question was $1.8 million. All of a sudden it became $700,000. Mr. CAFFEY. Yes, sir. PAGENO="0079" 98 Mr. DINGELL. This was reasonably contemporaneous with the loan. Mr. CAFFEY. Yes, sir. Now, the FBI has investigated this case, re- ported it to the district attorney who had cognizance and he decid- ed he did not have a prosecutable case. The facts are in the report, but it is in his jurisdiction to decide whether or not to prosecute. Now, there is a question about whether the U.S. Government was, itself, defrauded. It didn't lose any money because of this in- terchange between these two people, and there is no appearance that it did. Mr. BARRETT. There was an indication Mr. Dill provided inside information to this other employee. Is that not correct? Mr. CAFFEY. There is an indication that did happen; yes, sir. Mr. BARRETT. And in response to that information being sup- plied, the Oat Co. dropped its bid on two separate occasions to come up with the $705,000 figure. Now, that was the finding of the Office of Internal Review of ERDA, and, furthermore, ERDA, according to an internal memo, said that it seemed to be a "1 ½-year pattern b?r Oat Co., which sug- gests they may indeed be getting information.' Furthermore, they add, "They may plan to make an award on April 15 or 20, and are in a quandary as to whether to go through or hold up pending an investigation." Has there been such an investigation made of the passing of inside information? Mr. CAFFEY. I do not know that the Department has made such an investigation. That was part of this FBI investigation, I believe. Mr. BARRETT. This was recommened by ERDA, not with respect to the FBI. This is with respect to internal procedures, is it not? Mr. CAFFEY. I have no recollection of that recommendation, sir. Mr. BARRETT. Has any action been taken against Oat & Co. with respect to this activity? Mr. CAFFEY. No, sir, there is no indication that Oat & Co. had any hand in this improper sort of an arrangement. Mr. BARRETT. They did, however, respond by lowering their bids. Was that looked into? Mr. CAFFEY. They did lower their bid, and I do not know what caused them to lower their bid. Mr. BARRETT. Oat, in fact, got five other contracts. Is that cor- rect? Mr. CAFFEY. I would have to look at the timing, Mr. Barrett, to see whether that was before-all of those were before this particu- lar instance-or anywhere after. I ~vould also point out that not just one district attorney, but two district attorneys, one for east Tennessee, as well as the one for Los Angeles-- Mr. BARRETT. They said it didn't happen in California, and so it should be prosecuted elsewhere, and the one in Tennessee wasn't sure whether it was sufficiently serious to prosecute. They did not decide that a crime had not occurred. Mr. CAFFEY. May I read from the FBI report, sir? It has a some- what different expression. The date of referral is not included in the report, but the matter was presented to the U.S. attorney's office in Knoxville, Tenn., and PAGENO="0080" 99 the FBI investigator relates in their opinion no Federal violation has occurred under title 18, United States Code, section 201, brib- ery of a public official, inasmuch as Dill could not be considered a public official within the meaning of the statute. In September 1978, the assistant U.S. attorney, Robert E. Simp- son, Knoxville, Tenn,, advised that, in his opinion, if any fraud against the Government or violation had occurred, it did not occur within the Eastern District of Tennessee, and no further investiga- tion was warranted. In January 1979, the facts in this matter were discussed with As- sistant U.S. Attorney John D. Robinson in Los Angeles. He de- clined prosecution in this matter, since there was insufficient evi- dence to indicate there had been a violation of Federal law on the part of Donald Ray Dill, Edward Marinock, or Al Plizka. Assistant U.S. Attorney Robinson stated the alleged attempted bribery of Dill by Marinock did not appear to be a violation of the bribery statute since Dill was not a Federal employee `and the incident appeared to involve a one-on-one situation in which Marinock was supposedly intoxicated. Furthermore, the $1,000 loan by Plizka does not appear to be in violation of any Federal law since the $1,000 given by Plizka may have well been a legitimate loan, even though it has not been paid back by Dill. No further investigation is being con- ducted in this matter. Mr. BARRETT. There is no reference to section 512 of title 41, which I just quoted, but if I can go on with respect to the incident involving computer fraud, was that incident promptly reported to the IG? Mr. CAFFEY. That incident was reported in due time by-- Mr. BARRETT. After the incident? Mr. CAFFEY. No, sir. No, sir. You must think of this in the way in which these events actually happened. In March 1980, Mr. George Frazier resigned from Westinghouse because of conflicting outside business interests. At that time, I asked the chief of our automatic data processing section to look into the procurement records to see if there was any indication that Mr. Frazier had had any influence with respect to the compa- ny he was connected with over any procurement there had been in software or hardware for Westinghouse. He reported back to me in writing as of April 7 that, as of that time, according to the information available to him at that time, he could find no evidence of wrongdoing with respect to the procure- ment of hardware or software. I referred that memorandum immediately to counsel for the proj- ect office and asked him to look into it further. The words I used were on note to Paul Shlemon "for consideration as to whether to inquire further," and my initials and the date April 7 were includ- ed. Mr. Shlemon, as counsel, considered we should examine the matter further because of the possibility that Mr. Frazier may have used the computer for his own benefit. An investigation then was conducted through Westinghouse, which was responsible for the Knoxville computer, who had the people to get into it and look at it. It was a quiet investigation done so as not to disturb any evidence that might be in the computer PAGENO="0081" 101 Mr. BARRETT. Yes. Mr. CAPPEY. Violations of laws and losses of security interest? Mr. BARRETT. Yes, sir. Mr. CAFFEY. Yes, sir; there is some possible doubt here, because this is speaking of violations of laws and losses of security interest rather than of procurement or-- Mr. BARRETT. It talks about theft of government-owned property; isn't that sort of what was going on with respect to the computer use? Doesn't the Government pay for the use of the computers? Mr. CAFFEY. Yes, sir; that is exactly the characterization that Mr. Snyder, who is the Oak Ridge operations counsel, used in his report to Mr. Denton. It appears there has been a theft of govern-. ment property. I am trying to find in this IMD-- Mr. BARRETT. Memorandum of March 19, 1980, which would be contemporaneous with the episode that says DOE and contractor employees should inform the Inspector General as promptly as pos- sible if they have knowledge of possible fraud, abuse or other forms of wrongdoing. In this case the particular individual that you appointed to look into this matter was in fact a friend of the individual, Mr. Frazier, was he not?. Mr. CAFFEY. He was a friend of Mr. Frazier, and I asked him for the very limited purpose to examine the facts of procurements of hardware and software, and then referred the matter to counsel for consideration for further action. Mr. Robinson reported that as of the time of April 7 when he gave me his report, he had found no evidence of wrongdoing with respect to the procurement of hardware and software. Mr. Robin- son did not go into the question of the possible wrongful use of the computers. I did not have him do that. Mr. BARRETT. The FBI reported that material that was sold re- spectively to the project at a cost of $185 and $305 was in fact available in the open market in the area for $22 and $35, I believe. In other words, it was a markup from $22 to $185? Is that a fact or is it not? Mr. CAFFEY. Yes, sir; and I believe we are now moving to a differ- ent case. Mr. BARRETT. Correct. Mr. CAFFEY. This is a case of two employees of Atomics Interna- tional dealing with outside companies who were in effect, brokers for parts and pieces to be supplied to the steam generator work. As soon as Atomics International discovered this improper pro- curement practice it notified me orally that same day of this dis- covery. The next day the Office of Inspector General was informed by our office based upon simply a handful of facts which we had been given from ~I orally. Mr. BARRETT. It looks like those particular companies that got such an advantageous agreement did no other business with the Government or anyone else other than with Al on this contract; is that not true? Mr. CAFFEY. That is the report of the FBI investigation, yes, sir. We suppose it is accurate. Whether these were companies just formed for the purpose of doing business with Al, companies that PAGENO="0082" 103 Mr. BARRETT. What procedures are established as a result of dis- covering this incident that would enable you to see whether the practice wasn't going on in other areas? I await your answer. Mr. BREWER. Very well. Mr. CAFFEY. Do you want me to speak? There is no way that one can find out everything that goes wrong between private parties. The audit process which is established and the reporting process where everybody has been instructed to report evidence of fraud, abuse, waste, and so on, is our way of coming across these kinds of matters. There is no way we can find out something which goes on be- tween two people privately in a motel room, for instance. Only when you discover it, then the matter is what do you do with it when you have found it? Do you let it slide or pick it up and do something with it? Mr. BARRETT. You learned something by virtue of uncovering it in this instance. Have you implemented any action to go back and investigate other possible similar incidents? I mean what experi- ence have you obtained from finding it in this instance or is it just standard established procedure that you are going to pursue? Mr. CAFFEY. It is established procedure that all of our cost type contracts are audited and the audits are performed by either De- fense Contract Audit Agency or Defense Contract Administrative Services. I believe now all of them are being done by DCAA. If they come across something that looks suspicious, they will pick it up and put it in their report. We do our own internal audit on the project; we have our own audit staff. We have done some 9~ audits, but principally these are not with respect to our prime contractors nor to the cost type sub- contractors. They have to do with audits of our own procurement practice, our own financial management books, audits of the parties to the four-party contract. Mr. BARRETT. The 718 alloy, that is used in the aerospace indus- try? Mr. BREWER. Mr. Staker? Mr. STAKER. Yes, it is. Mr. BARRETT. In specifically turbine blades for jet engines? Mr. STARER. I am not certain. It is a high-temperature material; it probably is, yes. Mr. BARRETT. It is a fairly common alloy, or it's a known alloy? Mr. STARER. I don't know the way you use the term fairly common. It's a high-temperature material that was first on the market perhaps 10, 15 years ago. Mr. BARRETT. When was it first on the market? Mr. STARER. About 15 years ago, first application was probably in turbine blades. Mr. BARRETT. So it is a known commercially available alloy, the properties of which-- Mr. STAKER. No; it is a commercial alloy but in terms of its oper- ation at elevated temperatures and in our particular use we have a PAGENO="0083" 104 very extensive research and development program to define its properties. Mr. BARRETT. Can you weld this alloy? Mr. STAKER. No; you cannot. Mr. BARRETT. You are going to have to drill it? Mr. STAKER. We use mechanical fasteners. Mr. BARRETT. Wasn't the drill blade the problem with the tur- bine blades in the DC-10 and some of the early engine failures? Mr. STAKER. I have no idea. Mr. BARRETT. Mr. Fitzgerald, do you have any information you might add to this? Mr. GORE. About the aircraft? Mr. BARRETT. About the alloy and the properties that occur when you drill such materials. Mr. FITZGERALD. I can only give you what I have gained from dis- cussions, Mr. Barrett. I am told that there has not yet been a code established by the American Society of Mechanical Engineers and that they are cur- rently in the process of getting one. The engineers seem very con- cerned about the application of this alloy in the Clinch River Pro- ject, and the project or Department of Energy furnished us a docu- ment which I have studied which shows that they had a meeting on the potential problems and have started a process of defining exactly what the characteristics of the alloy are. Now, beyond the March 31, 1981, meeting minutes, we don't know what has been done. Mr. STAKER. Our materials and structures division investigates and provides data for some innumerable materials used in reactor design, this just being one of them. We have one of the largest ma- terials research development programs, and this, as a matter of course, as one would do in any material used in reactor, is to thor- oughly develop the fundamental understanding of all of its charac- teristics, and that was the purpose of this particular meeting. It had nothing to do with Clinch River application. It was just in the normal course of events of investigating what the program should be for this particular alloy for the next year or so as we do in the cases of other alloys. Mr. BARRETT. Thank you. That concludes my questions, Mr. Chairman. Mr. DINGELL. Gentlemen, the Chair is concerned. What is the original level of participation by the electrical utili- ties and of the Federal Government in the Clinch River Breeder Reactor? Mr. CAFFEY. May I read from the hearings before the Joint Com- mittee on Atomic Energy on September 7, 8, and 12, 1972? The hearing, chaired by Chairman Pastore on September 7, in- cludes a press release which the Joint Committee on Atomic Energy had prepared to be made immediately following that partic- ular session. This press release is captioned: "Joint Congressional Committee on Atomic Energy Announces Public Hearings Concerning Ar- rangements for Construction and Operation, Demonstration, Liquid Metal Fast Breeder Reactor." It announces the hearing and goes PAGENO="0084" 105 through and talks about some of the arrangements that would be made. On page 3, beginning in the third full paragraph on that page, may I read to you the whole paragraph? The whole paragraph is pertinent to your question. The Breeder Reactor Corporation, working in cooperation with the Edison Electric Institute, the American Public Power Association and the National Rural Electric Cooperative Association, will be responsible for collecting contributions to the proj. ect pledged by many utilities throughout the country. These pledges total approxi- mately $250 million. The collected funds, less expenses, will be turned over to the PMC for Project use. AEC will contribute about $92 million in funds and, additional. ly, as provided for in the enabling legislative authorization, will furnish assistance valued at about $320 million, from its base research and development program. TVA and CE will each make a contribution to project resources of up to about $2 million in services, over and above their substantial pledges to the $250 million util- ity pool, and a significant contribution is expected from the selected reactor manu- facturer or manufacturers. From the submitted estimate, the project resources appear to be in balance with total project costs. According to the memorandum of understanding, if additional funds are required, the AEC will endeavor to obtain ad- ditional appropriations and authorization, as necessary, to meet the needs of the project. As early as 1972 there was a proposal by the utility industry and acceptance of that proposal by the Joint Committee on Atomic Energy, and this became part of the statutory basis for the project of $250 million contribution into the project with the obligation on the part of the AEC to endeavor to obtain any further appropri- ations that might be needed. Mr. DINGELL. All right. Now, what were the original cost esti- mates with regard to this project, $696 million? Mr. CAFFEY. At the time of this particular hearing, it was $699 million. Mr. DINGELL. $699 million? Mr. CAFFEY. Yes, sir. Mr. DINGELL. What is the current cost estimate? Mr. CAFFEY. Current cost estimate, $3.2 billion. Mr. DINGELL. In 1974 what was the cost estimate, $1,736 billion; is that right? Mr. CAFFEY. That is correct. Mr. DINGELL. $1.950 billion in 1975? Mr. CAFFEY. Correct, sir. Mr. DINGELL. The current cost estimate is what? Mr. CAFFEY. It is $3.2 billion, sir. We are speaking in what we call year of expenditure dollars, not in constant dollars. In constant dollars it is quite different, because of escalation, we can show it to you in constant dollars, if you would like to see it. In terms of constant dollars, the project cost estimate-let me get the paper in hand, it is better to have it in hand. We furnished the committee a table on this. Mr. DINGELL. You can supply it for the record. [The following information was received:] PAGENO="0085" 107 Mr. CAFFEY. In constant dollars in 1974 to the current cost esti- mate, there is about a 31-percent incxease, and all of the rest of the cost increase is in terms of escalation, sir. Mr. DiNGELL. I see. Well, gentlemen, the committee thanks you for your assistance to us. Mr. GORE. Mr. Chairman? Mr. DINGELL. The gentleman from Tennessee. Mr. GORE. I had a couple more questions. The first estimate on this last matter, the cost estimates, the first estimate that really was reliable to any degree was the 1974- 75 figure that was already over $1 billion; is that correct? Mr. CAFFEY. That is correct, sir. Mr. GORE. The increases since that time have been accounted for by the items that you cited in your opening statement? Mr. CAFFEY. Yes, sir; and we have established, beginning with that reference estimate in 1974, an even better audit trail or care- ful tracking of the changes in the costs as they occurred. We do this on a monthly basis through the performance meas- urement system, and whenever we might revise the total estimate, we make a very careful thread through there so we can demon- strate the real reasons for the cost increases. Mr. GORE. Speaking of those audits, I would like to submit for the record a list of the reports on the Clinch River breeder reactor project by the Office of Inspector General and its predecessors. Now, is it true that there have been numerous independent audits, that there have been 16 reports or independent reviews of the project by the DOE Inspector General and 425 audits by inde- pendent Federal organizations? Mr. BREWER. Yes, sir. Mr. GORE. All right; now we had questions a moment ago about the alloy of 718. Now, is it true that this alloy was selected be- cause, one, it operates at high operating temperatures, around 1,100 degrees Fahrenheit, and it has a high thermal cyclic fatigue resistance and, three, the ease of manufacture and, four, it would be accepted by the ASME boiler code? Mr. BREWER. Yes. Mr. GORE. Reference was made to the use of fasteners for the alloy 718. The implication was that this was something that was unforeseen. Was that foreseen or not, Mr. Staker? Mr. STAKER. No, it was planned for. As a matter of fact, our plan- ning for the next large development of the plant has the same design feature. Mr. GORE. I thought there was an implication that maybe it was intended to be drilled or welded originally, and somehow this was just an evidence of mistake or sloppy work, and evidently that is not the case. Now, are you aware, Mr. Caffey, that in 1977 the Carter adminis- tration announced that it intended to terminate the Clinch River breeder reactor? Mr. CAFFEY. Yes, sir; I am quite aware it did. Mr. GORE. The administration at that time unilaterally wrote a letter to ask for suspension of public hearings on the licensing of the project; is that correct? Mr. CAFFEY. That is correct, sir. PAGENO="0086" 108 Mr. GORE. Well, now, at that time the utilities were put in the position of the Government, its partner in the project, announcing unilaterally its intention to cancel the project and up until that time they had already paid $100 million; is that correct? Mr. CAFFEY. That is correct, sir. Mr. GORE. Any indication whatsoever that the utilities are not prepared to meet their obligations? Mr. CAFFEY. Not only no indication that they are not prepared to meet the obligation, sir, we have very strong indications they are fully prepared and intend to meet their obligations, if the project goes forward to completion. Mr. GORE. Well, that is excellent. Mr. Fitzgerald, we went over three fraud and abuse cases that the staff of the subcommittee told you about and they found out about from the project people. In the document which you prepared prior to the hearing, you expressed your concern that, I don't know if I have the exact phrase, but the concern was that there were other instances of fraud that may have been covered up in light of the fact that those three instances which you found out about from our subcommittee staff were found out about from the project people. On what do you base your allegation that there may be other in- stances of fraud that have been covered up? Mr. FITZGERALD. I didn't testify to that, Mr. Gore. Mr. GORE. That may not even have been in your first draft. The document is entitled "Preliminary Findings." This is the one that has been released to the press, and it says:* "The staff is concerned that other allegations of potential wrong-doing have been covered up. "The Staff has found examples of bribery and fraud by Al con- tract officials and a Westinghouse official who was running his own business on the CRBR computer. The FBI has conducted inves- tigations of those cases. The staff is concerned that other allega- tions of potentail wrong-doing have been covered up." That is not your statement? Mr. FITZGERALD. No, sir; my only involvement in this fraud and abuse thing, as I think I have indicated, was the first meeting that I had with the DOE officials and our subsequent meeting with the Acting Inspector General. Beyond that I have not taken part in that. Mr. GORE. You want to disassociate yourself from this statement? Mr. FITZGERALD. Not a matter of disassociation; I was never asso- ciated with it. Mr. GORE. You see my concern is that it is kind of a broad brush being taken on the entire project, and that may not be justified. In fact, I don't, think it is. Now, the document goes on, "The staff found documents in DOE files which indicate that the top DOE reactor scientist responsible for the liquid metal fast breeder reactor program admitted that contrary to DOE's official position, CRBR is not a necessary step in the LMFBR program." That is you, isn't it? Mr. STAKER. I haven't read the report. If you are referring to ,the article previously mentioned, yes. PAGENO="0087" 109 Mr. GORE. And you wrote a letter to the editor of that magazine saying that they had it wrong and set them straight? Mr. STAKER. Correct. Mr. GORE. All right; now, it goes on, staff found that several util- ity officials, off the record, seriously question the justification for funding CRBR. We don't have their names and, of course, they won't speak on the record, so it is hard to evaluate that. I could go on, Mr. Chairman, but let me conclude by saying that this has been a very, very interesting hearing. It has been preceded by a lengthy period of 2 months or so in which this hearing has been anticipated by many seeking to write about it, interested in the findings which might come about from this hearing. In fact, the hearing itself, the responses to the questions and the record that has been made here today is really very, very different from what the advanced billing would lead one to believe, and I am confident that our colleagues during the debate tomorrow will be most interested in the difference between the advanced billing and the actual record of the hearing. I would like to conclude by thanking all of our witnesses here today and particularly Mr. Fitzgerald, and I mean it, Mr. Fitzger- ald, when I say that it has been a pleasure to be associated with you, and I seriously look forward to an occasion when we can be on the same side of an investigation. Mr. DINGELL. One question here. Gentlemen, I observe that the Clinch River breeder reactor is an interesting kind of device. It is a loop breeder reactor? Mr. CAFFEY. Yes, sir. Mr. DINGELL. Now, if you ever build another breeder reactor, would you build a breeder reactor of the loop type or another type? Mr. STAKER. The reference, the present reference design for the 1,000 megawatt plant is a loop design as is the FFTF. Mr. DINGELL. As opposed to pool? Mr. STAKER, Right; EBR II is a pool. The experimental breeder reactor No. II at 20 megawatts electric is a pool type operating in Idaho. We have pool and loop reactors. * Mr. DINGELL. If you ever build a second one would you build loop or a pool? Mr. STAKER. I would rather reserve that judgment until the time to make that decision. The pool versus loop issue has become almost a religious~issue. On first engineering principles, one can't prove which one is better. Our present reference design for the 1,000 megawatt CDS plant is a loop design. Mr. DINGELL. Mr. Fitzgerald? Mr. FITZGERALD. I would like to respond to Congressman Gore's comments, which I. appreciate very much. I would like to say that it is not a matter of which side because I would hope we are on the same side of this. My principal interest is that if the project goes forward that it be managed better, and that was the sole thrust of my recommendations which I was quite disappointed were not discussed. 89-405 O-82--8 PAGENO="0088" 110 They were constructive recommendations and were so meant. The recommendations assumed that the program would go foward. Mr. GORE. Well, let me just ask you a question then about your last recommendation. You recommend that we ask the utilities to, this is your next to last recommendation, that we require the utilities to fund 50 per- cent of all of the future expenditures on this demonstration project. Did you base that on any background in nuclear research and de- velopment projects? Do you think that is feasible? Do you think that a regulated utility could commit itself to 50 percent of an unspecified future amount of a research development and demonstration project where the lead participant is the Feder- al Government? Does that make any sense at all? Mr. FITZGERALD. It might if the project meets the test of the mar- ketplace. Mr. GORE. It is a demonstration project. You recommend alternative nuclear reactor designs. Do you have a background in alternative nuclear reactor cycles or alternatives to the breeder? Mr. FITZGERALD. No, sir; that is not in my last recommendation either. Mr. GORE. What does it say? Mr. FITZGERALD. The last recommendation says when require- ments set forth in recommendations 1 through 5 are met, advertise for competitive fixed price bids for a working licensable power- plant. That is again, marketed number-- Mr. GORE. Read No. 4. No. 4, evaluate alternative nuclear reactor programs. What alter- natives to the breeder would you recommend? Mr. FITZGERALD. I don't recommend any. I suggest that the people we pay to keep track of those things do so, just to make sure that we are not locking ourselves into a nuclear supersonic trans- port. Mr. GORE. I see. Well, sometimes lessons about contracting are governmentwide and I guess sometimes, though, there are difficul- ties in taking airplane specifications and trying to apply them to nuclear reactors. And where the SST is concerned, this may be valid, but I take it, Mr. Brewer, you have evaluated alternatives to the breeder? Mr. BREWER. Yes, sir; we have been evaluating alternatives to the breeder for the past 15 or 20 years. Every combination and per- mutation of fuel form, fuel cycle, coolant, neutron spectrum has been examined and examined and examined. The decision to go to the LMFBR, to concentrate on the LMFBR was made in the mid-sixties. Mr. GORE. It would be feasible to ask the utility industry to accept an agreement that committed them to 50 percent of all future funding of the project? Mr. BREWER. Not in a developmental project of this kind, sir. Mr. GORE. Now, the contract that he recommends be canceled, have they in fact been restructured relatively recently and as- signed? PAGENO="0089" 111 Mr. Caffey? Mr. CAFFEY. Sir, the contract for the procurement of the steam generator was entered into between General Electric Co. and Atomics International, we removed from the scope of work of Gen- eral Electric Co. in May of last year and have Westinghouse, as the prime contractor, take over the management of that subcontract directly. Since that time Westinghouse has constituted a management staff and has spent a very great deal of time in reviewing the suffi- ciency of the design, critiquing it, working it over with AT, evaluat- ing the entire steam generator program, and has only recently fur- nished me with its own current assessment of the whole steam gen- erator program cost. That is the cost which is referred to in the steam generator pro- gram papers which were furnished to committee staff a few weeks back. I have not yet rendered a final decision on that program cost. Mr. GORE. Thank you very much and, Mr. Fitzgerald, I did not intend in any way to question your motivations, not in any way. I know exactly what your motivations are, You are interested in seeing the taxpayers get the most for their money and seeing money not being wasted, and when you see large projects of this. kind you go up and you believe you can find some examples. I believe a good hard look has been taken here, and I am sure that we have all learned something today, and I am sure if they had this to do over again there might be some changes, but it is quite different from what the advanced billing was. Thank you, Mr. Chairman. Mr. DINGELL. The Chair thanks the gentleman. Again, thank you all. The committee stands adjourned. [Whereupon, at 2:05 p.m., the subcommittee adjourned.] [The following material was submitted for the record:] PAGENO="0090" 113 Discussion The first knowledge the Clinch River Breeder Reactor Plant (CRBRP) Project Director, Mr. 1. W. Caffey, had of the Investigation was after one of the Project Office employees related to him on May 28, 1981, that he had been verbally threatened over the telephone by a person representing himself as an Investigator for Congressman Dingell (see Tab 2). Mr. Caffey requested clarification and guidance from DOE Headquarters, where notice of the 1nvesti~ gation had just been received. Upon learning that there was indeed an investigation beginning, Mr. Caffey requested DOE Headquarters to arrange a meeting with the investigators. The investigators demurred at first, but 3 days later agreed to meet with the CRBRP Project Director and DOE Headquarters. The meeting between the investigators and Mr. Caffey occurred on June 3, 1981, with Mr. R. G. Staker and Mr. 3. A. Bartell of DOE Headquarters present (see Tabs 3 and 4). Full cooperation with the investigation was expressed by Mr. Caffey, who added that the philosophy of his management had always been that the entire project would someday be audited. The meeting covered organization, management, contracts, auditing, and an extended presentation on project control methods. The Project Office received an extensive request (see Tab 5) for documents and information on Friday, May 29, 1981. Project officials worked through the weekend to respond. A package weighing about 25 pounds was provided to the Subcommittee staff by Federal Express on Monday June 1, 1981. This clearly shows full cooperation by the Project Office. Mr. Caffey Instructed his staff on June 4, 1981, and the project contractors on June 4and 5, 1981, to cooperate with the investigators, and that they should not feel "muzzled" by project management. PAGENO="0091" 115 * MAt?y.uvcN,w CONSN~S ~w 2323 R*v~i N~msOpp~c* ~ JOHN 0. DINSIU.. MICN.. CWAINMAN Pwom (203) us.~, ao $*IVVI*. NOV. DANA ~. 0*000. PA. ~ ~- ~ w'~~ ~ CONGRESS OF THE UNITED STATES o.ca~oo ~. U*000rr. Jo. A. ~J*D', ON$O IDONA000000L DI. 0002000 ~ DI0.RY. V~ DAo~ N. ~~** __ HOUSE OF REPRESENTATIVES ~ ~ ~. ` ~"°"` SUBCOMMiTTEE ON OVERSIGHT AND INVESTIGATIONS NON NOONS 00*0. OF THE - COMMITTEE ON ENERGY AND COMMERCE WASHINGTON, D.C. 20515 May 22, 1981 Honorable James B. Edwards Secretary of Energy Department of Energy James Porrestal Building 1000 Independence Avenue, SW Washington, DC 20885 Dear Secretary Edwards: The Subcommittee on Oversight and Investigations is currently reviewing the economics of the Clinch River Breeder Reactor program. Inconnection with this review, the Subcommittee staff will be interviewing various DOE employees and requesting access to documents, as well as copies of selected documents. We expect full cooperation from the Department in order that this review can be carried out in a timely manner. Thank you for your cooperation. Sincerely, ~ ~;:V~/~~ ~ ~ J~hn D: DingeLt Chairman Subcommittee on - Oversight and Investigations PAGENO="0092" 116 4)) OGC Honorable cohn D. Dingell Chairman, Subcommittee on Oversight and Investigations, Committee on Energy and Commerce NE House of Representatives Washington, D.C. 20515 Dear Mr. Chairman: This is in response to your letter of May 22, 1981, informing the Department of your pending review of the economics of the Clinch River Breeder Reactor Plant Project and requesting the Department's cooperation. The Department will be pleased to extend to you and your staff our full cooperation. The Clinch River Breeder Reactor CP/ODL Plant Project is large and co~.plex, and involves numerous records and many different contractors throughout the country. Therefore, I have designated Robert C. Staker, Director, Office of Reactor Research and Technology,' to be the Department s point of contact for your review. Mr. Staker can aid you in providing technical and other factual data to support your inquiry, and will facilitate obtaining formal Department responses on policy related issues. You can reach Mr. Staker at 353-2915. Sincerely, CC: Os/Rusche (1) DS (1) US (1) NE (1) ES (E) DO-'2 (1) GC (1) Bergholz (1) fESBl-014425/ DD 6/2/81 OGC: NEBergholzibad: 6/2/81 252-6975 PAGENO="0093" 117 j/:, c.:~.. / 1~ MEMO COUTE SLIP ~ 0..' AIC-P) (*`~. 14.p $4 $04~' *0CM 0)40 J$440..sS..tu..i. LJ'~"~-'*" U'S".' J OS's ss4 ,~tsso. I ..` .s,s.s.~s. ~( I F~ sMU $S5TO~5 N.'SU I Peter Stockton Subcommittee on Over~' sight & Investigatlo Committee on Energy and Commerce ssn .~ Ernest Fitzgerald called me ont4ay 29, 1981 ~- end requested that I send to you certain ---- Information about the C~1nch River Breeder ~~i~~sffi*Ssd 5401 2323 Rayburn House Office Buflding Washington, DC 20515 WiM0 `.n . MM40I$ Reactor P'ant Project. That Information Is attached. 10 (Nsn.sssl `Mu .`?S'~$ at,' atom.' Attachments: F~j.4 ~ ~ ~`7.~( P. 1. Marquess, pie. Financia' Mat$ag~5$ent CRBRP/PO ataosts ~ As stated . ,wo,c~ loan 626-6040 J~6/1/B1 P ~ ~... ~ - CP0:1~?l C, ~ `.~ ~ ~W' ~A.~.O440 (~% ,-,~,4 L,4.4~. j', ~ f~~rl.~ss `~ ~ ~*rI+Lr~~r ~* t,.~ _>~~ -~ ~L (11' ~ ~s). ~ b~ 1'~ ~6u i~1~ PAGENO="0094" * ITENA CRBRP TOTAL PLANT COST ESTIMATE ($ MILLIONS) .1975 APR 77 PROJECT OFFICE ESTIMATE BASELINE .~PRO6RAM REVIEIL_.. APR 80 APW~8L.~. * INITIAL OCT 1, 83 JUN 1, 84 JUN 1, 87 SEP 15, 88 FEB 15, 90 CRItICALITY * TPCE IN 74 $ 1,316 1,4511 1,566 1,648 1,729 * ESCALATION _~1~fl LQl~ L2~.& * TPCE IN YEAR OF 1,950 2,194 2,644 2,886 3,197 EXPENDITURE $ * THE DELAY IN INITIAL CRITICALITY FROM OCT 1, 83 TO JUN 1, 84 IS DUE To: O LICENSING ISSUES -~ 4 MONTHS O FY 78 INITIAL FUNDING CUT -~ 4 MONTHS * ALL OTHER DELAYS ARE DUE TO THE NATIONAL POLICY DEBATE. NOTES: 1.. COMPLETIoN DATE IS 5 YEARS AND 7 MONTHS AFTER INITIAL CRITICALITY. 2. TPCE IN 74 $ INCLUDES RETENTION OF STAFF FOR DESIGN, CONSTRUCTION, AND PROJECT MANAGEMENT BEYOND THE PREVIOUS DATE OF INITIAL CRITICALITY. JUNE 1, 1981 PAGENO="0095" ITEM B - ~DATLOFJf1IT1ALCRIT1CALITY OCT 1~ 83 JUN~11 84 JUNJ..~87 SEP l5~ 88 FEB 15~ 911 OPERAT1N1~ PROJECTOFFICE 7 9 9 8 8 OPERATIONS AND MAINTENANCE 52 65 65 86 86 FUEL FABRICATION (RELOAD) 19. 511. SQ. 52. SUBTOTAL 98 124 12~i 146 146 REVENUE (72) (iQ~) (jQ~) (151) (151.) OPERATING TOTAL ~. j~. j5) CONTiNGENCI 197 1~ ~1 ii TOTALIN]'LDOLLARS 1,316 1,454 1,566 l,~48 1,729 E~SCALAT1ON 63q 7110 LQL?. w~ ____ TOTAL IN YEAR-OF- EXPENDITURE DOLLARS 1J~Q. 2.J.~!. 2,6114 2,886 _____ JUNE 1, 1981 PAGENO="0096" 122 w 4- CRBRP FUNDING SUM~'tARY IN MILLIONS OF YOE DOLLARS FEBRUARY 1990 INiTIAL CRITICALITY ITEM C GROSS COSTS ~P~IRIBUTI OHS 955.3 110.7 BUDGET OUTLAYS BUDGET AUTHORITY THRU FT 80 844.6 * * 947.3 81 199.5 .7 191.8 161.8 82 215.6 307.3 8.4 207.2 254.2 * 83 45.4 261.9 255.8 * 84 312.8 21.6 * 291.2 28B.8 85 * 293.3 * 14.9 278.4 316.B 86 389.3 15.4 373.9 372.3 .87 385.4 15.1. 370.3 * * 312.8 88 241.4 *. 15.4 226.0 188.5 89 148.0 . 15.1 13?.9 111.9 90 92.3 15.4 76.9 * 50.4 91 ( 5.0> 12.4 (17.4> <21.3) 92 93 94 95 * (22.8) <74.1) (114.9) (126.9~ 11.5 .9.8 8.6 ~35.3 (34.3> <83.9) (123.5? ; <162.2) (34.5> (83.9> (124.0> * K163.i) TOTALS 3,196.5 . 362.7 2,833.8 2,833.8 JUNE 1 * 1931 PAGENO="0097" iTEND CRBRP SCHEDULE FEBRUARY 1990 INITIAL CRITICALITY START SITE WORK APRIL 1983 START MAT PLACEMENT JUNE 19811 START SODIUM SYSTEM TEST MARCH 1989 START FUEL LOAD SEPTEMBER 1989 ACHIEVE INITIAL CRITICALITY FEBRUARY 1990 BEGIN 5 YEAR OPERATING PERIOD SEPTEMBER 1990 END 5 YEAR OPERATING PERIOD SEPTEMBER 1995 JUNE 1, 1981 PAGENO="0098" tc~ ::o~ A41010 E2iE~004 ~25A-003 ?25A~004 L26- 001 E26~003 023 L00~0Cl * AECP LC0001 Li 0~ 002 L1O"t02 L1C.~'~07 125 ITEM K L2C~NS1NG RtLATED ECPs 5/1 8/31 Anount $ 2B8,0O~ 6,000 560,400 81,000 £6,100 1,106,000 1,192,900 138,200 55,500 6,153,100 978,200 22,629,50U 789,500 2,361,400 * 288,700 * 21,581,400 13,350,830 2:, 000 ________ Brief Description Revision of Safety *nd Code Classes Appiica?le to the EVST A4~c:7 Definition of Xmpact Loads in Section 11 of £DD-41 ?~S101002 SDD~81 Code Class Changes 2~850i006 Addition of Second Containment Isolation Valve to Primary Cover Gas Sampling-Line A853008 Syster Separation Based on Safety C1ass~fication SC? Gantry Crane Revisions to the RSB BVAC System SC? Auxiliary Feedwater Pump Cells Unit Cooler Hodification Evaluation of Appendix A to Branch Technical Position APCSB 9.5~l Implenenting of Appendix A to Fire Protection Branch Technical Position ~\PCS3 9.5~l RC3 Seismic Design Modifications vflI:~ii Seismic Design Changes VIIINM Seismic Design Changes Modification to SBRS Requirements to Enhance Redundancy & Diversity Tornado Missiles Site S,uitability Source Term (SSST) Third Level Thermal Margin (TLTr1) Ultii~nte }J~at £in}~ Lo~i Combinations 89-405 O-82--9 PAGENO="0099" ________ Brief Description Design Basis Na Fire SGB Naintenance Bay Foundation and Excavation Definition of the Design Basis Sodium/Water Reaction Event G-~0598 System 53 Water/Steam Pipe Break Loads & Restraints .G~0736 System 56 Pony Motor Support Stand Hardware Nodification (Seismic) G-0680 Resolve System 52 (Steam Generator Athiliary Heat Removal System) Local St~ess Problems Ll0.~l38 TMBDB Operations, Maintenance and ~`est (and Update) Post Accident Monitoring System 26A Catch Pan Design Details Revision of SDD~96 Inservice Inspection * Cost to be addressed in clean~up BC? **Tàtal to be adjusted after Ll0-137 estimated cost is addressed in clean~up ECP ~The amount shown is in year of expenditure dollars for the Project schedule In effect at the time the ECP was approved. However, these ECP's are In the current cost estimate in year of expenditure dollars for the February 1990 InItial Criticality schedule, $ 127 ECP ~o. LlO-~O90 B21-'133 L10-137 Anount $ 257,300 l,696,CÔO * 1,576,200 606,600 2,280,800 164,800 92,900 25,200 1,759,800 6,283,300 *** $100,004,700 W..'I 647 A26 025 B10~075 Li 0~08 0 PAGENO="0100" 128 ITEM L AUDIT R~POR1S AUDIT REPORT REPORT PERIOD AGENCY NO. DATE CONTRACTOR COVERED ERDA 76-24~M-2 July 7, 1975 WESTINGHOUSE CV 1975 (Contract 0003) ERDA 76~286~B~C~131 March 26, 1976 WESTINGHOUSE CV 1973 (Contract 2395, et. al.) DCAA 3191~OH14O003 November 5, 1980 WESTINGHOUSE CV 1978 (All Contracts) DCAA 6191-O1$~O344 January 5, 1976 BURNS AND ROE CV 1973 * 0CM. 62O1-9CI60OO5~1~249 December 3, 1980 BURNS AND ROE CV 197d DOE 37 December 19, 1977 STONE & WEBSTER CV 1976 DCAA 217O~iD160186~O907 May 1, 1981 STONE & WEBSTER CV 1978 and 1979 * Efforts are currently underway to resolve the findings in these eports. June 1, 1981 PAGENO="0101" 129 Department of Energy Washington, D.C. 20545 JUL 09 1981 Mr. Peter Stockton Subcomlttee on Oversight *nd Investigations Corrvnittee on Energy and Comerce House of Representatives Washington, D.C. 20515 Dear Mr. Stàckton: This is to provide you with information you requested July 7, 1981, concerning a meeting on Inconel held at Germantown, Maryland, on March 31, 1981. The information is: 1. Letter J. R. Hunter, Acting Director, Materials and Structures Division, Office of Light Water Reactors, to multiple addressees, dated March 16, 1981, Subject: Materials and Structures Program Mechanical Properties Design Data, Alloy 718 Program Review Meeting 2. Letter J. R. Hunter to multiple addressees, dated April 8, 1981, Subject: Materials and Structures Program Mechanical Properties Design Data Alloy 718 Program Review Meeting Enclosure 1 provided the agenda for the meeting. Enclosure 2 provided the meeting report and agreements. You characterized this as an "emergency meet1ng~' during your telephone request for the information. As you can clearly see, this was a routine program review meeting addressing details of a development activity. A purposeof this meeting was to provide the Clinch River Breeder Reactor Plant Project the latest base program information on the mechanical properties of Alloy 718. The schedule for the meeting was established consistent with the design and fabrication schedule for the Clinch River Breeder Reactor Plant upper internals. Sincerely, R. 6. Staker, Director Office of Reactor Research and Technology Office of Nuclear Energy 2 Enclosures PAGENO="0102" 131 MEETING AGENDA March 31, 1981 Mechanical Pro~perties Design Data (Alloy 711) Time I. Introduction C. Seals (DOt) 0830 II. Objectives: c. Seals (DOE) 0835 o RevIew of the current status of ~the mechanical properties testing program for Alloy 718 o Review of methods for data evaluation and development of mathematical md graphical representations o Discussion of follow..on work III. Review~~4genda Items C. Seals (DOE) 0840 IV. Alloy 718 Development Pr~ram Status Review 1. Conventional Heat Treat Material Tests 6. Korth (INEL) 0850 tensile, creep~rupture, fatigue, aging 2. INtL Heat Treat Material Tests 6. Korth (INEL) 0920 tensile, creep~rupture1 fatigue, aging, (base metal and weld metal) 3. Status of ASME Code Case C. Korth (INEL) 0950 BREAK 4. Sodium effects on base material and weld W. Pay (WARD) 1030 materiel properties S. Creep effects on crack propagation, fracture D. Michel (NRL) 1100 toughness LUNCH 1130 1230 V. Comparison of huh cycle fati~gue pro~perties ~pf 6. korth (INEL) 1230 type 316 Stainless Steel and Alloy 718 base material given the conventiànal end INtL heat Xreatments and weld metal given the INtL hélt treatment Including grain size effects PAGENO="0103" 132 VI. Stress Rupture Properties, Ivaluatlon and Inte~pretation of the Data 1. Reactor Structure Requirements for P. Falk (WARD) 1300 Stress Rupture Design Curves and Present Approach (NSMH) 2. ASME Code Practice in the Development A. Snow (WARD) 1330 of N-47 Stress Rupture Design Curves 3. Booker Design Curve Development P1. Booker (ORNL) 1350 * Description of data base: heats, heat treatments, aging, grain size Development.of curve representing mean of data Development of minimum (Design) curve Comparison of mean and minimum curves to actual data 4. Discussion of Results General 1450 * Comparison of Booker, MSMH, P1.47 and Discussion curve based upon Code practice using Booker data base VII. Discussion 1530 VIII. Agreements and Conritments 1630 PAGENO="0104" 133 47.~7~I U.S. DEPARTMENT OF ENERGY 161981 memorandum I' Of NE453 (LWR:PtS-074) susi'C' Materials and Structures Program Mechanical Properties Design Data, Alloy 718 Program Review Meeting `0 L. Caffey, Director, CRBRP Project Office C. Bauer, Manager/Regional Rep., Chicago Operations and Regional Office C. Williams, Manager. Idaho Operations Office C. Hart, Manager, Oak Ridge Operations Office .1. LaGrone, Manager, San Francisco Operations Office The subject program review meeting will be convened at DOE Germantown on March 31, 1981 in Roon~ £401 at 8:30 a.in. Representatives from CRBRP.P0. WARD, $RL, ID, INEL, ORO, ORNL, MSTMC and GE have been invited to attend. The purpose of the meeting Is to review the status of the Alloy 718 Program and to review methods for data evaluation and development of mathematical and graphical representations. If you have any questions regarding this matter, please contact C. Beals of icy staff. ~- James R. Iltinter, Acting Director Materials and Structures Division Office of Light Water Reactors Attachment cc: W. Pennel, WARD P. Falk, WARD R. Leasure, WARD V. Ray, WARD £. Wright, CRBRP..P0 C. Hoffman, ORO V. Harms, MSThC 3. DiStefano, MSThC C. Brinkican. ORNL P1. Booker, ORNL B. Vivian. ID B. korth, INtL C. Spalaris, GE D. Michel, CCL L. Steele, CCL PAGENO="0105" 134 MEETING AGENDA March 31, 1981 Mechanical Properties Design Data (Alloy 118) Time I. Jntrod~ç~~n C. Beals (DOE) 0830 II. Objectives: c. Beals (DOE) 0835 o Review of the current status of the mechanical properties testing program for Alloy 718 o Review of methods for data evaluation and development of mathematical and graphical representations o Discussion of follow~.on work III. Review of Agenda Items C. Beds (DOE) 0840 IV. Alloy 718 Development Program Status Review 1. Conventional Heat Treat Material Tests 8. Korth (INEL) 0850 tensile, creep*rupture, fatigue, aging 2. INEL Heat Treat Material Tests 8. Korth (INEL) 0920 tensile, creep~rupture, fatigue, aging, (base metal and weld metal) 3. Status of ASME Code Case 8. Korth (INEL) 0950 BREAK 4. Sodium effects on base material and weld W. Ray (WARD) 1030 material properties 5. Creep effects on crack propagation, fracture 0. Michel (NRL) 1100 toughness LUNCH 1130 1230 V. ~o~parison of high cycle fatigue pr~2.perties of C. korth (INEL) 1230 ~ype 316 Stainless Steel and Alloy718 base material iiven the conventional and INEi~hiat treatments and weld metal~iven the INEL Mat treatment Including grain Size effects PAGENO="0106" 135 VI. Stress Rupture Properties, tvaluatlon and Interpretati,O!i of the Data 1. Reactor Structure Requirements for P. Falk (WARD) 1300 Stress Rupture Design Curves and Present Approach (WSMH) `2. ASME Code Practice In the Development A. Snow (WARD) 1330 of P1.47 Stress Rupture Design Curves 3. Booker Design Curve Development P1. Booker (ORNL) 1350 Description Of data base: heats, heat treatments, aging, grain slzç * Development.Of curve representing mean of data * Development of minimum (Design) curve Comparison of mean and minimum curves to actual data 4. DIscussion of Results General 1450 * Comparison of Booker, NSMH, P1.47 and Discussion curve based upon Code practice using Booker data base VII. DiscussiOn 1530 VIII. Agreements and Couritments 1630 PAGENO="0107" 137 Meetiflg Report ~~ject: Al1oy 718 Program Review Date end Place: March 31, 1981 Germantown, Maryland Attendees: (See~ Attached List) Agreements: (See Attached List) Discussion: A meeting was held at the Department of Energy, Germantown, Maryland, among representatives of MS/LWR, CRBRP/PO, WARD, MS1MC, P4RL, ORNL, IfJEL, and GE-A~SD on March 31, 1981. The objectives ofthe meeting were to review the current Status of the mechanical properties testing program on Alloy 718, to review the methods for data eveluation and development of mathematical and graphical representation, end to conduct a discussion of the follow-on work. The high- lights of the meeting are as follows: The speakers presented viewgraphs and handed out copies of their presentations to the meeting attendees. The volume of these handouts is sufficiently large to preclude attaching the handouts to this report. Each meeting attendee was provided copies of the handouts. Considerable time was $~ent discussing the interrelation of the various Alloy 718 materials properties that are being measured on the program and the comparison of this data to that data delineated in the huclear Systems Materials Handbook (NSMH). It was recognized that the Alloy 718 properties in the NSMH were extracted from the available literature several years ago. In some instances, the Alloy 718 data being generated on the program tends to indicate prope~ties which are degraded from those predicted by the N$MH. The Agreements of the meeting address areas where additional Alloy 718 data is needed and/or areas where revision Is needed in the development of mathe- matical and graphical data representations. Consideration will be given to implementing the Agreements of this meeting on the Alloy 718 Mechanical Properties Program on as expeditious a schedule * as permitted by available funding. 2 Attachments PAGENO="0108" 138 ATTEND~Nct Attachment 3 ~ij~py 718 Mechan~ea1 ProperUes Nee~~g March 31, 1981 ~gar~ zat~o'~ Claude Beals Chuc~c Erinkrna~ B~11 Penmell lliarc E. Ra~ Chuc~: Sch~n~dt ~ )~. Booker .iim 33orok V~c Storhok rave t'2ichel A. W. Daleher A. L. Snow P. T. Falk D. .7. Nornstra D. B. Peters Gary Xorth .7. R. Hunter C. M. Purdy C. C. Eige~ow MS/LW1~ WARD ~ATc~ GE-ARS~ OR~L MS~M: EG&G Idaho ?~RL GE~ARS~ WAR~ WAP.~ ~RBP~P/PO CRBRP/PO INrL flS/L~?. FTS 22~-422~ FT~ £24-SsCC 412-722-~2~~ 412~~~22-~12 4CB-92~-~C~ F~$ C245~.2 F'E £2~S1~ FTS 583-E7~S 2O2-7C7-2C2~ 4~S~~73E.-?4t4 4~2-722-~!~.E 4 12-722-~4~ F7S 62~-C11C F'~S 62~~52 FT.~ SE3-:34E FT~ 2~7-522~ F~S 273-~~4 F~S 233-42~~ PAGENO="0109" 139 Attachment ~ March 33, 1981 ~T~ic MeeTjn Agreements I. The data base involved in the ORNL analysis of creep rupture data for Alloy 718 included four especially weak heats that were apparently small experimental heats (~"10 ibs). It was agreed that 0R'~L will reevaluate the data base excluding these four heats and proposerevised stress-rupture design curves based on the modified data base. These curves will be subrritted to all of the organizations present at this meeting by May 15, 1981 (CRBRP Request). 2. It was recomended that the Code package be amplified to include a study of the factors appropriate for deriving the fatigue design curve frofr the fatigue failure curve, i.e., the factors of 2 and 20. 3. It was reconanended that additional test data for forged bars should be generated to provide verification of the stress-rupture design curves for this category of material. In particular, these tests should be concentrated so as to define the behavior of this category of material in the region where the stress-rupture curves develop sharp slopes, presumably due to overaging. It was concluded that a number of creep-rupture tests0should be started with failure times in excess of 20,000h at 649 C (1200 F) to fully characterize the apparent metallurgical overaging. 4. It was recomended that additional creep and rupture data should be generated in the temperature regime from 427-482 C (800-990 F) so as to provide ar~ improved basis for the stress-rupture design curves in this regime. 5. It was recornended that an evaluation should be made of the applica- bility of the time and cycle fraction damage law to Alloy 718. Further, that a damage law accounting for creep and fatigue damage be established if simple time and cycle fraction sumation is not appropriate. 6. WARD stated that their current design approach is suct~ to preclude the onset of both fatigue and creep crack propagation. The data from ongoing programs presented at this meeting supports this approach. 7. It is recommended that added emphasis be placed on the point that present Inconel 718 Components are subjected to surface (as contrasted with full cross-section) strains which are thermally induced. Therefore, testing of specimens with prototypic, sodium-corroded surfaces under conditions of thermally-induced strain is needed to clarify prototypic crack initiation! propogation kinetics as well as the significance of surface finish. B. It was recomended that methods be developed in fatigue testing in the high cycle fatigue region in air that would allow emphasis on characterization of surface phenomena, 1,e., surface finish, tensile mean stress, etc. Results.presented at this meeting suggested that high cycle fatigue testing of simple uniaxial 0.25" dia bars may not fully account for surface related phenomena. Thin wall specimens of only several grain sizes in thickness should be avoided. PAGENO="0110" 141 Department of Energy Washington. D.C. 20545 JUN 91961 Mr. Peter Stockton Subcomittee on Oversight and Investigations Coninittee on Energy and Conrnerce House of Representatives Washington, D.C. 20515 Dear Mr. Stockton: This is to provide you with Information that you requested concerning the Clinch River Breeder Reactor Plant Project. 1. Clinch River Breeder Reactor Plant Project Office Organization Chart. 2. Cl Inch River Breeder Reactor Plant Project Office Personnel Management Roster, dated June 4, 1981. This roster Includes current telephone numbers. 3. Clinch River Breeder Reactor Plant Project Office personnel with contracting or procurement functions and their telephone numbers, dated June 4, 1981. 4. LIsting 0f Title and Frequency of Clinch River Breeder Reactor Plant Periodic Reports. We believe this Information satisfies your request, if not please advise us. Sincerely, i7~ ci-~~ L 6. Staker, Director Office of Reactor Research and Technology Office of Nuclear Energy Enclosures 89-405 O-82----10 PAGENO="0111" CLINCH RIVER BREEDER REACTOR PLANT PROJECT OFFICE _____ I- 1 CONSTRUCTION I ENGINURING DIVISION DIVISION --~------I---- Oaf t DATE ___________ ~sj ___________ ~ I I SERVICES 1 i PROCESSING I F~OMINISTR*TIVf I ~ DATA DIvISION ~j j DIVISION ~ i~ DIVIssos~J L*~c~i I [R~~d N?~VAT~J ` * ~ Position t11IdN$t~d Januery 1, 1' PAGENO="0112" 61*181 Lochiln V. Caffey $%~n V. Ahrends Vilita. F. Roll Raymond I.. Copeland ,TITLE Director - - - Acting Deputy Director General Manager ~j Executive Assistant Information Project Control Financial ~nsg~t Ccsmsel ~iniatrative Services Mit~mstic Datd Processing ~.ality Assurance Labor Relations Sit. Representative Construction Engineering Procurenent P**lic Safety Operations Ronald J. Gets Rféhard P. Moore Paul 1. Marquess Paul P. ~tienon Jdml. Peeve Carol Horrsstra Jdm J. Nerbert Joe V. Anderson Vacant Vacant Richard A.~ Caidla~ Donald P. Riley George Grisaffe Jones Orasky Raymond L. Copeland Don C. Reeton chief Deputy thief thief thief Q.ief ~inistrative Officer Acting Cidef thief 6~1 6121 6~O 6112 6198 2bO~ 6035 0053 6193 61.83 0cTO 0013 6091 6015 OFFICE NAIL Office of the Director CRDRP PROJECT OFFICE PERSONNU. MRR~DENT R(~TER I, .4~ 615/576.6008 6008 6012 60914, Assistant Director Assistant Director Assistant Director Deputy Assistant Director Assistant Director (Acting) Assistant Director PAGENO="0113" 145 CRDRP. PERIODIC REPORTS 1,. `togt ?erfor,~anoe Report ~zttU.y 2. Schedule Status Report 3. tlear4ero Level 0 Milestone Status Report R. A~track.~RM Level 1 Schedule Report )brfthly 5. Constructor 6plcyment Statistics Monthly 6. Quaiity Assurance Status Report ,~ ~thly 7. DOE Report of Motor Vehicle Data Annually 8. DOE Report of Truck Data Annually 9. Vehicle Supplesental Me and Mileage Analysis Annually 10. Estimated Requiresents for Selected Materials (Helitsa) Annually 11. Word Processing - Text Editing Report Annually 12. CopyIng Activity Report . AiYIually 13. Contractor Dcployment Report 3~cLannually 111. DHS..~S Report . Defense Materials Syst~t Detailed Breakd~rn of Controlled Materials S~1annually 15. S~mnary of Goverrvaent~4ir*d Property $mniannually 16, JCP Form S2 Commercial Printing Report Semiannually 17. IGS$ Major Pr'xur~ents Report Quarterly 18. ~PMIS 330C Report Norb.GOCO Contractor ~Vbcontractor Report Quarterly 19. SocioeconomIc Coals Quarterly Progress Report Quarterly 20. Critical Itens Report . Monthly 21. Level 2 Schedule Reports Monthly 22. Drawing Status Report li-monuly 23. Class 2 and 4 ECP Report Monthly 2~I. Accrued Cost Report Monthly 25. construction Progress Report Monthly 26. Procurement Status of Constructor Assigned lOP Components Weekly 27. Affirmative Action Report bnthly 28. Small and Small Disadvantaged Business Goals Annually PAGENO="0114" 147 Department of Energy Washington, D.C. 20545 `JUN 12198, Mr. Peter Stockton Subc~r,tttee on Oversight and Investigations Conrittee on Energy end Cossnerce House of Representatives Washington, D.C. 20515 Dear Mr. Stockton: This is to provide you with copies of documents that you requested June 9, 1981. The enclosed lists the documents provided. In addition, on June 9, 1981, you were provided two copies of "Assessment of the Status of the Clinch River Breeder Reactor Plant Project and Update of the Total Estimate and Cost to Complete the Project," dated March 1980. This, report was prepared for the U.S. Departwent of Energy, Assistant Secretary for Nuclear Reactor Programs. Sincerely, Original signed by R. G. Stoker R. C. Stake,', Director Office of Reactor Research and Technology Office of Nuclear Energy Enclosures PAGENO="0115" 148 Enclosure 1. 0CRBRP Cost Estimate Review learn Final Report to the LMFBR Steering Conrittee." dated April 5, 1977. 2. The viewgraphs dated 10/78 a. CRBRP Project Termination/Discontinuance Funding Situation b. CRBRP Termination Funding Sunr~ary, October 1, 1978, Initiation c. CRBRP Project, October 1, 1978, Termination Funding Suimnary 3. CRBRP Project Major Component Sunr~ary, dated 9/13/78 4. Submittal from Bryan Walker, CRBRP~P0 Engineering to Ralph Blackwell, DOE/HQs, "CRBRP FY'79-'81 Strategy' with two marked up viewgraphs attached. a. Compromise Budget b. CRBRP FY 1979 Funding 5. TWX, P. T. Marquess, Acting Chief Financial Management CRBRP Project to Aaron Edmonson, Acting Director, Office of Budget, dated March 17, 1980, providing reasons for a February 1980 cost underrun of $3,776K below the financial plan. 6. Draft dated 6/30/78, concerning information on "CRBRP Turbine Generator." 7. Letter, Robert D. Thorne, Assistant Secretary for Energy Technology to Honorable Henry N. Jackson, Chairman, Comittee on Energy and Natural Resources, United States Senate, dated September 13, 1978, providing information on a contractual *action on the CRBRP Project Turbine Generator. 8. Draft TWX, G. W. Cunningham, Acting Program Director for Nuclear Energy to 1. W. Caffey, Director, CRBRP Project Office, dated 6/30/78, "CRBRP Turbine Generator, Subcontract No. 3066~SC5 Between Burns and Roe, Inc., and General Electric Company." 9. Listing of CRBRP Project Contractor Employment Information, dated September 30, 1978, Revised November 16, 1978. 10. Question and Answer concerning CRBRP equipment procurement from a 1977 file concerning studies of alternative fundinq levels for the CRBRP Project. 11. Two Questions md Answers, undated, concerning CRBRP cost. 12. Draft dated March 15, 1979, from 1. W. Caffey discussing open licensing issues. This draft was the source of information used in response to a question from the GAO. 13. Analysis of the meaning of NDiscontinuance. 14. Three draft Questions and Answers, dated March 16, 1979, from L. W. Caffey. PAGENO="0116" * 149 JUN sSi~~ Mr. Peter Stockton Subconrittee on Oversight and Investigations comittee on Energy and Comerce House of Representatives Washington, D.C. 20515 t~ar Mr. Stockton: This is to provide you *1 th a copy of "The Clinch River Breeder Reactor Plant Revised Cost Estimate" Volumes I and II, dated August 1975. These volumes are sometimes referred to as "The Green Book." Also included is a copy of the letter transmitting these volumes, t4. M. Jacobi, Westinghouse, to 1. W. Caffey, dated October 30, 1975, subject: Clinch River Breeder Reactor Plant: Revised Cost Estimate (as 0f August 1975). As was explained, these are our file copies, so please return them when you are finished with them. Sincerely, Original 6i!ned by R. C. Staker R. C. Staker, Director Office of Reactor Research and Technology Office of Nuclear Energy Enclosures eO1~ 1325.10 OFFICIAL FILE COPY PAGENO="0117" 151 Enclosure 1. Six viewgraphs concerning CRBRP steam generators: a. Steam generator problem areas (undated) b. Steam generator status (undated) c. Steam generator program status (March 31, 1979) d. Prototype steam generator schedule (undated) e. Steam generators - parameters (undated) f. Prototype steam generator schedule (October 1978) 2. 1WX, 1. A. Nemzek, Director, Division of Reactor Research and Development, to L. W. Caffey, Director, CRBRP-PO, dated September 18, 1975, subject: CRBRP Steam Generator Vendor Selection. 3. Letter, 1. W. Caffey to R. A. Passman, Deputy Director, Division of Reactor Development and Demonstration, dated September 13, 1977, subject: CRBRP Prototype Pump and Steam Generator Cost and Schedule Information. 4. Letter, 1. W. Caffey to R. A. Passman, Deputy Director, RRT, dated November 11, 1977, subject: CRBRP Prototype Pump and Steam Generator Status Report, w/o enclosures. 5. Letter, D. E. Erb, Acting Director, RRT, to L. W. Caffey, dated February 27, 1978, subject: Briefing on Selected CRSRP Equipment Items. 6. Draft of letter, R. Balent, Vice President and General Manager, Atomics International Division, Rockwell International, to R. Staker, Director, RRT, dated January 24, 1979, subject: Proposed Alternative Use of CRBRP Hockey Stick Plant Units. 7. Memo, J. A. Bartell, RRT, to R. G. Staker, Director, RRT, dated October 22, 1979, subject: CRBRP Steam Generator. 8. Letter, 1. W. Caffey to R. Staker, Director, RRT, dated February 11, 1980, subject: CRBRP Pump and Steam Generator Reports for January 1980. 9. Letter, 1. W. Caffey to R. G. Staker, Director, RRT, dated December 17, 1980, subject: Monthly Steam Generator and Prototype Pump Report for November 1980. 10. Letter, L. W. Caffey to R. G. Staker, Director, RRT, dated May 13, 1981, subject: Monthly Steam Generator Reports for April 1981. 11. Project Management Corporation Balance Sheet June 30, 1980. 12. Letter, R. T. Simons, Project Operating Officer, Burns and Roe, to L. W. Caffey, dated July 24, 1980, subject: CRBRP Project Burns and Roe Quarterly Procurement Report. 13. Letter, W. 3. Purcell, Project Manager,Westlnghouse, to L. W. Caffey, dated July 22,. 1980, subject: CRBRP; NSSS Major Procurements Quarterly Report. PAGENO="0118" 152 14. Letter, 1. W. Caffey to Thomas A. Dillon, Deputy Assistant Secretary for Nuclear Reactors, DOE, dated March 26, 1981, subject: Cost Budget Performance in CRBRP Project. 15. Four Questions by Honorable 7. Bevill and Answers by R. 6. Romatowski, Acting Under Secretary, DOE, undated. 16. Letter, R. 6. Staker to W. B. Behnke, Cornonwealth Edison Company, dated October 24, 1980. 17. Letter, R. 6. Staker to Editor, Popular Science, dated October 22, 1980. 18. Protest, R. E. Herzstein and P. F. 3. Macrory, Counsel for Brown Boveri Corporation, to the Comptroller General of the United States, dated August 20, 1976, with attachment letter. K. P1. Horst, General Electric, to H. Heinrich, Brown Boveri Corporation, dated July 28, 1975, subject: Sodium Pump Drive Procurement RFP A0001X 19. Draft Action Memorandum, W. A. Neustadt, Procurement Advisor to Director of Procurement, dated July 30, 1976, subject: Brown Boverl Protest of Award of Sodium Pump Drive Systems to General Electric Company. 20. Letter marked Company Controlled Information from W. H. Young, Burns and Roe, Inc., to Distribution, dated July 6, 1973, subject: Corporate Position Regarding LMFBR Project, transmitting document marked Company Controlled Information Strictly Private, dated July 1973, PosItion Paper on LMFBR Project. 21. Statement of E. S. Beckjord, Director, RDD, Before the Subconsnlttee on Nuclear Regulation of the Cormittee on Environment and Public Works, United States Senate, dated July 11, 1977, concerning the internal Burns and Roe Memorandum, dated July 6, 1973 (item 20 of this list). 22. Document titled Clarification of Coments Contained in an Internal Burns and Roe Memorandum of July 6, 1973, Regarding the Clinch River Project, Burns and Roe, Inc., dated June 23, 1977. 23. Draft by R. Dowling dated July 6, 1977, with no address or indication of Intended use. 24. Draft Sumary Statement of Reasons for Cost Increases of the Clinch River Project, dated June 5, 1981, from L. W. Caffey with undated viewgraph ISCRBRP Project Changes in the Estimated Cost." PAGENO="0119" 153 Department of Energy Washington, D.C. 20545 JUN 191981 Mr. Peter Stockton Subco~mnittee on Oversight and Investigations Comi ttee on Energy and Comerce House of Representatives Washington, D.C. 20515 Dear Mr. Stockton: This is to provide you a document that you requested June 17, 1981. The document is: Informational memorandum, T. A. Nemzek, Director, Division of Reactor Research and Development, to R. C. Seamans, Jr., Administrator, Energy Research and Development Administration, dated September 2, 1975, subject: "Intention to Award Subcontracts for the Clinch River Breeder Reactor Plant (CRBRP) Prototype and Plant Unit Sodium Heated Steam Generators." We believe this information responds to this request, if not please advise us. Sinc rely, R. G. Staker, Director Office 0f Reactor Research and Technology Office of Nuclear Energy Enclosure PAGENO="0120" 154 "f. c~(. UNITED STATES ENERGY RESEARCH AND DEVELOPMENT ADMINiSTRATION WASHINGTON, DC. 2054$ 2 1975 INFORMATION MEMORANDUM TO: Robert C. Seasons, Jr., Administrator Richard V. Roberts, Assistant Administrator for Nuclear Energy PROM: T. A. Neek, Director, Division of Reactor Research and Developanot Orj~:~? S:~ned by SUIJECT: INTENTION TO AWARD SUBCONTRACTS FOR ThE CL1N~ RIVER 1RE~)EL. Nemzek REACTOR PLANT (CRBRP) PROTOTYPE AND..PLANT UNIT SODIUM HEATED STEAM GENERAXORS Purpose: This rcrandum is to Inform you of my intention to reject all bids previously solicitied for desige and fabrication of the CR.BRP prototype and plant onit steam generators and to direct the placeannt of a cost type subcontract with Atoisics International Division of Rockwell International (Al). The bases of this directed piscemant are (1) greater potential for maintaining continuity of vendor experience and for develop- mant of a viable L~BR industry base (2) potential for core efficient job control and coordination by placing the desi~ and fabrication respoosi- bilities with the vendor who developed the basic CRBRP steam generator concept and (3) the prices quoted by the two vendors vary from the original fair cost estimates by aaotmts large enough to cause on to question the validity of either vendor's estimate as well as the visóom of component acquisition on a fixed price basis. £ cost plus incentive fee coctractual arrangeonat is contemplated. lackgroimd: The delegation of authority to on (SECT 74-155) to act in behalf of the agency in carrying out the fonctions of the Project Steering Coonittee (PSC) contains the state~t: "In representing the ARC, you are expected to bring to the attention of the Coanission, those matters on which, Ln your jud~nt, you should have the benefit of Coonissiom reviev one advice, such as ...contractual matters of anusual nature or cost..." The maique mature of this action in avarding a major CRBRP subcontract is considered tóbe such a matter. PAGENO="0121" 155 The steam generator modules are major developmental and schedule critical components for CRBRP. A prototype imit viii first be designed, fabricated, and tested to verify the reliability of the current design concept. Design and manufacturing complexities of these components, including an estimated fabrication span of. some 24 months, dictate that prototype development proceed as rapidly as possible to assure timely delivery of the follow on CRBRP plant units. General Electric (GE), under its contract with Westinghouse Advanced *aactors Division (AND), is responsible for the procurement of the steam generator modules. The San Francisco Operations Office (SAN) provides ERDA field office surveillance of GE's procurement activities in support of CRBRP. In early 1974 the "hockey stick" design concept, which bad been developed and tested by LI, was selected as the reference for the CR.BRP. Subsequent to this decision, on May 31, 1974, LI submitted an unsolicited proposal for design and fabrication of prototype and plant unit steam generators. At the time LI's unsolicited proposal was received, it was the view of AEC management that competition should be sought for this procurement in an attempt to obtain the lowest possible price. Therefore, Al's initial bid was rejected and AND and CE were directed to solicit competitive pro- posals. Subsequently, fixed price proposals were requested from AZ, *abcock and Wilcox, Combustion Engineering, Foster Wheeler Energy Corpor- ation (FWEC) and Westinghouse in July 1974. The only proposals received were from LI and FWEC, neither of which was totally responsive to the IFP. After extensive negotiation, the fina.l prices excluding materials mere as follows: Price Lubcontract Contract Type ~C Prototype ~IP $ 6.7)1 $ 9.0)1 Plant Units Fixed Price $13.7)! $17.4)! $20.4)! $26.4)! It is currently estimated that materials will add some $8.10 *illion to the total cost. The initial CE fatr cost estimate for the prototypes mad plant units totaled $11.7 million excluding materials. Subsequent to the receipt of bids, CE adjusted this eBtimate upward to $16.1 million. PAGENO="0122" 157 £. £ viable co~onent vendor bose for U~BR components aist be catch- Ushed~ Overconcantration at PVEC or any other vendor is highly aid~sirable from a programeatic standpoint. Al baa stated i willingness at this time to coanit corporate funds to constructing the manufacturing facilities necessary for this contract. If this offer is rejected, it is uncertain if Al will reenend the of for to the UffIR program at a later date. 8. The base of previous experience omit be maintained until such time as the volume of U*~R work allows wide industry participation. In the `last five years, only LI ham designed, built (at their own expense) end tested a sodium steam generator in this country. Similarly, `PWEC has designed and built t~e a'ly large ThX. Other potential suppliers of large heat exchangers have only voter reactor, gas cooled reactor or non-nuclear experianca. C. Experience supports the fact that final design end fabrication of major developmental iterm, such is the steam generator, by the party who developed the design concept and preliminary design is ~st conducive to tinely and successful contract performance. Considering recent steam generator problesm experianced by the Russians end British, it is apparent that success of the steam generator contract will be a hey factor in the success of CRBRP. The views of the Comtroller and Djrector, Divi~ion of Procurement have been commznicated to an and were `carefully considered in my evaluation of this procurement. Formal comments, transmitted to by the DireCtor, Division of Procurement, are enclosed for information. In s*~ary, I believe quite strongly that both the technical end program- matic aspects of this procurement dictate placement of this subcontract with LI end I plan to proceed with this action. As with previous CRBRP contracts, I have instructed my staff `to give particular attention to' `assuring that the proposed subcontracts contain provisions (phased funding, flexibility in adjusting schedule milestones, etc.) ubich vifl accommodate the recently identified rearrangement of Project activities. Ruclosures: 3. Analysis of GE recommendation 2. Coents from Procurement Prepared by4 UD: T. A. liemeek/bsc: 973-3773: 8/21175 89-405 0-82--li PAGENO="0123" 158 Department of Energy Washington. D.C. 20545 Mr. Peter Stockton Subcomittee on Oversight end Investigations Conrnittee on Energy and Comerce House of Representatives Washington, D.C. 20515 Dear Mr. Stockton: This Is to provide you Information on equipment contracts of $1 million or more, whi~ch you requested June 11, 1981. Sincerely, ~,.JR. G. Staker, Director ~/ Office of Reactor Research and Technology Office of Nuclear Energy Enclosu~: PAGENO="0124" caoa, VOIPIISIC suocosTRAcTs PAGE .~j._. Or .4.~.. ACllflu,(R) 0* ORIGIrIL ?CTUAL(k) OR coslmner XIARD On:GHRI. enTu!RTr~(r) DELIVERY RElcuiDuis(s) 10*0 _________ g~ ni'r.iv.su ce,e Dc~ctor Cseteiaasst 54-7G- . 07/75. 5.21.404 + goc. 5 41,054(1) (1) 01105(0) 1913*1-U :. . Therani Iaavlet44a syatsa 54-IlLS- OS/il S 5.3434 siC. I 5.944(1) 03/02 00/03(0) 245002 llucleu P14th 1~I2O-C*C- U/SI 5 1,339 + sac. I 1,239 + sac. 09,11 D Units 00214 Ping Dries I ~ostr.1 54-1CCI- a2/74. $ 1,040 1 1,347(r) 54/70 09/701*) 231549 Pilusry Control Rod $~stea 54-lCd- 03/17 5 1,712 5 1,523(1) 01/55 $7/Il(s) 231745 Pri.~cy ConUol Sod Dti~* 54-7)1)4- 15/75 5 0,135 + sac. 5 11,040(1)12) 09/19 14/11(1) lIscb~n*aaa 209121 IllS? Reactor Vsaa.1 L.tt~i Con- 04/75 tract 312555 and 54-lw?- 04/14 5 21,595. sac. I ~3,l00(P) 12/00 13/7914) 3)2555-So Outlet IlsazIs t$au fob. 54-7WF- 04/5) 5 1,430 4 1,140(1) 03/13 03/1314) 212-555-Ill Ilod. 034 . Cloture Read 54-7CQI- 11/75 5 9,400 + sac. 4 34,004(9) (3) 07/79 52/52(5) 312547 - . Dolt.) Risers 54-lCd- 07/71 5 1,423 5 1,149(1) 03/79 *5/10(1) 337970 Cold 1mg Cbecb Volvas 54-lCd- 03/74 5 4,543 + sac. I 4,asS1) $9170 12/70(1) 199202 flint Pgotsct~on 54-ICC!- 04/7~ 5 2,534 5 3,597(5) (4) 01/11 03/03(1) R~a4.. 231741 l1~" latagoata lUoctngs 54-1CCII- 03/01 5 10.071 1 10,441(1) 09/14 05/54111 hots Gansiatoig 44501 09/75 5 j~,05S Proctir:aant astbod 04/79 01/54(5) being revievod. - Price being avslnat.d. Seictoe Gongd V.a..1 5I-7CCV- 03/74 5 3,321 * sec. 5 3,011(0) 03/79 13/70(1) 212503 311* Coerd Vassals 54-7CC'd- 03/74 ~ 3,111 * 555. 5 3,3)5(1) 10/70 53/79(1) 311900 PAGENO="0125" canar s~uumn aacosseucu Glossary of Abbreviations P*O~ _J._~, or .__j__ Plus Oscalatios final Price Subject to Clona~out leqotiations Notional Policy Debate forced delay ACTUAL(A) OR CDNTR?.CT AWARD ORIGIWM. I1STG ~1CI Jj50 PN~41~r 1005 01/76 .3/77 04/70 0~/?~ .7/Ti 02/00 07/77 ...7/77 $atety/lelief Valves 7010$ Reaction Products separator leaks 101$ S~PI1OR PVsp Drivee 02T0$ Sodius Reap Tanks 400$ $ocisc$ation P~s 13301 looter Power 0 Coatrol Panels 7011$ Protsoted Mr Cooled Condsnsst 12511 Steen louse .70111 * .Rc 4,) NOD * 1,4SS*e... $ 1,002 * 11.620 + is.. * 3,260 * 1,161 * 2.0I0+eso. $ 1.257 $ 1.534. 01W. usuaL D0LlVU~ pa's.. OS/$I. 03/76 04/01 01/10 .00110 0,/si 01/Ia 03/01 * 2.45440) (10) * 3.072(5) * 1z.049(r)(1l) * 3,163(0) *~ 1,2761*) 1 2,11140). * 3,3*2(1)412) .1 1.611(5).. ACflIM.(tu) OR RtSCHcDUL(s) DIIJVIIY 04's 100 09/01(5) 13/101*) *1/$S(A) 63/01(0) 05/12(3) 01/13(1) 03/014*) Potess . . . . . .. *. . Generals is general the changed NRC requsirsnenta on safe shutdOwn earthquake end on the accossodetlon within the thecanl and structural design sargins of the effects of hypothetical core disruptive accidents led to dealga analyses and to design changes which increased costs directly and indirectly delayed design work and hardware fabrication, with additional coat increases Schedule dit~a toe harduare delivery reflect delays induced by the NOD beginning in Aptil 1017. 11) Cost growth of contaianent vessel bee resulted Leon escalation due to NRC changed r.gvirnaenta and to onee the. five yost. Project delay from the NOD. . . . . 43) Cost g10wth of the PCnLsN'e has r.sultsd free escalation due to Project deley (*1.600k) and design changes required by astasic. structural design norgins, etc. ($l,097k). . . ..: -. (3) Cost growth of the closure head has resulted Lees the incorporatIon of additional stvaeteeal and Lherssl analysis and LunctionsI testing of the cospleted unit. . . . .. : 44) Cost growth sO the 101 hes resultad Less change notices for asailiary equigneet (71*) and aelensid drivers (30*). PAGENO="0126" 163 ~. t I,*~ .~ Department of Energy Washington, D.C. 20545 `JUN 261981 Mr. Peter Stockton Subcomlttee on Oversight and Investigations ColTrnittee on Energy and Commerce House of Representatives Washington, D.C. 20515 Dear Mr. Stockton: This Is to provide you a copy of Attachment 5 to the paper on the Clinch River Breeder Reactor P'ant steam generator. Sincerely, R. G. Staker, Director Office of Reactor Research and Technology Office of Nuclear Energy Enc'osure PAGENO="0127" 165 Exhibit I SUMMARY COST HISTORY AND FORECAST (S Million) SI Prototype and Ten Plant Units 1. Definitized Contract with Atomics International, 56.7 February 1977 2. Externally Induced Changes tO the Cost 26.2 Revised Seismic Requirements, Revised Load Combinatipns 3. Plant Design Evolution 14.6 Plant Transient Changes and Prototype Instrumentation 4. Component Development 54.6 Design Analysis Code Developpent, Material Properties Development, Inelastic Analysis, Tube~to-Tubesheet Weld Development, Post. Weld Heat Treatment, Perfor~nan'ce Analysis, Steam Spool Development, Component Support and novation of materials contracts from others to Al 5. Estimated Cost of Delay, including Escalation 54.0 and the Effect of the National Policy Debate _____ 6. Total Estimated Cost of Procuiement with 206.1 Reduced Scope of Al Contract and Reprocurement of Nine Plant Units 7. Deduct Cost of Reprocurement of Nine Units on .63.0 a Competitive Basis - 8. Development, Design and Production under the Al 143.1* Subcontract The costs of the delay induced by the National Policy Debate are in Item 5, `and are approximately $25 million. *Subject to further review, audit and negotiation. 6/24/81 PAGENO="0128" 167 Epclosure I 1. Letter, Mravca, Director, Demonstration Project Office, U.S. Atomic Energy Comission, Chicago Operations Office, to Jacobi, Project Manager. Westinghouse, dated January 8, 1975. subject: `Audit Findings Atomic International (A!) Proposal to General Electric (GE),' with enclosure Letter, Deubler, Director, Finance Division, San Francisco Operations Office, to Mickey, Director, Finance Division, Chicago Operations Office dated December 9, 1974, subject: `Request for Audit Assist Atomics International Proposal to General Electric.' 2. Letter, Little, SAN/PMIC, Task Force Chairman, to D. R. Riley, Assistant Director for Demonstration Plant Project, RRD, dated January 6, 1975, subject: `SAN/RRD Task Force to Assess GE Activities Related to Procurement of CRBRP Steam Generators and Pumps; Submittal of Report (Reference: TWX, RRD (Riley) to SAN (Thorne), RRD:PG:263, dated 12/19/74)." 3. Memorandum, Wright, CRBRP Procurement, to Riley, dated January 17, 1975, subject: `Pre-procurement Plans Related to Components Covered by Appendix C to ~-PMC Contract." 4. Letter, Heeke, Manager, LRM Procurement, to Mravca, Director, Demonstration Plant Office, Chicago, dated April 25, 1975, subject: "Clinch River Breeder Reactor Plant; Steam Generator Purchase Approval." 5. Letter, Key, Manager, Procurement and Material, General Electric Control, to Jacobi, Project Manager, Westinghouse, dated April 30, 1975, subject: "Steam Generator Award Recornendation PURG.0003." 6. Letter, Reardon, Acting Manager, ERDA San Francisco Operations Office (SAN), to Bauer, ERDA Manager Chicago Operations Office, dated May 2, 1975, subject: "SAN Evaluation of GE Recomendation for Subcontract Award for CRBRP Steam Generators PURG-0003." 7. Letter, Key, to Jacobi, dated May 9, 1975, subject: "Steam Generator Award Recomendation PURG-0003-Supplement No. Two." 8. Letter, Wright to Riley, Assistant Project Director for Engineering, CRBRP Project Office, RRD, dated May 12, 1975, subject: "CRBRP Steam Generator Procurement PURG-0003." 9. Letter, Heeke, to Mravca, dated May 13, 1975, subject: "Clinch River Breeder Reactor Plant (CRBRP); Contracts E(ll.i)-2395, 9-18-12-3. Proposed Contracts 54-7A0-192908, Request for Approval on Sodium Heated Steam Generators, PURG-0003." 10. Letter, D. E. Reardon, Acting Manager, SAN, to Bauer, Manager, Chicago, dated May 23, 1975, subject: `SAN Evaluation of ARD Recomendation for Subcontract Award for CRBRP Steam Generators PURG-0003.' 11. Letter, Bauer to Smith, Director, ERDA HQs Division of Procurement, dated May 27, 1975. subject: "Recomendatlon for Contract Award for CRBRP Sodium Heated Steam Generators. 12. Letter, Riley to Murley, Acting Director, CRBRP Project Office, RRD, dated July 11, 1975, subject: "CRBRP Steam Generator Contract." 13. Letter, Smith, Director of Procurement, ERDA, to Nenizek, Director, RRD, dated August 6, 1975, subject: `Selection of Subcontractor for Sodium Heated Steam Generators for CRBRP." PAGENO="0129" 169 CRBRP Project Subcontracts and Contracts Between $100,000 and $1,000,000 Item Consulting Services Main Stream Bypass Desuperheaters Check Valves Downthenn J/Water Heat Exchangers RV Storage Mel lability Assurance Services Design Cost/Schedule Contro' System CRBRP Duplex Rupture Disc Assembfles Engineering Services CSS & LIM Piping Intennedtate Heat Exchanger Pipe Material Riser Assy. Plate UIS Plate MIS Mainipulator Emergency Cooling Towers Risers, Welded Deaerator Make~up Treatment Plant MV Design Study 494842~17 78110 54..7WM.216167~S 544 WR.209714 54.7CCQ.199286 54.7CCR~237971 54~7CCR443566 707~0007 12720~CRC~00207 54.7CCW~239324 3066-REQ~298 3066.REQ~1012A 54.7WN~212569 Cot~tract ~No. 54~7W048479 3066..REQ.317 79118 3067.REQ.~848 54-7CCU.243371 49~18~12~18 Supplier Dr. A. A. Bishop Metek Anchor/Darling Valve Co. Atlas Babcock & Wilcox Co. Boeing Company Bradford National Corp. BS&B Safety Systems Co. BT1 Cameron Irons Works Cameron Iron Works Carlson, Inc. Carlson, Inc. Central Research Lab Ceramic Cooling Towers Co. Chicago Bridge & Iron Chicago Heater Chemical Separations Combustion Engineering, Inc. PAGENO="0130" 170 Supplier Item Contract No. Combustion Engineering, Inc. RV Study Phases 1~5 54.7WN480737B Combustion Engineering RV Thermal Liner and 54~7WN~204611 Core Support Ring Combustion Engineering RY Shell Plate 54~7WE.~209451 Combustion Engineering RV Forgings 54-7AF.204610 Combustion Engineering Cutting of FFTF Head 54~7WF~.212594~BM (SRP & LRP) For Closure Head Combustion Engineering Closure Head Inter~ 54~7WN~212570.~B mediate Rotating Plug Forging Conseco, Inc. Watev~ Dump Tank 78104 Evaporate Dump lank Copes~Vulcan Corp. Control Valves 78112 Curtiss~Wright Corporation UIS Piping S4~7CCR~243571 DDI Engineering Services 544CCR~290221 Design Decisions Consulting Services 54-7CCQ~290358 Design Decisions Consulting Services 54-7CCD-243362 Design Decisions Engineering Services 54~7CCP-243370 Diamond Shamrock Iiypochlorite Generating 3066~REQ4028 Plant Eagle-licher md., Inc. PCA Irradiation Test 54~7CCU-265305 Boron Carbide Absorber Pd lets Eastrn SS Company - UIS Plate 54~.7CCR.256675 Ecolaire Condenser 49-18-12.~14 PAGENO="0131" 171 Supplier Item ~p~ract tio. E. D'Appolonia Construction Enginnering Services 3O66$C02 Energy, Inc. Corporate Consultant S4~7CLH~239L59 Agreement Safety reviews of CRBRP systems and component design, prepa~ ration and processing of PSAR changes and performing a lead sole In resolution of outS' standing licensing Issues. Fag Bearings Bull Gear & Bearing 54~7CCN~239588 Assemblies Fag Bearings Closure Head Margin 54-7CCN.239588 Rings Federal Mogul Test Seals 544CCA~239346 Fisher Main Steam Bypass 3O66~REQ.323 Control Valves roster Wheeler Stress Analysis 54~7WH-19929O C/N 3~21 Foster Wheeler Consulting Services 54.~7CCY~3O3OO2 Foster Wheeler Consulting Services 54-7CCQ.197917 Foster Wheeler Consulting Services S4~7CCY4O3OO7 FWEC Intermediate Head 54..7WH199290 Exchanger Bellows Development FWEC Intermediate Head 54~7CCH499291 Exchanger Inelastic Analysis General Atoinics Flux Monitoring Sys. M4CCP467243 (Phase I) PAGENO="0132" Lincoln Lincoln Lincoln Mechanics Research, Inc. Mclnnes Steel Company MPR Associates MPR Associates MPR MRI MRI NASh Newbrook Machine Corp. Nuclear Pacific, Inc. Nuclear Service Corp. Olympic O'Donnell O'Donnell O'Donnell Par Co. Process Equipment Co. Roilmet, Inc. Royal Industries Engineering Services Engineering Services Engineering Services support for Project Control System UIS Forgings Engineering Services Consulting Services Engineering Services Cost/Schedule Services Cost/Schedule Services Vacuum Pumps New Core Assembly Inspection Equipment Fuel Hanling Cell Windows Engineering Services Scheduling Services Engineering Services Engineering Services Engineering Services Crane and Manipulator Protected Water Storage Tank UIS Chimneys Test Controller Contract Np. 54.7CCR490218 54.7WM.~224O84-S M~7WM.2O9385~S 4948.12.~16 S4~7CCR498O8S 54.7 WF482174S M~7WN~192929~S 54~7CCN498O82*S M.~7WM48O879~'S 54-7CCW.215873 3O66.~REQ-113O N714~.O17 N904-0002MP K9A21 544WF..182179 54-7WM~18O676~'S 54.7CCR-309112 54~7CCRO3D91OO 707~001 0011 54~7CCR~25667U 54.7CCH434844 Supplier 173 Item 89-405 O-82--12 PAGENO="0133" 174 Supplier Item Contract Np. Sechrlst md. Permanent Magnet Assy. 54-7CCQ-267246 Science Applications Risk Analysis Support EY.71-C-15-0005 Services Science Applications, Inc. Corporate Consultant 54-7LR-197906 Agreement Analyze non-core related accidents leading to radioactive release. Science Applications, Inc. Engineering Services K9A22 Souther States 161KV Disconnect 3066-REQ-1276 Switches Spencer Turbine High Pressure Blowers 12720-CRC-00205 Swanson Engineering Services 54-7WM-2181505 Swanson Engineering Services 54-7CCD-290358 Swanson ANSYS Code 54-7WR-184778-B Swanson Engineering Services 54-7CCR-290357 Swanson Engineering Services 54-7CCR-235031 Target Rock Corporation Manual Valves 79116 Temp-Flex Division Expansion Joints Assy. 78114 Thermxchanger Hot Water Heat Exchangers 3066-REQ-1146 Trent Tube; Colt. md. CCP Tubing 626-0002 Union Pump Co. Auxiliary Feedwater 79103 Pumps & Motor Drives USS Corporation CFS Rings 54-7CCR-231748 USS Corporation CSS Forgings 54-7WR-209738 W-AESD PCA Irradiation Test 54-7CCD-265313 Assembly W-AESD Prototype PCA 54.7CCD-234b32 V. E. Oliver Individual Consultant 54-7CLS-243005 agreement for Procure- ment Services. W-IGTD Sodium Level Instru- 54-7CCP-267243 ments (Phase 1) W-ISD Primary Flow Control 54-7CCP-301400 Sys. Wolverine Condenser Tubes 3066-REQ-1062 Worthington Pump Normal Plant Service 12720-CRC-00202 Water Pumps Yarway Corp. Vent & Drain Valves 78109 YUBA Heat Exchangers 3066-REQ-1029 PAGENO="0134" 175 Department of Energy Clinch River Breeder Reactor Plant Project Office P.O. Box U Oak Ridge,Tennesse~ 37830 June 22. 1981 Joe Bartell SUMMARY OF CRBRP PROJECT STEAM GENERATOR PROGRAM Attachment 1 is a diagram of the CRBRP steam generator history. Attachment 2. is a chronology of some of the more principal activities in the steam generator program. Attachment 3 is a discussion of some of the principal matters about the equipment speciflc~tion and the effects of changes caused since the contract award to Al in September 1975 that were necessary to meet the changing requirements imposed by the NRC. Attachment 4is a sunsnary discussion of some of the more principal activities and d:isions On this program since April 1977. Attachment S is a cost history and forecast, sunsnary and detail. bc n . Caffey, Director CRBRP Project w * Enclosures DR:81-32 PAGENO="0135" 177 STEAM GENERATOR PROGRAM CHRONOLOGY DESIGN DEFINITiON COMPETITION REQUEST FOR PROPOSALS FOR HOCKEY STICK CONFIGURATION FiRST FORMAL DESIGN REVIEW Al SELECTED AS VENDOR LETTER CONTRACT SECOND FORMAL DESIGN REVIEW THIRD FORMAL DESIGN REVIEW RELEASE TO FABRICATE DEFINITIZED CONTRACT PROTOTYPE SHROUD/SPACER ASSEMBLY INITIATED PROTOTYPE SHELL/HEADER ASSEMBLY INITIATED FEW TUBE TEST MODEL (FTTM) INITIAL STEAMING STEAM HEAD FORMAL DESIGN REVIEW FL4 TUBE TEST MODEL RESULTS APPARENT TUBE WELDING iNITIATED DiSASSEMBLY OF FilM EVAPORATOR STARTED STOP ORDER ON PLANT UNIT SHELL/HEADER WELDING INTERNALS DESIGN REVIEW WORK STOPPED ON SHROUD ASSEMBLIES AND TUBE SPACERS OPERATIONS, MAINTENANCE AND TEST REVIEW CHANGE PROPOSALS SUBMITTED BY Al PRESSURE BOUNDARY DESIGN REVIEW DOE HQ REVIEW CLOSURE WELDING REVIEW CHANGE ORDER NO. 6 FOR PROTOTYPE CHANGES EXPEDITED CHANGE FOR PLANT UNIT INTERNALS APPROVED CLOS~tJRE TOOLING AND FIXTURING REVIEW CHANGE ORDER NO. -7 PROTO. FA~.. AND DELIVERY CHANGE. ORDER NO. 8 PLANT UNIT MOD. AND FAB. TUBE TO TUBESHEET WELDiNG RATE DEMONSTRATION PROTOTYP.E CLOSURE WELDING INITIATED W.~LRM ASSIGNED RESPONSIBILITY FOR Al CONTRACT CHANGE NOTICE TO A! REDUCING CONTRACT SCOPE Al PROPOSED CHANGES TO RESOLVE DESiGN PROBLEMS Al SUBMiTTED PLANT UNIT DESIGN LAYOUT DRAWING W~LRM/AI AGREE ON PLAN TO RESOLVE DESIGN PROBLEMS 1972~i974 JULY 1974 MARCH 1975 SEPTEMBER 1975 MARCH 1976 NOVEMBER 1976 JANUARY 1977 FEBRUARY 1977 DECEMBER 1977 JULY 1978 JULY ~978 NOVEMBER ~97B DECEMBER 1978 JANUARY 1979 MARCH 1979 APRIL 1979 MAY 1979 JULY 1979 JULY 1979 AUGUST 1979 SEPTEMBER 1979 NOVEMBER 1979 DECEMBER 1979 JANUARY 1980 JANUARY 1980 JANUARY 1980 FEBRUARY 1980 MARCH 1980 MAY 1980 JUNE `1980 JUNE 1980 AUGUST 1980 OCTOBER 1980 JANUARY 1981 FEBRUARY 1981 PAGENO="0136" SUMMARY OF DEVELOPMENT OF THE EQUIPMENT SPECIFICATION In Autumn of 1975, AI-ESG was awarded a contract by the General Electric Company, Manager of the CRBRP Steam Generator Systems, to supply hockeystick steam genera- tors for the Clinch River Breeder Reae9r Project. The term hockeystick Is used. because of the simple offset leg at.the top of the unit which provides the flexi- bility to accommodate differential expansion between tubing and shell. A total of eleven units is to be provided nine plant units, a spare, and a prototype test unit. Two evaporators and one superheater are employed in a recirculating arrange- ment (2:1 ratio) in each of the three secondary loops of the plant. The approximately 100 MWt unit applies 2-1/4 Cr - 1 Mo, has 757 tubes, is 66 ft. long by 4-1/2 ft. in diameter, and weighs 110 tons. The evaporator and superheater units are interchangeable. The CRBRP steam generator equipment specification has undergone many changes since the beginning of the program, primarily because of NRC input to the plant design criteria. A great many of these have established very large increases In design requirements (e.g., the number of thermal transient analyses required has increased by 10, severity of transients has greatly Increased, and peak mechanical loads.have Increased by a factor of ~). Many major changes have occurred after key materials have been released for procurement, necessitating many. reanalyses and some design innovatIon to preserve the usefulness of previously ordered parts. Despite this, because of the `forgiving" configuration of the hockeystick, the design continues to show safe structural margins and the scrappage of parts has been minimal. The extensive development accomplishments which have occurred since the hockeystick concept was chosen for the CRBRP Project are summarized In the following pages. PAGENO="0137" CRBRP STEAM GENERATOR E-Speclftcatlon ChronoloqZ ~omb1ned Loads Thermal Transients Material Properties * This chart shows graphically the history c ESpeciftcatlon changes since the time the original steam generator bid w~s ~ubnitted in September 1975. Many of these have been the.resu~t of licensing Interactions with the Nuclear Regulatory Conusission. Also shown are points where several key material items were released for procurement. Some of the specification changes which have significantly * ~sOlated requirements In various areas are listed below. Revision and Change Order Numbers Date Seismic * C/O's 3, 6, 1, 9; Rev. 15, 18 01/76, 06/76, 09/76; 12/77, 03/78 * C/O 8, Rev. 15 08/76; 12/77 CfO's 8, 9, X, T, Rev~ 19, 22, 35 07/76, 09/76, 12/76, 02/77; 12/77, 06/78, 07/78, 02/80 ~* 0005; ORNI. Rules, Rev. 1, 2 and 02/76, 10/76, 12/76; * Creep~Plasticity Rules; CPR 12, 12A* 10/78; 05/78, 11/78 The timing and nature of many of these changes have dictated significant engineering efforts to show that the new requirements could be met using previously ordered parts. Because of *forglvlnge character Of the simple hockeystick configuration, with Its separation of * structural functions, these changes have resulted In mlnlusmm scrapping of parts. ~AR~Contract Authorization Request; CPRChange Proposal Request PAGENO="0138" Seismic Response There have been sizable increases In specified seismic conditions for CRBRP as a consequence of interactions with the Nuclear Regulatory Coimnisslon. Both Operating Basis Earthquake (USE) and Safe Shutdown Earthquake (SSE) conditions have Increased significantly since 1975. Reoulrejnents for Demonstration Plant Steam Generators were Initially specified by General Electric and translated Into a module design under Task 14 of the LNFBR Base Program In 1975. However, no ground motion requirements were specified at tha.t time. The steam generator response spectrum, which takes into account the steam generator buildIng amplification of the ground motion, shows four times greater acceleration levels today than In 1975. The main items Influenced by these Increasing seismic conditions have been elbow and support. ring thicknesses (increased four times) and internals design. $~1 Combined Loads The specification revision which had the greatest impact of any single change concerned the manner In which loading conditions are to be defined. Originally, the dominant mechanical load was that due to the Safe Shutdown Earthquake; however, the change by NRC to require the ability to accomodate the SSE simultaneously with a steam pipe rupture (and Its large reactive loads) increases the peak applied mechanical loading by a factor of over 8 over the original requirements. This necessitated significant adjustments to the support design and Increases In support PAGENO="0139" COMBINED LOADS CRITICAL FAULTED CONDITION LOAD COMBINATION MAXIMUM LOAD BASE CONTRACT SSE ONLY 2.22 X i07 in.4b (SEPTEMBER 1975) CURRENT SSE + PIPE BREAK 18.65 X iø~ In.4b PAGENO="0140" SEISMIC RESPONSE (EQUIVALENT STATIC" C" LOADS) BASE CONTRACT TASK 14 (SEPTEMBER 1975) CURRENT * GROUND SEISMIC MOTION a OBE SEISMIC** 0.09 G 0.125 C a SSESEISMIC 0.190 0.250' * SC RESPONSE SPEcTRUM a OBESEISM1C 1.20 4.00 a SSESEISMIC * 10 1.50 6.00 PAGENO="0141" ç~par1son of Host Severe Specifle4 CRBRP ThennallranslentS This chart provides an indication of the manner in which increasingly severe transients have been specified. The plant control philosophy for CRDRP in the interest of protecting the reactor core from severe transients has transferred the burden of acconinodating transients to the heat transfer system and components. As the plant design has progressed, more numerous and conservative conditions have been defined and required additional requirements for the components. In the Figure shown, the SG430 uncontrolled rod withdrawal transient was the most severe transient condition specified In RevisIon 3. More recently (Revision 27), new transIents have been specified including SG-11E (loss of power with SGA}IRS drum vent valve opening remaining open) which represents a one-third Increase in range and a doubling of the rate compared with the earlierSGO3U transient. The increases in transient severity have most significantly impacted the design- analysis of the tube support assembly, thermal, liners, and the tubesheet region. PAGENO="0142" COMPARISON OF MOST SEVERE SPECIFiED CRBRP THERMAL TRANSIENTS 1000 800 400 200' * RANGE HAS INCREASED ONE THIRD * RATE HAS DOUBLED I I I * I I___~__ I 400 800 TIME Isec) ~~1 465°F RANGE 0.36°F/sec AVERAGE SG.03U.REV. 3 1 (9175) * 620°F RANGE 0.7°Flsöc AVERAGE 1600 2000 0 1200 PAGENO="0143" Tube-to-Spacer Loading Condition One of the consequences of the Increase In n*nber and severity of thermal transients Is shown by this chart. A tube-shell relative motiOn occurs during steam genera- tor heatup from ambient conditions because the tube wall, which Is cooled by water/steam, Is at a lower temperature than the shell. Following certain thermal transients, the tubes get even shorter relatiye to the shell because of their rapid response to temperature changes. As the transients have become mere rapid and the range of temperature changes have Increased, the lateral loads between tubes and spacers and the relative axial motion (stroke) has also Increased. The changes In specified thermal transients have resulted .~tn extremely high )ater4l loads and strokes as shown on the table opposite. These have dictated a major redesign In the tube support subassembly area. PAGENO="0144" C Materials Design Properties and Rules The design of the hockeystick In accordence with Section III, Class 1, bigh~ temperature design Code Case 1592 ~`ules require that the time-dependent behavior of structural materials be taken into account. AI-~ESG' conducted material tests on a Company-sponsored program which provided a sound basis for designing the 30 141t Modular Steam Generator, which also met the requirements of Section III, Class A. Additional materials data has been developed this decade on DOE programs. and considerable effort has been devoted to establlstnent of conservative material properties and rules for design' in such areas ai creep, creep-fatigue Interaction, and hardening. During the course of the CRBRP steam generator design, there have been revisions to the long-term mechanical property models and rules specIfied for use in design. Nevertheless, the extentive amount of analyses dune to date provide a sound basis for proceeding with fabrication without assuming large risks. (The 30 NWt Modular Steam' Generator was developed and tested by AI-ESG at Its own expense in 1971-73). PAGENO="0145" ~be~tb~Tu6esheet Weld Porosity Criteria The CRBRP requirements relative to manufacturing and Quality Assurance are more rigid than ASME Sectton .111, Class 1, Code provisions In a humber of areas. Further, they have become more restrictive as the program has, progressed. This chart shows one example The hockeystick tubeto~-tubesheet joint utilizes an autogenous (no filler metal) butt weld between the tube and a boss machined on the backside of the tubesheet. It Is a highly reliable, butt weld and Is readily inspectable, The k-factor shown on the opposite.chart is an acceptance criteria to define the porosity limits of the weld, The k-factor is the sum of diameters of all pores, These more restrictive requirements and the specified calibration standards necessitate the use of highly sophisticated (and delicate) instruments for inspection, Including a microfocus rod anode X-ray machine. Even with this highlj sensitive inspection technique and restrictive acceptance criteria, the rejection rate of tube-to-tubesheet welds has been extremely small, PAGENO="0146" TUBE-TOI.TUBESHEET WELD POROSITY CRITERIA 0 I INAL CONTRAOT R C DU CH nrr i I C ER °1~ GE CHANGE OR~R NO.1 Al RECOMMENDED PRiOR TO DEMO. FINAL AGREED UPON CRITERION - (ASME CODE) . K(250 . KC65 K<16 K(83 K~5O . INlhi.OF . . . . WELD . ..` DETECTION LEVEL DETECTION LEVEL DETECTION LEVEL DETECTION LEVEL DETECTION LEVEL l5TO2OmIIs lmIls 2mlIs Smils SmUt NOTES: `K" IS SUM OF DIAMETERS OF ALL PORES. PAGENO="0147" Configuration Changes The preceding charts have highlighted specified changes from the original requirements in several steam generator areas. These particular changes have translated into increased design complexity and thicknesses of various parts, as noted In the chart opposite. One consequence of these changes is a module weight Increase of 30%. PAGENO="0148" CONFIGURATION CHANGES 1975 JUNE 1976 PRESENT %INCREASE WEIGHT 82 Tons 94 ToNs 106 TONS 30 SHELL * 1.1/2 In. 2.114 In. 2.114 In. 50 ELBOW 21/2 In. 3414 In. 3.3/4 In. 50 MAIN SUPPORT RING 4 In. 4~3/B In. BIn. 125 THERMAL LINERS 3/Bin.. 318In. 1.1/2 In. 300 ELBOWSHROLJD NONE NONE 1/2 In. PAGENO="0149" 195 However, a resolution of the NPD and a cocmltment to complete the Project were riot In sight by AprI) 1979. Management judged that priority should be placed on completing fabrication end testing of the prototype unit, while further defining and resolving design matters for the plant units, taking advantage of available time to advance the technology but avoiding the major expenditures for plant hardware that would not be needed if the Congress were to terminate the Project,. In surirnary, externally induced CRBRP construction delays provided the opportunity to re~evaluate the steam generator design by conducting reviews without further consnthnentto steam generator plant unit fabrication. The following reviews were conducted: Internals Pressure Boundary Operations and Maintenance Closure Welding Closure Welding Tooling and Fixturing The reviews Identified improvements in the following design areas and In fabrication process improvements: lube spacer geometry and material Vibration suppressor geometry and material Elimination of centering bolts Elimination of shroud window bars Modification of component support Modificatipns to areas having excessive creep fatigue damage Potential for thermal striping Installation and maintenance of.ccmponent support and steam heads Necessary design revisions are scheduled for completion and approval for re~lnitiatlon of plant unit fabrication by the end of FY 81. The CRBRP construction delay also provided opportunities to implement the following changes to improve the program management and establish a con tractual basis. more favorable to the government, Vendor contract reassigned to Westinghouse Vendor contract reduced in scope to prototype and one, possibly two, plans units Vendor contract to be modified from CP1~ to CPFF Véndor agreement to be obtained to provide plant units at a later date under appropriate contractual arrangements. Negotiations with this vendor are expected to be complete and a contract amendment placed this year. For the prototype steam genirator, fabrication Is almost complete. Dellv..~y toETEC Is scheduled for 8/30/81. Achlev4ng that date is hlghlyprobable. Installation and test at ETEC will occur thru 11/82. For the plant unit steam generators, design work is proceeding to resàlve remaining plant unit design matters. Layout and subassembly drawings to be available from Al by September 15, 1981. Al fabrication of plant unit No. 1 continues on hold pending resolution of design matters, but fabrication can resume at the end of September 1981. PAGENO="0150" 196 ~OL F,IQSB ".79) US. DEPARTMENT OF ENERGY Datc July 15, 1981 Ixieniorandurn REPLy TO ATTN 01 NE-.530 sus,tc' Meeting Report with Subcormnlttee on Oversight and Investigations to File On June 3 Joe Bartell, Loch Caffey, and I met with Peter Stockton, staff member to the Subconrittee on Oversight and Investigations, and an Ernest Fitzgerald who identified himself as working for the Department of the Air Force and was on loan to the Dingell Subconvnittee. The meeting was held in response to an offer by Loch Caffey to meet with the Subconuiittee staff as he was in town that day on other business. The meeting got off to a rather bad start when Loch Caffey was interrupted in his opening statement by Mr. Stockton who stated in words to the effect "These guys (Staker and Bartell) could misinform you about the subject of this discussion." In questioning Mr. Stockton, he could not elaborate on the basis for that statement. Mr. Stockton then stated he wanted to review the basic contracts and again in a derogative statement to the effect that he did not like to work through funnels like these two (Staker and Bartell). Mr. Fitzgerald raised a series of questions and called into question Loch's judgment on contracts and wanted a line-by-line analysis of the contracts. Loch offered to go through the, contracts with the staffers and his contracts people at Oak Ridge. Loch also offered an audit trail for the cost and schedule growth of the project and there was no response. The staffers requested a copy of the organization chart with names and phone numbers which we agreed to provide. The bulk of the meeting consisted of negative declarative statements in the guise of rhetorical questions like "Can you explain why there have been no penalties assessed against the CRBR contractors when the completion date of the project has slipped from 1982 to 1990?" In another instance, Mr. Caffey was asked if there were any cases of fraud or abuse. Mr. Caffey responded there were two. One concerning a bribe to a possible Al employee and another to a project employee who was suspected of soliciting private business for himself through a CRBR contractor. During the discussion of fraud and abuse, Mr. Caffey added that there was another case of a Westinghouse employee who was suspected of misuse of the Government- owned computer facility. Mr. Stockton and Mr. Fitzgerald seemed well versed on the latter subject. The meeting was adjourned by Mr. Caffey inviting the two members to the CRBR Project Office in Oak Ridge to review the official files, 11 /. `I v_~' `h~t,4..'-~'. R. G. Staker, Director Office of Reactor Research and Technology Office of Nuclear Energy M/R: Dictated July 15 from notes taken at the June 3 meeting. PAGENO="0151" Department of Enesgy Clinch River BteederReacsor Plant Project Office PO.BoxU Oak Ri1ge.'~enr~es~e 37830 Nay 29, 1981 To File ICNO OF TELEPHONE CONVERSATION WITH JOE BARTELL, NAY 28. 19,81 Audit Qivislon pro~ided the following 1nfo~matf on to J~e Bartell, DOE4IQ, per his request: * Dates 0CM assurred cognlzanc~ for audits of prima contractors and major subcontractors: SWEC 111/79 BR! inception W4RD 10/1/79 SAl inception GE 1011179 Al 2/6/81 *Noted that PNC h~s aTways been audited by DOE. .Joe B~rteU also requested whiCh audIt reports go to Headquarters.' We told him we sent reports In connection with the DOE Audit Report Tracking System (DARTS) and estimated less than 2S had been sent. Bartell asked for us to * determine the nun~er vLd how many were perfornmd by. DOE and how many by 0CM. The following was determined: 21 reports sent to HQ 130CM 8 DOE (1.CRBR, 1.SAN, 6-CH) Bartell wet not at Ms desk wh~nwe called back, Left word to return the call. J hn T. Reeve, Chief *13:81.213 dit Division cc: P. 1. Shle~m, SC * I. L.$oore, t't., . I. U, Valkar,'tI P.t Karquen, rn 1,. V. Caffey, (11 S. C. Grisaffe, PR PAGENO="0152" 199 File: 06.02.21.07 Department o~ Energy Clinch River Breeder Reactor Plant Project Off ice P0. Box LI Oak Ridge,1~nnessee 37830 June 2, 1981 Memorandum for File REVIEW BY `IRE ROUSE SUBCOI~MITTBE ON OVERSIGHT. AND INVESTIGATIONS References Memo Route Slip, P. T. Marquess to Peter Stockton (staff member of the House Subcommittee on Oversight and 1mvestigations)~, which transmitted certain in- formation about the CRBRP Project, dated June 1, 1981 The purpose of this memorandum is to document the discussions I have had with Ernest Fitzgerald (an investigator for the subject review) since May 29, 1981. The reference transmitted the answers to some of Fitzgerald's questions. The following additional information was provided by telecon in response to other questions: 1. Fitzgerald asked how the cost estimat~e was prepared ane tracked. o I explained that the estimate is by cash flow catego- ries (as required by Congress), and that the genesis of the amounts which result in the estimate by cash flow categories is a work package/work agreement system for each of the major contractors~ .~ o I explained that the estimate is based on a schedule of major events which begins with the start of site week 82-1/2 months prior to initial criticality and ends with the.completion of the operating period 5 years and 7 months after initial criticality. 2. Fitzgerald caked who PPIC was and how they fit into the I explained that PMC represened tbe~iht~restI of `tJ~... etility industry. 5 PAGENO="0153" 200 3. Fitzgerald asked which of the contractors (i.e., catego~ ties of work) bad been associated with the largest growth in the estimate, I replied that the construction part of the estimate had the largest growth because we have not yet been released to start the construction work, 4. Fitrgerald irked bow often PMS surveillance reviews are conducted and what is the scope of the surveillance reviews. ~fter validation, surveillance reviews were initially conducted at appkoximately six month intervals. This was extended to nine month intervals in 1979 and 1980 and has now been extended to an annual basis. The scope of the surveillance reviews is in accordance with the DOE Cost and Schedule Control System Criteria, S. FitzgeraLd asked about the types of contracts we have. There are S major contracts (all cost type) as follows: WestInghouse (2) Burns and Roe Stone and Webster `Sc Beneath these contracts, there are many subcontracts of varioizs types (CPFP, fixed price with periodic progress payments based on contract milestones, fixed price with payment on delivery, and a myriad of purchase orders for supplies/services). 6. Fitzgerald asked if I knew of any `particularly interest' ing items in audit reports. ,~ I did not Uk ?itzgetYld to define `particularly interesting' and neither Fitzgerald nor! volunteered a definition. I r.spond~d that I could not think of any `particularly interesting' items. My basis, for that response La that audit, findings (`until resolved through negotiation) are not `particularly interesting'. ~PT~Iar~uëie,JSbief ?14:B:81066 . FiViancial Managbfnent PAGENO="0154" 201 Cooperation Source: The Knoxville Journal, July 2, 1981 (from staffs and wire reports) Allegation: wlnvestigators haven't received cooperation from project officials," Stockton said. He said the head of the project refused to help the investigators at first. NThe staff were told not to talk to us, but now they've been instructed.to only answer our questions and volunteer no Information.", Stockton'.said. Response: There is no basis to support the allegation that the investigators have not received cooperation from the project officials. Congressman Dingell's investigation has received full and timely response from all Deparbeent of Energy personnel, including Clinch River Breeder Reactor Plant Project officials. The investigators requests have been broad and numerous, but all requests have been answered in a timely manner. Upon learning 0f the investigation, the Project Director immediately requested a meeting with the investigators in order to help the inves- tigators as much a possible. The meeting was held June 3, 1981. On June 4, the Project Director, as a result of his own initiative, Instructed all principal staff to directly respond to the Subcommittee Investigators questions and no one should feel "muzzled.' The project contractors have also been instructed to respond to the Subcommittee questions. The staff Investigators have made numerous broad request for documents and information. All request have been responded to in a timely manner. Director and committee staff since the June 3 meeting. Despite the priority attention provided to responding to the Investigators request in one of those discussions, the Project Director was told by an investigator `Congressman Dingell is furious. He'll have, your ass." The response was a calm expression of regret. The official Deparbeent of Energy point of contact in the investigation has received no complaints from Congressman Dingell or the Subcommittee staff about a lack of cooperation by any project official or any con- tractors. PAGENO="0155" 203 Appendix 2 Issue Discuss the cases of known fraud and abuse associated with the CRBR Project that have appeared in the recent press. Contents Tab Tftle 1 Discussion - 2 "Clinch Unit Fraud" Termed Unchecked-~ Nashville Tennessean 3 Irregularities Ignored--Nashville Tennessean 4 DOE Brass Kept in Dark--Knoxville News 5 Computer Misuse--Nashville, Tennessean 6 Dummy Companies--Nashville Tennessean 7 FBI Investigation--Knoxville Journal 8 Missing File--Knoxville Journal 9 The Way Some of These Contracts Were Let is Suspicious as Hell--Nashville Tennessean 10 No GAO or Inspector General Reviews-.. Nashville, Tennessean 11 Memo, J. P. Robinson, to FIle, April 7, 1980 12 Letter, Snyder, OR, to Denton, OR, dated May 21, 1980, Subject: Report of Possible Criminal Activity--CRBRP 13 Letter to CRBRP Contractors from L. W. Caffey, dated June 4, 1980, Subject; Fraud, Abuse or Wrongdoing 14 Letter, Hart, OR, to Weisz (SS), and Mansfield (IG), dated August 6, 1980, Subject: Possible Misuse of Computer Software 15 Memo, Caffey to Grisaffe, dated July 2, 1981, Subject: Investigation of Alleged Wrongdoing PAGENO="0156" 204 Discussion There were four cases of possible fraud or other violations of law or regula- tions which have been detected in connection with the Project. They are as follows: 1. In March 1980, a Westinghouse employee reported he had business interests which possibly conflicted with his responsibilities. He resigned rather than give up his outside interests. Investigations Initiated by the CRBRP Project Director in Oak Ridge in May 1980, revealed evidence that the employee had used a Goverment computer for his own personal purposes. The Project Director immediately had the matter reported to the FBI. The matter was then investigated by the FBI and DOE's Inspector General and presented to the U.S. Attorney, who declined prosecution in May 1981. The IG provided technical assistance to the FBI. 2. AIS security discovered in April 1980 that there was an indication that two employees had been purchasing materials not required for Project work and possibly of paying higher prices than normal to certain minority owned companies. These companies by law and procurement regulations have certain competitive advantages. The Al security office immediately notified the FBI of suspected procurement irregularities. DOE's Office of Inspector General was concurrently notified. The FBI investigation disclosed discrepancies in purchase orders of about $20,000, on contracts which totaled about $68,000. Al reports that it has absorbed the cost of the unauthorized purchases. The matter is still under investigation by the FBI and 1G. One of the employees admitted falsifying records and PAGENO="0157" 205 took early retirement. The other no longer works for Al. When the `FBI Investigation is at the stage that a DOE Audit will not interfere, the CRBRP Project Office will conduct a special audit of the contracts involved. 3. A member of the Project Office procurement staff was twice contacted by persons claiming to represent an office supply company and offered gifts if he would make purchases from them. He advised the callers that office supplies are purchased from GSA sources and the caller hung up. The receiver of the calls notified his supervisor. The company which the callers claimed to represent could not be located through any procurement sources avail able. 4. *An investigation in February 1978. by Al internal security disclosed that an employee was found to have accepted a $1,000 interest free loan from a manufacturer' s representatIve and had al so allegedly been offered a $5,000 bribe for bid information. The matter was immediately referred to DOE's Inspector General and to the FBI. (The IG representative in Oak Ridge referred the matter to the FBI in April 1978.) The FBI investigation was unable to substantiate the alleged attempted bribe. The FBI investigation determined that no Federal law had been broken. The U.S. Attorneys from Eastern Tennessee and `Los Angeles both declined to prosecute on the basis that there had been no damage to the Govermuent. No Federal employee was involved. 89-405 O-82--14 PAGENO="0158" 207 Irregularities Ignored Source: Nashville Tennessean, July 2, 1981 (By Ed Gregory) Allegation: TMIn the first two weeks of the probe, Stockton said, the Subcom- mittee has learned of three specific instances, one involving bids by phony companies, one involving bribery, and the third, misuse of govern- ment computers." "He said all three were `practically ignored' by the Department of Energy and Project Management Corporation (PMC) a quasi-governmental organization created to oversee construction of the Nation's first commercial breeder reactor." Summary Response: On June 3, 1981, the CRBRP Project Director told the Subcommittee investigator of the three FBI investigations. DOE Inspector General also investigated these matters. The matters were not ignored they were reported to the FBI and to DOE's Inspector General. Reporting an irregularity to the FBI and the IG is not ignoring the matter. The matter involving bid irregularity is currently being investigated by the FBI. The incident involving "bribery" was in fact an alleged attempted bribery. This incident was detected in February 1978 and investigated by Al in February and March of 1978. The matter was reported to the IG in March of 1978. In April 1978, the matter was referred to the FBI. The FBI investigation did not sustain that there was an actual bribery * attempt. No Federal officials were involved. The FBI investigation determined that no Federal law had been broken. PAGENO="0159" 208 The irregularities in bids involved ráal, established minority businesses, not phony companies. The incident was discovered in April 1980, and inunediately reported to the FBI and to DOE's Inspector General. The FBI found irregularities involving about $20,000 in purchases on $68,000 in contracts. The case is still open. The misuse of Government computers was discovered as a result of one investigation initiated by the CRBRP Project Director in March 1980. The matter was referred to the FBI when the investigation found evidence of irregularities. DOEs Inspector General was notified in accordance with DOE's established procedures. The FBI investigated and referred the matter to the U.S. attorney who declined to prosecute. PMC is a nonprofit corporation, not a "quasi-governmental organization." DOE manages the CRBRP Project. PAGENO="0160" 209 DOE Brass Kept in Dark Source: Knoxville News - Sentinel, .July 3, 1981 (from staff, wire reports) Allegation: "Department of Energy (DOE) officials in Washington, D.C., have been unaware of fraud, price fixing, and other contract problems involving the Clinch River Breeder Reactor project because Oak Ridge project managers never reported them, a Congressional investigation has charged.' Response: Department of Energy officials in Washington, D.C., have been fully informed of such problems on a timely basis. The Department of Energy's Office of the Inspector General, or its predecessor offices, has conducted eleven audits, one inspection, and one investigation concerning operations of the Clinch River Breeder Reactor Plant Project. Attached is a list of the resulting Inspector General's reports. Cognizant Federal audit organizations have provided 425 reports to DOE and its predecessor agencies between 1973 and June 1981. There have been three FBI investigations initiated by the responsible project officials, and numerous GAO reports which have covered essentially all aspects of the project. As soon as Project Office officials became aware of cases of possible fraud or other wrongful matters they were reported to the proper authority in accordance with Departmental requirements. PAGENO="0161" 211 o The Project Director referred the response to the Project Office Counsel for review. Based on this review, additional Information was developed by Westinghouse in April 1980. o By May 19, 1980, it was found that there was clear evidence of misuse of a Government owned computer. o DOE immediately reported the matter to the FBI and followed up with a routine report to DOE's Inspector General, in accordance with DOE's procedures. o DOE's IG provided technical assistance to the FBI during the investi~ gatlon and provided a report with recommendations to the project. Many of recommendations have already been complied with. o The FBI investigation results were presented to the U.S. attorney, who declined to prosecute. PAGENO="0162" 213 Dummy Companies Source: Nashville Tennessean, July 2, 1981 (By Ed Gregory) Allegation: "....two enpl oyees of A! allegedly set up several dummy companies that acted as brokerage houses for subcontracting supplies and materials " "He said the dummy companies did at least $70,000 business with the A! contract officers." There is no way at this point of even estimating how far It went." Response: Atomics International's internal controls identified the suspected procurement irregularities. Both the FBI and the Deparbnent of Energy's Office of Inspector General were notified. The suspected irregularities were determined by theFBI investigation to involve increased billings of about $20,000 on contracts which totaled about $68,000, including the increased billings. The FBI investigation is continuing. So far it has been ascertained to date the matter does not involve udummyu companies. It does Involve minority-owned businesses, although this has not been shown to be a factor in the irregularity. The incident was discovered by A! Internal security in April 1980. The FBI and DOE's Inspector~neral were both immediately notified. PAGENO="0163" 214 FBI Investigation Source: Knoxville Journal, July 2, 1981 (from staffs and wire reports) Allegation: "Congressional investigators said Wednesday they've turned up FBI investigations into alleged illegal bidding schemes and conflicts by officials of companies working on the Clinch River Breeder Reactor Project." "Another involved two men who allegedly set up phony companies to bid against Atomics International, a unit of Rockwell International Corporation. The dummy companies submitted high bids for extra equipment used on Atomics International's steam generators. ...` Response: The Clinch River Breeder Reactor Plant (CRBRP) Project is being conducted in a strict manner, with any indications of wrongdoing bein9 reported to the proper authorities for a thorough investigation. There have been three allegations of fraud or abuse by employees of CRBRP Project contractors or subcontractors. No Federal employees have been involved in any irregularities. The FBI has investigated all three cases. Two of these investigations have been referred to the appropriate U.S. attorneys, who decided not to prosecute. The third case is still open, and the responsible U.S. attorney will have to determine if this matter is to be presented to a grand jury to obtain an indictment. `Phony companies" are not involved in any investigations. An investi- gation does involve established minority owned businesses. PAGENO="0164" 215 Missing File Source: The Knoxville Journal, July 2, 1981 (from staff and wire reports) Allegation: "Doctinents relating to the Atomics International purchase couldn't be found by the project office or the Energy Department." Response: The Department of Energy was asked by a Subcontnittee Staff investigator to provide CRBRP Steam Generator procurement docunents on June 19, 1981. A file search was conducted for these doctinents which were generated in 1975, and the requested docunents were pro- vided to the SubcorTmittee on June 26, 1981. PAGENO="0165" 217 No GAO or Inspector General Reviews Source: Nashville Tennessean, July 2, 1981 (By Ed Gregory) Allegation: "After spending a billion dollars, neither the General Accounting Office nor the Inspector Generals office of the Department of Energy has ever reviewed a single contract down there,' Stockton said. Response: The Department of Energy's Office of the Inspector General, or its predecessor offices, has conducted eleven audits, one inspection, and four investigations that concern the operation of the Clthch River Breeder Reactor Plant Project. The General Accounting Office responds to Congressional requests and has conducted several reviews of the Clinch River Breeder Reactor Plant Project. The DOE's Inspector General has a resident auditor at Oak Ridge who routinely audits the CRBRP Project. The attachment is a list of reports issued on the CRBRP Project by DOE's Inspector General. PAGENO="0166" 218 Reports on CRBR Project by Office of Inspector General and Its Predecessors Jun. 1975 (444..356) `Allegations of Conflict of Interest on Part of ftting Assistant Director, CRBRP' Dec. 1976 `Inspection of Clinch River Breeder Reactor Plant Project Office' Nov. 1976 `Audit of ERDA's Ackninistration of the Westinghouse Procurement Function' Dec. 1976 `Audit of Employee Relocation Costs' Jan. 1977 `Audit of ~RBRP Project Office Unpaid Obligations and Other Financial Matters' Mar. 1977 `Payroll and Travel Support Services Provided for the CRBR Project Office' Apr. 1977 `Review of CRBR Project Office Audit of TVA Costs During FY `76" Jul. 1977 `Review of Budget Ackuinistration' Oct. 1977 `Evaluation of CRBR Audit of Project Management Corporation's Accounts and Records' Oct. 1977 `Review of CRBR Financial and Accounting Reporting System' Oct. 1977 `Annual Audit Statement CRBRP Project Office" Nov. 1977 `RevIew of CRBRP Contracting and Procurement Activity' Feb. 1978 (26~2-197) `Allegation of Loan to and Attempted Bribe of an Employee of Atomics International' Feb. 1978 `Audit of CRBRP Project Office Unpaid Obligations and Other Financial Matters' Apr. 1980 (O1G 942) `Allegation of Procurement Irregularities on Part Of Two Employees of Rockwell International' Aug. 1980 (P171) `Allegation of Misuse of CRBRP Computer Resources' PAGENO="0167" 219 ,~ --~. D~~rtmer't of En~rçy Ch~h RrBreedei~Rsector Pient Poj!ct Office Ra8oxu O~k Ridg~~T~nn s~ee 37830 * *" AprLL 7, 1980 Me~rio to File: The purpose si this ~i1e *erno is to doc~uaent ce~tai~ aspects at ti~e Projoot's coa~)uter system (GENIE); the resignation o~. GeOrge isr WLEZ~ cQmputex services caordinatory arid his outside business activities. On or about J&rzuary 23, 1979, Frazier irt.forined Westingbotise of ax,.. intent to pursue Outside business interests itivo1vin~ CO~*,ttór servLce~ for ioc*1 firms. The riature of this business Venture :eqt:.rs4 that he suhnit a disclosure mtateittent to kestisghous~ The Statement, re~r&thg potential. co list of irite~st,' w~s submitted is accordance with V*stinghouse policies and procedures. tJ~on. review and evatluation, the disclosure atatcmezit was deesed ~c~eaptabl.e by W management and Frazier was notified accordin~ly. Frazier proceei3'id to enter into an agreement v~Lth Florida Coa~utur Corporation to act as a representative for Data Boss softv4re. Data Boss *oftw&re is a complex of programming modules Sold as a data base 1nana~ement system fox ,use on Digital. Equipment Corporation's (nEC) PDI'/il series computers, I're7ier leerried of Data Eozs as a result of experience with that software cii the Project's GENIE computer systeni (DEC PD? 11/60). TI~ Proj~c:t'a acquisition of DEC hardware, software `and Data BOss ~:as in Scptenther l.977~ long before F?azier's affiliation with ~lorida Computer. Si.~ca~t~en, Frazier Florida Computer a.ffi]i*tion, the Project baa naOe one acquisition from Florida Cort~uter. It wan a Data Entry System (DES) so~twa.re pac3cage. The recoimaendatiôn for this acq~isitin~ was the result of a Itudj Of the application software by keen Mitchull of ~LRM computer operations and a visit by the under,igne~1 to Dulce !ow.x who initiated and contributnd toward the dtvelopn*nt of DIE. Frasier r.ce~vec1 no compensation as e result o~ this Project ~ct~uisitiø~. PAGENO="0168" t~. t'c~ n'i PAGENO="0169" 222 OF1i~AL USE QNLY. Jack S. Denton ~. 2. * . Maj 23, 1980 Near DUE's CSBSP office in Oak Ridge, Weatir4heuae leases apace in a cor~.eraia3. bui1din~ and houae~ in that building a staff of engineers, and other Westieghoui* employees who provide se*'vicsa in supporti of W.atinghoi~ee' a role as the lead ret~cter ma~uta,,t~w.r for the, project, ~a'&der two CPPF contracts with 3)05. Contained in~ that building is ~ ~CveriV~ent.owr~a~ computer and asmociated Goverrent..owned ?ho Ccrn~%ater is used primarily by W~stthghouse b~t i~ used by oth~ CRSRP contractors ~&nd by DOt, Ur.ti]. recently Waat.~rtçbouss employed Mr~. Ceerjo 1~raz~or as A~t~it~c Data Procecaing Coordinator a~ its OaIc Ridga offices. Zr. t~at j~oaition. H:'. Frazier bad virtwa~.ly unUs~tted access tc~ t~ cowt~,i$~,r, On March 39, 1080, W~it1nghouse dis.,overed MY * Fra2~ce~ had a connection with a computer !napeny in F2 orida that had not been .reporttYd on WostiT4v$.1ss internal - ccnfliut-gf.4~tepe~t rep~rt& * Mr. Frazier was suspeided. on Mzrc~~2Q, ~nd he a~.bzLtted h~u r~signatien on Maz-~h 2~ effe~tiy~ a~ of May 7, when his available . vacation tima expired. * 7~tri~j ths. first wd~ik in May, W~.itthghctu,t. ssn~ to Oak Rid;~ EJ~. au~t~.t team Out of ~`osUnghouso' c hom.~ c.fftc~s in Pittsburgh. `1'l-e audit toazi' a Au~ctioA was to gain sor~c id~.i cf the extent ; F:e~.cr' ,~ involvomant with outeido ccin~v.to~ comparn~ss, t'Lt n.~t to conduct such a~i in.'depth thy tt~at..on that suapi-. ciona would be raiocd, , . *.. `. . ... t~ r4~dzg ~s few of ~ that Praz~i~' h&d us~èd, th'e ~ti~.ouz~ audit tt*az founi~t haterial that related to ?r~zitr ~rs~#u&lly, p~'onot~u~. and other material of a cr'*xvflle acm.. p~t~' d~ervicef.: Oom~)i'r~y in *4Ch Frazier has. fins~cte1 nter~nt, end prcmo~.ona1 materis2 Pelated tO the Florida ccspu:v~r co.epony wiU~ which Frazier may have had i financial tie. The audit teem also concluded that those activities way hcve been tom; en for s ps~od of two years,. ok" pert~ps more, * .` ,*, * .*,, Is addition, it ha~ heirs disccvsred ths~ 1*teria), FOi&ting to the xnox,illa computa' sorvious company ha~i oontinue4 tr. appear on the computer after March 2O-tt. date Frazier was suspended end the computer access codes ware changed. ~svexal e~c~lazsationa die possible, but it is ausp.ctea that otheni in WCatingl'souLe ~r the Project Office may be involved with Fz'aaie~' in hi* commercial ~ctivitiea and mty be continuing to support those activities with the Gø'arnmant's computer. PAGENO="0170" 223 OFFICIAL USE DN1Y~ Jack S. Denton .5 May 21. ~O8C»= The full extent of the unlawful use of the Goverrm~ent computer iS ~aiknown. The fact that those activities ore being thvsst*- gated is known only to a few Westinghouse and C2~S1~P off ieio1s~ and haa intentionally been kept low.4cey bscau~e of the apparent invo~vcmu~t of others ~ are xtot presently aware of thc~ * irweatiçiation. Another raison for having kept the invøstiga- tion 1e~r-key is the need t prevent erasing of' tapes thet~ ~ay eOnte~ni~aterial evidence.. * F~r the above rason,~, it i~i telievad any investigatj,on Should pr~c.e~f initially with very low Visibiliiy, The cont~c~ point at C~i~P is Paul E. stj~o~, 1~ad ccnnael StAtioneL at CRB~PI His nwnber is FT~* 62~61i1, ccn~ercia1: 61$- 5?6-611l~ * Williatá ~ Inyie' CC~1O:P}LS/WP3 Chief Counsel cc: ~ Dfr~,_C1~$~PLP$~, Pau. A * $hleseon Counas~~ 0.'iee, CHETtP/~O PAGENO="0171" ~Tø, ~ File: O6~O4.15 1sløw',~. a,,' * -* * *. * i$4. aP~ *PI$ML *.-* ___ The Department of Enerçty Act ~npha~izes the need for the Insptctur general !i~ tc7 ascertain thct Oper~~tion3 are being condut ted e?ii~'ent)y and econcoica y~j~'~ and that appropriate steps are~be1ng taken. tu prev~ant. and detect fr&id or ` abuse The Secretary of Energj~issued 1 attached ~ t~ all DOE ~npioj,ees cafl their a;tentic~ to their obligation tc' report.any knaw1ed~e or suspi;lon o possible fraud, abuse or other wrongdoing prouptly to the IC While DOE ouployces are required to be on the alert for fraud or abuse, a primary defen*e aqainat fraud or abuse on goveriwment contracts 1* the v131 lance ~f eoployees of DOE contractors. . Therefore, It is re4uested that you report any fraud, abuse or wrongdoing. or euspi;ion thereof, effecting govermuent funds or property, promptly to this office for.actton, and that you pus this raquirsnent down to your~: subcontractors. * * *. *. * * * ~i~LsTsM~33* ~T LOU :LocPtlIn ~ $iU:30.211. 224 Mr. WIl l1vi~a .PuroelT~')roJáct~ Manager * CitichRlye~' .Brender~Reactoytplani~ ~ ~`r ~ be 4~n~ihou,e Zlectr~a CorpQratio~~. ~ `m. ced Rea ~ ~i c&~ * * P. C. tuc* ~*~` ~a RI .1~ 30 Mr. N. C. MC ci', .Priject Manager CRSRP. Project * Burrs ar1d Roe, Inc. * 700 ~inderkamack Road l~r, Dear Arrnstreng, Acting * Prcjr*t ptana~er. Store ~k Webster Engfneeriri9 Cnrp~rztjcr~: *: P. 0. Box~8U~~ Oak MdV.~TN 31833*** * : FRAUL, ABUSE OR WRONGDOING Attachmei~t: As stated PAGENO="0172" 225. t'y running a f~w of tI$ ta~gs that Frazier had usad1 thi Wctin~housc ~u~1t t~a~i fosino ~tatertal that related to Frazier persooally, pPco~tion .md other i~ater1al of a rnuxvifle, Yn.~ computer services company 1,t t~1cP~ Frazier has a V inan~~,1 Interest, and proevitjon.l material related to thC Fior4d~ ~`v~wuit~~v' coranan~ w~ th which Frazier may hive hs.d a financial tie. The *ud~t team also concl~j4~d that those activities may ,~a"a beer, going on for ~ per1~d ~,` tt~ ~ears or perhaps e~re. lii ~dJft1oi~, It has bean discovered that material vela~In~ t~ tern Kn~,xvIlle conput~ir serv cat cornpany hs continued to ajpó~ir or tha AD~~4~ cO.~puter after ~I~irch 2O~ ~tha iSa te Frazier was suspended *niS the ao;Futar access cc4e~ ~re chansed. Several eXpl~nat1o,,s We POftible, Christie ~i~t It is suspected that other~ In Wast1rs~ho4~k or the PTuJect Office ;~y be i~wolv~d with Fr~zjer its hit com*,pcjal Ictivitios and may be e~t1rai.1ng to support. those activ~je~ with the Gover,~ant's computer. N-i ~,. :~-npd!y / * F. Hart .3. ~. Sweffr~g,pjr,, OP~ ~ ~nydt~r, 0CC b~ l4flson Edmorids, Resident Inspector (_.Afl4~ ~~~0ent~n: ri h:6-0897!8-4~8O PAGENO="0173" 227 ?rc~ecz Cff~ce ~.~eTer.r~essee 37830 July 2, 1981 George Grisaffe INVESTIGATION OF ALLEGED WRONGDOING Upon reading the article from the Knoxville Journal of July 2, 1981, copy attached, I discussed with Paul Shlemon whether he had any information concerning the allegation by Mr. Stockton with respect to "alleged illegal bidding schemes and conflicts by officials o~f companies working on the C'~?RP,"and the allegation "Ax~other involved two men who allegedly set up phony companies to bid against Al, a unit of Rockwell Intl. Corp. Both men have left the compiny, Stockton said. The dummy companies submittedhigh bids for extra equipment used on Atomics International's steam generators, which are the center of the subcommittee's probe." Paul Shlemon said he had no more information than was in the newspaper. I asked him to call Thomas Abruzzo in the of f ice of the DOE IC and find out if there were any more information available there than we had here. Paul later responded to me that Abruzzo said he knew nothing about the alleged illegal bidding schemes or alleged phony companies. Later today I telephoned Abruzzo ñ~yself tà discuss with him what he might know about the allegations. He told me that he had no infor- mation concerning illegal bidding schemes or phony cOmpanies as cited in the newspaper article, of which he had a copy by that tine. Abruzzo said that he had an FBI report dated July16, 1980, issued by the Los Angeles Office. He said that he could not tell me much o.~ what was in the report because of the privity of such a report but that he could say that investigation indicated that there were more people than just the two Al employees identified in the newspaper article involved in the matter, that there seemed to be several small companies involved, and that the amount was approxi- mately $68,000. He suggested that if I needed further information I call the FBI Office itself. I told him I would do so because if there were illegal bidding schemes and phony companies set up to do business with a Project subcontractor, I felt an obligation to find out more information, especially because of. the appearance of a greater amount of money involved than the approximately $20,000 that I had understood from Al was the amount. I told him that I was concerned that this Project not reimburse Al for money which Al may have spent unintentionally but improperly or unlawfully. PAGENO="0174" 228 Later today I informed Mr. Wilson Edmonds of my conversation with Abruzzo as outlined above in case he might find the information useful to him in connection with the investigation of the alleged wrongdoing that he is making. I telephoned Bill Ryan of the FBI, Tarzana Office, today. He said the "investigation is pretty much complete." He has talked with the US Attorney who is now considering the matter of whether to prosecute or not. Mr. Ryan said that the matter did not develop into a major fraud. There were four companies set up, apparently for the sole purpose of doing business with Al in view of the fact that they had not secured. other business. He said that "a minimal amount of worka went to them. Altogether the contract amounts were approximately $68,000. Ryan said that there were deliveries made pursuant to these contracts so that the government did receive the hardware which was originally contracted for. He said there was an appearance of about $22,000 overcharge, an amount which Al, he understands, had absorbed to its own account rather than passing it to the government. Ryan said that the bids were not competitive because they were awarded *to minority individuals who had set up the companies, who bought the goods, and then sold them to Al at a higher price than they paid for them. He said that his assessment was that these contracts are in the area of the government's procurement practice whereby it undertakes to stimulate minority business even though there might be a greater possible cost to the government for doing so by eliminating the competitive nature of the procurement. He said that he did not distinguish anything improper in the actual engagement of these four contractors. He said that the problem was an apparent overcharging because of the spurious change notices to the contracts. He said that he was gratified that the situation had been caught early and that the amount of improper charge had been limited to about $22,000. I asked whether if I were to take action now to examine the Al accounts it would interfere with his investigation. I said that I had deliberately not pushed the matter further in order to avoid interfering with his investigation. He said that "the investigation is substantially complete" so that I can feel free now to audit the Al accounts. It is necessary that we now obtain a special audit of the four subcontracts in qLuest.ion, including an exanination into source selection, contract placement, contract performance, the Al coi~ estimates before contract placement, the contract prices that might have been secured under fixed price competitive bidding, all financial transactions in connection with these contracts, AX's, investigation after it discovered the spurious change notices, and the value of goods delivered compared with the charges by AX, direct and indirect, to the Project. Please get onto this. Lochlin W. Caf fey * Director cc: W. T. Snyder, Counsel, ORO 3. W. Swaf ford, ORO M. T. Abruzzo, IG Office, DOE W. Edxnonds, IG Resident, Oak Ridge PAGENO="0175" PAGENO="0176" 231 o Increasingly stringent requirements imposed by NRC in light of develop- ments In the nuclear power industry since 1972 that necessitated modification of original plant design. The two most significant changes were the increased seismic requlremnts and the need for a double contain- ment reactor building. o Delays in project schedule caused by licensing and procedural matters between 1972 and 1974, by the previous Administration's 1977 intention to cancel Project, and by several yearly appropriations that were consider- ably below planned budget. By pushing back the.schedule, these factors intensified the effect of escalating inflation and distorted the cost/ performance picture. These actions of the previous Administration have delayed the CRBRP Project by 6 years. Attachments I and II chronologically detail the reasons and their effects, and reveal that since 1974, 80 percent of the increase is due to factors beyond the authority of project management to control. PAGENO="0177" 232 Attachment I REASONS FOR INITIAL INCREASES IN ORIGINAL ESTIMATE FOR CR~BRP, 1972..74 FROM Statement of Thomas A. Nemzek' before the Subcommt~tee on Legislation of the Joint Committee on Atomic Energy,.March 11, 1975 Escalation was the major item leading to the cost increase compounded by a 2.~year delay in (CRBRP] project completion. In addition, the 1972 estimate was based on conceptual design ideas as opposed to the finn reference design upon which the revised estimate now stands . . . Other major factors that have caused the $1.037 billion increase over the previous estimate are: Improved plant availability and safety; revised codes and standards requirements; impact of the marketplace; additional technology efforts (transferred to the project from the base technology programi; and additional contingency. Items Affecting CRBRP Estimate Since 1972k (Millions of Dollars) Total Project cost estimate, 1972 699 (escalated, Including $56M contingency) Factors affecting estimate since 1972 o Improved plant availability, added safety provisions 85 o Revised requirements, codes, standards3 135 o Increased material and fabrication cost3 35 o Transfer of certain base technology programs to Project 75 o Scope and schedule changes 50 o Additional contingency6 173 553 Escalation (beyond original estimate) 484 Revised total Project cost . 1,736 1Director, Division of Reactor Research and Developnent, ERDA 2See ERDA Authorizing Legislation: Fiscal Year 1976, Part 4 3Extenslve nuclear construction in 1974 caused abnormal cost increases for materials and fabrication of nuclear components 4Adapted from testimony cited above ~To improve safety, reliability, and plant availability 6Additlonal contingency required due to recognized uncertainties in the nuclear construction escalation rate, Increasing NRC requirements and design uncertainties PAGENO="0178" Attactmeent II SUMMARY OF CRBRP PROJECT COST INCREASES, 1974-80 * (Mifltons of Year-of-Expenditure Do1larsT~ AUG 74!! AUG 75 APR 77 DEC 80?1 TOT (% of Total Change) Cost Estimate 1,736 1,950 2,194 3,197 -- Initial Criticality Date 7/82 10/83 6/84 2/90 -- Changes in Estimate o Internal Causes -- 46 65 178 289 (20%) o External Causes: - Licensing -- 78 140 -- 218 (15%) - Funding Reductions -- 90 27 -- 117 (8%) - National Policy Debate -- -- 12 825 837 (57%) - Total External Causes -- 168 179 825 1,172 (80%) Total Changes -- 214 244 1,003 1,461 S (100%) 1This estimate relates to the Reference Design of August 1974; the earl icr concept estimate was $699nrtllion 2Approximately a 6-year delay due to 4 years of National Policy Debate and the almost 2 years additional licensing restart S DATE: June 29, 1981 PAGENO="0179" 235 was entered into that the entire Project concept, cost estimate, and schedule were under reevaluation, but it was considered imperative to enter Into the formal contract rather than continue under the letter contract arrangement for the time it would take to perform the Project reevaluation. Similarly, for the 2395 contract, the contract price was not established although the contract was limited to a term of five years; It has been extended. A most unusual aspect of these two contracts is that Westinghouse agreed to a total fee of $9 million for the work to be performed under the two contracts, divided $1 million to the 0003 contract and $8 million to the 2395 contract, and Westinghouse agreed in the 0003 contract to make a cash contribution of $7.2 million. Thus, between the two contracts Westinghouse expected to net $1.8 million and whatever might become earnable if contract 2395 were extended. Contract 2395 has been extended through March 31, 1982, with additional fee of $17,924,000 payable for the added work. Westinghouse has claimed additional fee entitlements under both the contracts for work performed prior to September 30, 1978. The claims wore settled for $8.4 million. There are no open claims fran Westinghouse. The two contracts with Westinghouse contaIn contractual commitments by Westinghouse not to assert any work to be performed through September 30, 1981. The ~freedom from claimsu provisions will be extended through the period of October 1, 1981, though March 31, 1982, when a fee for that period is negotiated. It is anticipated that a similar provision will be incorporated into both contracts as a part of any further extension of contract 2395. PAGENO="0180" 236 Although for the sane reasons aS for the 0003 contract with Westinghouse, PI4C and Burns and Roe did not provide in their contract for a contract price and a stated cunpletton date, the contract with Burns and Roe is unusual in the sense that Burns and Roe was willing to accept a fee which, according to its own calculations, was 5 percent of the cost of the work that it estimated it would perform under the contract. Customarily, in commercial practice (the PMC.'BWR contract was a contract between private corporations, not a government contract) architect~engineer companies secure 7 percent to 10 percent fee for the type of work PMC engaged Burns and Roe to perform. Burns and Roe had agreed with PMC to take the Job at a fee that is even less than the statutory limit of 6 percent for Goverment contracts with architect.engineers for the type of work that PMC engaged Burns and Roe to perform. The contract with Stone and Webster has an unusual aspect concerning fee. When Stone and Webster was interviewed concerning its interest in the Project, it was asked whether there was a fee below which it would not take the project. Stone and Webster responded that although for a job of this magni~- tude it would expect a fee of $25 million or more, it had not set any minimum fee for taking this Job. The fee agreed upon between PMC and Stone and Webster was negotiated at $3,150,000 with a provision for a possible $875,000 as an award fee element. Thus, Stone and Webster was willing to take on this very large project for what anounted to a token fee. PAGENO="0181" 237 Appendix 5--Role of the Project Management Corp. Discussign In January 1972, the Government selected frám among four solicited utility industry proposals the joint proposal of Commonwealth Edison Company and the Tennessee Valley Authority for a cooperative effort to build and operate one phase of the Government's liquid metal fast breeder reactor research and development program. The key features of the selected proposal were: a commitment to collect supporting funds from the utility industry, a commitment to supply technical support in the form of utility engineers, cooperative management of the Project. in conjunction with the Atomic Energy Commission, and a commitment to build the p1 ant on the TVA system and to operate it under contract with TVA. In 1973, the contractual arrangement between the AEC and the utility industry was acceptable to Congress. Between 1972 and 1975, the utility participants met or exceeded the commit- ments they had made. The Project Management. Corporation was formed by the utility participants to manage the Project in cooperation with the AEC. The commItments included soliciting utility contributions (now amounting to $257 million); collecting funds from the utility industry; supplying manage- ment and technical leadership; and in cooperation with the AEC selecting and engaging the prime contractors for design, constructiofl, and hardware procure- ment, and managing those contractors' work. The fundamental arrangement was changed as of May 1, 1976. Fo1lowing~ completion in 174 of the first detailed Project plant cost estimate, which was based~on the general features now employed in the Project, and on accurate geological data from the selected plant site, the Joint Committee on 89-405 O-82--.-16 PAGENO="0182" 239 Appendix 6 Issue Selection' of Al to Supply CRBRP Steam Generators Contents Tifie Discussion 2 Letter, Reardon, Acting Manager, SAN, to Bauer, Manager, CII, dated May 2, 1975, Subject: SAN EVALUATION of GE Recom~ mendation fÔ~ SUbCO~kt Award for CRBRP Steam Generat~p~i 3 Letter, Reardon, Acting Manager, SAN, to Bauer, Manager, CH, dated May 23, 1975, Subject: as in Tab 2 above 4 Letter, Bauer, Manager, CH, to Smith, Director of Procurement, ERDA, dated May 27, 1915, Subject: Recommendation for Contract Award for CRBRP Sodit~n Vented Steam Generators 5 Newspaper Article, Al Contract `Mighty Suspicious', Nashville Tennessean, July 2, 1981 6 Newspaper Article, Congressional Approach, Nashville Tennessean, July 2, 1981 PAGENO="0183" 240 Selection of Atomics International to Supply the CRBRP Steam Generators The responsible ERDA Field Procurement Office, San Francisco Operations Office (SAN), recommended (by letter dated May 2, 1975, Tab 2) that Atomics International be selected for negotiations for the CRBRP steam generators on a Cost Plus Incentive Fee (CPIF) basis (Tab 3 is extra details). The basis for the recommendation was: 1. The design concept was developed by Al 2. Al designed, manufactured, and successfully tested a 30 MW version of the concept 3. Al possessed directly applicable experience in the many relevant tech- nical are~s 4. Al offered advantages related to steam generator prototype testIng SAN concluded that Al's strengths offered significant advantages in terms of schedule, quality of design, and ultimate cost. SAN recommended a CPIF contract because of concern that a fixed price contract might result In a higher cost to the program than a cost type contract. It was expected that large contingencies coul d be eliminated with a cost type contract. CH endorsed this recommendation and forwarded it to ERDA HQ (Tab 4). The ERDA decision was to approve the procurement of the CRBRP steam generators from Al on a CPIF basis, as recommended by SAN. The decision was reviewed and concurred in by the ERDA Administrator. / Tabs $ and 6 are two recent newspaper articles containing allegations that the Atomics International contract award was suspicious and that it resulted from Congressional Influence with responses. PAGENO="0184" 241 UNITED STATES ENERGY RESEARCH AND DEVELOPMENT ADMIN~STRAT1ON SAN FRANCISCO OP~RATIO'~PS OFFiCE 1333 BR0ADWA~ OAKLAND; CALIFORNIA 94612 IAY2 lSfl Robert Ii. Baucr Manager, Chicago Operations Off tee SAN EVALUATION OF GE RECOHUENDATION FOR SUBCONTRACT AWARD FOR CRBRP STEAM GENERATORS PU1tG~OOO3 Reference: Letter, CE (l~cy) to ARD (Jacobi), "Procurement Recommendation for the CRUR? Sodium Heated Steam Generators - PURG-0003", GE-WARD~D892-75-4l4, dated April 25, 1975. The purpose of this memorandum isto convey the results of SAN's evaluation of the Reference submittal, by which GE recossnended award of eubeontracts to Foster Wheeler Energy Corporation (FWEC) for CRBRP prototype and plant unit steam generators, and to provide SAN's recommendation that Atomics International Division of Rockwell International Corporation (AI)be selected for negotiation of the subcontracts. This memorandum contains a description of ~hé extent and nature of the review conducted by SAN in arriving at our conclusion and recommendation, the results of the SAN review including a recoin- mendation that the plant unit subcontract be awarded on a Cost Plus Incentive Fee (CPIF) basis, and a recommended approach (letter subcontracts) for assuring that design and material procurement efforts can proceed without interruption during the time required to negotiate, obtain approval, and execute final subcontracts. Extent and Nature of SAN Review SAN representatives have observed and evaluated the progress of CE's proposal evaluations, including attendance at fact finding meetings, and reviewed and commented upon portions of PURG-0003 while it was in the draft stage. The final version of PURG-0003 has been reviewed by SAN personnel representing tile Contract Services Division, Finance Division, Office of Chief Gounsel, and Office of Program Coordination and Management - Industrial Contracts. PAGENO="0185" 243 3.. "The required warranty of CRfl~ plant units is provided (such warranty has not been obtained from LI) ." SAN's reaction to each of the "primary reasons" presented by GE in support of the recommendation for award to FWEC is as follows: 1. Cost con~idcrattons, SAN does not concur with GE's use of proposed price differences as a basis for recommended selection for the following reasons. First, the prototype subcontract is * based on a CPIF structure, so that actual coats will be paid to the supplier, and differences between At and FWEC estimates o~ cost (target Costs) should not be used as a "primary reason" for preferring one over the other. Secondly, it is not possible to determine if the proposed fixed prices for the.plant units are reasonable. Furthermore, there is sufficient potential for changes in subcontrcct scope, after award, to question the relevance of the proposed prices which are based on no changes. Our observations concerning coat considerations related to the plant unit prices are described in further detail in the following two paragraphs. SAN's first concern regarding the proposed prices for the plant units is that it is not possible to determine if the proposed prices are reasonable. That conclusion is based on evaluation of: 1) significant differences between existing estimates of CR3RP steam generator costs; 2) signi- ficant differences between CE's finalestimates and best and final offers from the proposers; and 3) GE's cost analysis presented in PURG-0003. A sore detailed discussion is provided in Attachment 1. Secondly, it is important to note that the proposed prices are based on no ch3nges. Significant chtngcs to the equipment specification (a cosuple~e revision Revision 3) will b.c incorporated tnto the *ubcon- tract after award, ~ current plans are implemented, PAGENO="0186" 244 and it is prudent to expect that additional changes to the specification will be forthcoming. In addition, any necessary changes to the design features depicted on the drawings furnished by GE to form the basis for development of design details by the supplier will result in an adjustment to the subcontract price. Zn view of the fact that changes in subcontract scope and definition arc already contemplated, ~and that additional (presently unidentified) changes are in- .evitable, SAN qudations the use of proposc~ price differences, based on the assumption of no changes, as a basis for selection. As a result of the considerations presented above, SAN concludes that differences in proposed prices do not form a valid basis for source selection. Such uncertainties raise not only the question of the propriety of a source selection based on price, but also the question of whether a PP subcontract structure. is appropriate for the plant units, The latter question is `addressed later in this lemoran- dust. . 2. Schedule considcratjor~s. SAN does not concur with this aspect (minimized schedule risk) of GE's basis for recommending selection of PWEC. It is our opinion that ~ ~ nsso±cist.cL with mmmi, .jo~.~L.}c1,edule risk. is mnre.~th~_, offset by 1,robnblQAi t~chedu).~ M nta~c~,~ Dotails ~Vthe basis for our opinion, which results from consideration of issues either not discussed or not sufficiently emphasized by GE in PURG-0003, are pro~ vided in Attachment 2. 3, Warranty Considerations. It is SAN's opinion that GE has overstated the value of the warranty provisions agreed upon by TWEC, and has understated the extent of ~ agreement with GE's requests concerning war- ranty. The.reasons for our opinion are discussed in Attachment 3, and include the following observa- tions: the warranty provisions contain numerous conditions, exclusiqns, and limitations; PWEC cost proposals for the plant units include a charge of PAGENO="0187" 245 up to ~54,B25 for agreeing to the warranty provisions; and Al's proposed warranty pro- visions establish a maximum liability which could bo more thom double that established by TWEC (110,000,000 for At vs. a possible *4,557,994 for FWEC). As a result, .SAN does not concur with this aspect of Gg's basis forrecommending selection of FWEC. GE presents, in Enclosure 15 of PURG-0003, in support of the "primary reasons" for its recommendatiOn, a detatIed discussion of the results of its. comparative evaluation of Al and FWEC. Although SAN does not agree with some of the statements made by CE in Enclosure 15, we are not providing comments on those details, since it is our opinion that our evaluation of GE's "primary reasons" presented above provides sufficient basis to conclude that the recommendation for selection of FWEC is not justified. Basis for SAN Recomme$dation That Al Be Selected It is SAN's opinion that Al should be selected to supply the ~RBRP steam generators for the following reasons, which are discussed in further detail in Attachment 2, and which either were not discussed or were not sufficiently emphasised by GE in PURG-0003. 1. The design cOncept wasdeveloped by LI. 2. LI has designed, manufactur~d, and successfully tested the Modular Steam Generator. 3. Al possesses directly applicable experience in the following areas: sodium technology, includ- ing the effects of sodium on L~BR materials; sodium/water reaction ana1ysis~ related test programs; cleaning and maintenance; etc. ~. Al offers advantages related to steam generator prototype testing and incorporation of results. PAGENO="0188" 247 ATtACHMENT 1 Cost Considcrnti~ns the reasons for SAN's disagreement wlth* CE's use of proposed' price differences as a basis for recommended selec'tion are described in the body of our memorandum. This attachment contains additional details which support our conclusions, As is indicated by the tabulation of various CRBRP steam generator coat estimates shown on the next page, there is no b~sior~,&ete~ njJ1~th&nrooosed costs are rens~~14e. Ani~ilysis of the data shown in the tabli~1eads to the following observations: 1. Extremely broad discrepancies exist between estimates of costs developed by GE during the past 8 months for prototype and plant units, ranging from an estimate of prototype costs developed in October 1974 which is 527. of the final GE estimate for the prototype ($2,978K vs. $5,729K) to an estimate of plant unit costs developed in August 1974 which is ,252t of the final GE estimate for the plant units ($26,100K vs. $lO,365K). 2. Best and final proposals for the plant units (fixed price redeterminabic downward) differ from GE's final estimate by as much as 2087, in At's case ($21,580K v~. $lO,365K) and 155% in FWEç's case ($l6,093K vs. $lO,365K). 3. The uncertainty concerning rea3onableness~of costs is magnified by the confusion which results from the fact that some estimates include material àosts, whereas other estimates (and the proposed prices) are exclusive `of material costs. Zn addition, it is difficult to compare the final CE cost estimate for each subcontract with final propoced costs because it is not possible to determine whether the GE estimate was made on the mRFP basis" or "alternate basis". (The"alternatc basis" is derived by charging certain support activities for the plant units (e.g., program control, QA planning, purchasing support, etc.) to the prototype (CPZF) cons tract. CE further explains "RFP basis" and "alternate basis" on pages 7 and 10 df the P1* letter in PURC.~O0O3). 4. The FWEC propoicd price for the plant units increased from $ll.4M to $18,311 when the contract mode was changed from a combination of CPIF and FP to a VFIU~ (Fixed Price Redeter~ minable Downward). It would seem, therefore., that thnf~~ ~ proposnjs (from ~ ~igh profit and contjngencjc~,, PAGENO="0189" 248 Steam Cenerafor Cost Estimates ArrAcnitur 1 CE Estimates Preprocurement Plan Estimate v/materials `i/o materials SC Cost Estimate v/materials `i/o materials Revised SC Cost Est. v/materials `i/o materials Final GE Cost Eat. Enclosure 14 to PURG*0003 `i/o materials * Prototype Plant Unit Cost Cost ($l000's) I ($l000's) - 31934 12/4/74 9825 : 35617 8/23/74 7000 5500 10/10/74 4108 2978 10/13/74 5580 4371 4/25/74 S of Final CE ~~CostEst. Protot~~eJ Plant Units 34100 26100 967. 18263~ m 6973 ~ ~527. 19208~ 7353-1L7~ 767. 71% Origin Date + CRDRP Bazcline Estimate 6/20174 (includes materials) Work Agreements (includes materials) 2527. 677. 5729 10365 Vendor Estimates (`i/o materials) At initial proposal 10/16/74 5948 20911 104% . 202% best 6 final prop. 3/26/75 RFP basis T,P. F.P.R.D. " Alt basis PP. * 6104 9047 . .* 20086 21580 162l~e . 107% ~ 1587. 194% 2087. 1567. F.P.R.D. ,` * 17420 1687. FWI~C initial prop. revised prop. best & final prop. RI'? bants P.P.R,D. 10/18/74 12/9/74 3/19/75 * . 5210 . $174 11387 18300 1~093 91% ` 907. 1107. 1767. 1557. Alt basis P.P,R.D. " 6693 13674 1177. 1327. PAGENO="0190" 249 ATTACInIENT 2 Issues Not Discussed or Not Sufficiently Emphasized by CE in PURG.0003 Which Favor Selection of At This Attachment contains a brief description of issues which either were not discussed or were not sufficiently emphasized by CE in PURC-0003, but which SAN believes are extremely important factori which should be considered in determining the selected supplier for CRBRP steam generators. As noted below, all of these factors result in probable At schedular advantages, thus offsetting one of the primary reasons citedby CE as its basis for the recommended selec. tion of FWEC (minimized schedule risk based oh TWEC manufacturing plan flexibility). In addition, all `of the factors described below result in probable cost advantages related to selection of At, of f~ setting the apparent (see Attachment 1) FWEC cost advantages cited by CE as another primary reason for recommending selection of FWEC. All of the factors described below favor Selection of A! as the supplier for the CRBRP steam generators. 1. The desinn concept was developed by At. The documents which form the basis for completion of design and manufacturing of the steam generators in~ dude drawings and supporting data which have been developed by At. Al has continued, during the period while proposals have been prepared by At and V~4EC and negotiated by CE, to further develop the details of the design concept. ______________________ fernbleexperionco,wMchron~,fts in both Cdu1eidvinti~e, 3f At ic the celectod ~ The cost advantage.s are associated with the fact that only a portion of the results of the A! efforts (for which At has already been paid) will be utilized by FWEC, since~7EC will r~4~ no of the work done ,~y~At (and ~ The' i~i~t~- advantages result from `the fact that FWEC will redo a portion of the work already performed by At, and will also devote some time to reviewing and under~ standing that portion of the work performed by At which will be utilized dircetly. In additton, it ~ for desi~~n channàs born ~ "_!`~-~` W~ ~ ; lit ~t r th ~n t h~"'pot u I ~ the design was `(md is ~ ~divclopcd by AL. Such design changes, if agrced upon by CE, would result in impact on Schedule (time required to develop details and analyze) and cost (the prices proposed by At and FWEC are based on the assumption of no changes). PAGENO="0191" 251 ATTACHMENt 3 ~8~r~tanty IC One of the "primary reasons" cited by CE as part of the basis for the recommended selection of VWtC as supplier of the CRI3R.P steam generators is the fact that "the required warranty of CR.BRP plant units is prorn vided (such warranty has not been obtained from Al)" (PUR letter, page 2, paragraph II, "Basis for Award"). SAN does not concur with this aspect of CE's basis for recommending selection of PWEC, for the rea~ sons presented below. The warranty provisions negotiated by CE with FWEC contain numerous conditions, exclusions, and limitations, including: 1. FWEC'I maximum liability is United to 1/3 of the contract price ($4,557,994), 2. FWEC's liability is limited to correction of (or payment for) nonconformities, with no liability for consequential damages. 3. The effects of corrosion, erosion, and the aodiu~ environment are specifically excluded from the warranty. * 4. If the equipment fails to meet the performance warranties, Ft~'EC is responsible for correcting the defective work only if "the equipment has been operated in accordance with Seller's generating instructions or mutually agreed to test procedures." 5. In the event t~hat any defective item is returned to VWEC for corrective action after fnstallation in CRBRP, VWEC would not be responsible for costs. of removal or reinstallation. 6. increases in FWEC's costs for correction or replace' ment which result from the equipment being highly radioactive will be the basis for "an equitable adjustment." PAGENO="0192" 252 In addition, the warranty issue is further clouded by the fact that GE has placed orders for tubesheet forgings and is in the process of procuring the tubing, and additional long lead materials are being purchased by Al, with the intent to novate material contracts to the selected supplier after contract award. Although the supplier will accept responsibility for the contracts, it would seem that there is significant potential for dispute regarding responsibility under the warranty if failure in performance could be attributed to defective materials. Because the warranty provisions contain the conditions, exclusions, limitations, and uncertainties described above, it is SAN's opinion that NEC's acceptance of the provisions is largely a matter of principle. That is, the warranty provisions contain so many "loop~' holes" that it would seem to be extremely unlikely that, if the equipment should fail to perform satisfactorily, the Purchaser could actually obtain significant corrective action at FWEC's expense. As a result, it is SAN's view that the real merit of the warranty provisions is contained in the principle that they demon- strate; namely, that ?WEC has enough confidence in the quality of its product to be willing to incur some (albeit small) financial risk if such confidence should prove to be unjustified. Further- more, SAN observes that even the amount of financial risk actually incurred by FWEC is questionable, since FWEC's best and final proposal for plant units includes a "Warranty Reserve" of up to $854,825. SAN understands, on the basis of conversations with CE personnel, that the "Warranty Reserve" is the amount being charged the project by TWEC for agreeing to the negotiated warranty provisions. Consequently, it is SAN's opinion that Ct.has overstated the value of the warranty provisions aCreed upon by FWEC when (on page 8, paragraph X, item B, PUR Letter) GE stated that without the warranty provisions "the project is exposed to significant cost risk, over which little control can be exercised." In fact, it appears that GE may also question the real value of the warranty provisions, since GE referred elsewhere in PURG-0003 (page 2 of Exhibit 6 of Enclosure 15) to "the little protection the purchaser is afforded in this Article" (Article 34 - Warranty). PAGENO="0193" 253 In addition, SAN observes that CE has overstated the ca~c again (on page 8, paragraph X, item B, FUR Letter) in saying that "Al has not accepted Article 34 (Warranty) ... as set forth by the SelLer." Although the CE statement is strictly true, the fact is that Al accepted warranty provisiofts that differ from those set forth by GE only by the specification of an additional condition (based upon named development work and testing being performed as is currently contemplated) and by taking the position that a 4 hour (vs. 100 hour as agreed upon by FWEC) steady state performance test at 100% load, with data extrapolation, should suffice to demonstrate that the units Eeet performance requirements. Although SAN shares CE's concern regarding the inclusion of such an additional condition and limitat~on in the warranty provisions, SAN does not believe that their inclusion destroys the real merit of the warranty (the principle of confidence in quality of performance, as discussed above), particularly in view of the many other conditions, exclusions, and limitations already contained in the warranty provisions "as set forth by the Seller." Furthermore, SAN notes that CE `has neglected to point out, in PURG~0003, .that the warranty provisions proposed by Al differ from those pro. posed by FWEC in terms of maximum liability. As described above, FW~C's maximum liability is limited to 1/3 of the contract price ($4,557,994), Al's proposed warranty provisions establish a maximum liability of $l0,000,00G. 89-405 O-82---17 PAGENO="0194" 255 Additional concerns regarding the use of a fixed price basis for the plant unit subcontract, including the potential for contract changes, arc discussed in the body of our memorandum and in Attachment 1 (see item 4, pertaining to inordinately high profit and contingencies). The advantage of redetermination included in the proposed fixed price subcontract may not be as beneficial as it appears since the redeter.~ miriation would be based on the cost of the prototype. The prototype is being manufactured under a CPIF contract in which the Overrun share is 90/10. As a result, the redetermination could be a dis~ advantage, since VWEC would lose only 10 cents for every dollar of overrun as the prototype cost goes up, but would gain dollar for dollar on the plant units. Therefore, the tradeoff on incentive could be to increase costs on the prototype to establish ~ better position on the plant units. Having concluded that a fixed price contract is not desirable, SAN has considered alternative contract types, including cost plus fixed fee, cost plus award fee, and cost plus incentive fee. Of these three, it is SAN's opinion that,cost plus incentive fee is the best subcontract form for the plant units, because it recognizes the cost uncertainties discussed above, but provides an incentive to control costs on the part of both the supplier and the customer. In addition,the use of CPIF subcontracts for both the prototype nd plant units could eliminate the need for GE's alternative basis of contracting (i.e., the shifting of certain support functions from the plant units subcontract to the prototype subcontract). While it is acknowledged that the use of a CPIP subcontract for the plant units was initially recoessended by GE in their preprocurement plan for the CRBRP steam generators and that it was at SAN's direction that the Rfl requested a fixed price proposal, SAN is nov of the opinion that CPIF is the more appropriate means of subcontracting for the plant units. Thereforo, SAN recommends that GE be instructed to negotiate the subcontract for the plant units on a CPIF basis, similar to the sub- contract negotiated with Al for the prototype (i.e., total incentive with negative fee provisions). PAGENO="0195" 256 UNITED STATES ENERGY RESEARCH AND DEVELOPMENI ADMINiSTRATION 5AN FRANCISCOOPERATIONS OFFICE 1333 BROADWAY OAKLAND, CALIFORNIA 94612 cRZRP 10-9.3 MAY 23 1975' Robert F. Bauer Manager, chicago Operations Office SAN EVAL~ATI0N CT ARD RZCO)DIZNDtTION FOR SU3~)NTRACT AWARD FOR CR332 STEI4'l GEEEATCRS - P~RG-0003 References: (1) Letter, GE (Key) to ARD (3accbi), "Procurement Reconmendation for the CZ~BRP Sodim Eaated Steam Generators - PURG-0Q03", GE-JARD-D392- 73-414, dated April 25, 1973. * (2) Memo, SAN (Reardon) to CM (Bauer), "SAN Evaluation of GE Recommendation for Subcontract Award for CRBRP Steam Generators' - PURG-0003", dated Nay 2, 1975. (3) Letter, LED (Seeks) to DPO (Mravca), "cRBRP; Contracts E(l1-1)-2395, 49-18-12-3, Proposed Contracts 54-7A0-12908, Request for Approval on Sodium Seated Steam Generatots, PURG-0003", WR40712, dated May 13, 1975. By Reference (1), GE recommended award of subcontracts to Foster Wheeler Energy Corporation (TWEC) for CR337 prototype and plant unit steam generators. By Reference (2), SAN provided the results of its evaluation of the Reference (1) recccinendation, and recommended that Atcmics International Division of Rockwell International Corporation (Al) be selected for ne;otiation of the subcontracts. By Referen:e (3), LED provided its endorsement of the Reference (1) reccmmendaticn by GE, and reccmmended approval of the selection ofF~EC as the CR332 steam generator supplier. The purpose of this inenorandum is to convey the results of SAN's evaluation of the data presented by ARD in Reference (3). Ia general, it is our opinion that the infcxmation contained in Reference (3) either is not relevant to the issue of steam generator supplier selection, or it provLdes no basis for SAN to alter the results of our previo,*s evaluation of PURG-0003, provided in Reference (2). The detailid'SAN evaluation of Reference (3) is provided in the - Enclosure to this ammorandum. As a result, SAN reiterates the Reference (2) recommendation that LI be selected for negotiation of the subcontracts for Ocnpletion of design and fabrication of the CRERP prototype and plant unit steam generators. P1eas~ ft `itee to call upon me or members of my staff to provide ,,any ~r~.ssistance you may desire. J2 ~ D. E. Reardon Acting Manager, SAN Enclosure: As stated.~j:~..,~ cc: T. L.~Nemzek, RED T. E. Murley, RED (ATTENTION: .7. 1. Longene~ker)Z A. E. Nravca, DPO PAGENO="0196" 257 ENCLOSURE SAN Evaluation of ARI) Recommendation ~ojubcontractAvard for CRER? Steam Cenerators In Reference (3) ARD concluded, on the basis of the data provided by CE in Reference (1) and the discussions presented by ARD in Attachment 1 to Reference (3), that approval of CE's seleàtion of FWEC as ~RBRP steam generator supplier would be in the best in~ terest of the CRBRP pro ect. SAN has already provided, in Reference (2), our evaluation of Reference (1). ThIs Enclosure contains the results of our evaluation of Attachment 1 to Reference (3), where ARD discusses the following topics: 1) concerns regarding the delivery schedule; 2) the validity of the cost/price difference between the vendors; 3) the desirability of including plant support activities in the prototype contract; 4) the acceptability of assigning final design and fabrication responsibility to a vendor different from the one who originated the conceptual design; and 5) the impact of the procurement action upon the o~erali L}~BR national program. 1. concerns Regardlng the Delivery Schedule * ARD addresses, in this section of Attachment 1 to Reference (3), * three ~lenents related to delivery schedule. SAN's evaluation of ARD's discussion of each of the three elements is provided below. a. Ass~qqptionson tubin deItve~yjigpiicft in the ~proposals. ARD notes that the Al need date for prototype tubing was identified by At in its propos&l.to be January 1976, whereas the YWEC need date was stated to be August 1976. For the plant unit tubing, Al identified a need date of June 1976, and FWEC stated a need date of March 1977. In view of the difficulties which have been encountered to date in obtain' .ing timely delivery of tubing, ARD concludes that the "over. all situation weighs in favor of awarding the contract to F~EC." SAN does not co~cur with the ARD conclusion. As is noted by ARD, each vendor was instructed to bid on the basis that the tubing material would be available when needed by its manufacturing plan. SAN is not aware that any revised instructions have been is;ued to the vendors indicating that manufacturing plans should be modified to accommodate late tubing delivery. Consequently, the ARD conclusion èay be incorrect, since it is possible that each vendor c\puld revise its manufacturing plan to account for late PAGENO="0197" 258 tubing delivery, and Al might be able to do so more easily than TWEC. In any event, the evaluation and selectior( criteria did not include a consideration of the effect of tubing delivery dates on steam generator delivery schedules, and to develop new selection criteria of that type.nov, after receipt of final offers, would not be consistent with good procurement practices. Consequently, it is SAN's opinion that the issue of tubing delivery dates is not relevant to the question of steam generator supplier selection. b. Ability o~ the vendors to provide mmanufacturint facilities on tine. The intent of this section of the ARD discussion is not clear. A~D presents more than a page of text des~ cribing concerns related to FWEC facilitization plans, which require a 27,000 square foot expansion of TWEC floor space, on a tight schedule, with inherent risks. Only four lines of text are provided to describe potential problems related to At facilities, an4 ARD concludes.that "adequate time should be available to accomplish the required tasks." Consequently, it appears that the ARD discussion provides no new informationrelevant to the question of steam generator supplier selection. c. Potential machine load~n' and priority conflicts atFWEC between IHX and steam cenerator subcc~ntracts. ARD's dis. cussion of potential machine ~oading conflicts at PWEC between the IRX and steam generator subcontracts results in the conclusion that it is "reasonable to support the FWEC claim that serious machine conflicts will not delay the component schedules." Since GE arrived at the same conclusion in Reference (1), and since no such potential machine loading conflicts exist at At, the ARD discussion adds no new relevant or substantial information pertaining to the question of supplier selection. 2. Validity of CostlPrice Difference Between At~nd~~ç. In the first paragraph of thts section of Attachment 1 to Reference (3), ARD st~tes that "since the manhour estimates for the job (prototype contract) are in reasonable agreement, * deviations *.. can reasonably be expected to be the same for either vendor." SAN does not concur with the ARD logic that results in the conclusion that ultimate actual cost incurred on the CPIF contract will be the same for Al and TWEC simply because the proposed cost estfmatgp. are in reasonable agree~ ment, so that it is SAN's iudgmcnt th3t the detailed prototype manhour and cost estimate comparisons provided by ARD in Table 1 PAGENO="0198" 259 and Table 2 of Attachment 1 to Reference (3) are not rp1e'~ar~t to the questt~n of steam generator supplier selection, It is SAN's c'pinion that actual prototype ~ ~ costs will prove to be much more dependent on factors discussed in Reference (2), which included: 1) understanding of the design concept (developed by AT~; 2) willingness to accept the design without changes; 3) previous experience with manufacturing of thc dtsign concept (which At possesses as a result of MSG experience); 4) the relationship between cost experience on the prototype and the redeterminable downward aspects of the plant unit contract cost (discussed in Attachment 4 to Reference (2)); and 5) the number, type, and magnitude of expected change orders. As discussed indepth in Reference (2), SAN is of the opinion that consideration of such factors strongly favors selection of LI as the CRBRP steam generator supplier. 3, Inclusion of Plant_UnitSupoort Activities in the Prototy~pe Subcontract. This section of Attachment 1 to Reference (3) provides a discussion of the "PS? basis" and "alternate basis" of accounting for certain aspects of plant unit engineering, program management, and support servi~es. The "alternate basis" involves charging the selected plant unit activities to the CPIF prototype subcontract. Such considerations are no: relevant to the question of steam generator supplier selection. It should be noted, however, that acceptance of the Reference (2) SAN recommendation that the plane unit subcontract be negotiated on a CPU' basis instead of PP wilt result in elimination of the need to charge costs on the "alternate basis", since costs for both prototype and plant units would then be paid on a CPIP basis, and the obvious contingencies included in the plant unit fixed price (cited by ARD in the Reference (3) discussion of this sub lect) are eliminated. 4. Precedence for Assignnent ofj'inal Desien/Fabrication toaVendor Different from the One Deve1nDjn~the Conce~ua1 Design. In this section of Attachment 1 to Reference (3), ARD presents an analysis of the risks associated with "introducing delivery delays and/or costly changes to the desi%n through changing the detign responsibility to another vendor" (i.e., assigning responsibility for the At design concept to FWEC). ARD attempts PAGENO="0199" 261 d. ARD cites PWEC's "available and proven fabrication processes" but neglects to point out that the basic processes.required for CRBRP steam generator fabrication have already been developed by Al as a result of the MSG and 1~ydraulic Test * Model efforts. As discussed by SAN in Reference (2), con~ * sideration of such directly applicable and nontransferable * experience favors selection of At as the CRBRP steam generator supplier. 5. Potentisl Inoact of this Procurement Doom t~h~Overall L~FBR Pro~grani. ARD's reasons for providing the discussion contained in this lection of Attachment 1 to Reference (3) are not obvious, since national L~BR program objectives are store appropriately con~ sidered by RRD than by ARD as CRSRP Lead Reactor Manufacturer. Furthermore, ARD states in Reference (3) that Attachment 1 provides the basis for ARD's conclusion that selection of F~~EC "is in the best interest of the CRBRP project", and consideration of overall L)~'BR program objectives is outside of the scope of the "best interest of the cRBRP project." Although such eon~iderations are also outside the scope of SAN'; evaluation of CRBRP steam generatot suppliers, SAN simply does not concur with ARD's opinion that the national LMFBR program objectives, which include establishment of a viable industry skilled in the manufacturing of large U!F3R heat exchangers, "can be discounted in deference to the shorter term CRBR? project interest." PAGENO="0200" 262 UNITED STATES ~tftKuY ~ ~ ;EVZLD;;~z;~T A4:;Tr:~: CHICAGO OPERATIONS OFFICE $$OD SOUTH CASS AVENUE ARGONNE, ILLINOIS ~O433 MAY 27 ~ ~ rev~i~~~ J. I.. Smith, Director * Division of Procurement, HQ RECOMMENDATION FOR CONTRACT AWARD FOR CRBRP SODIUM HEATED STEAM GENERATORS Enclosed for your information are three copies of D.* E. Reardon's memorandum of May 2, 1975. in which he recommends the selection of Atomics International Division of Rockwell International Corporation (Al) for final design and fabrication of the prototype and fabrication of ten (10) Plant Steam Generators. (Complete copies of the GE submission (PURG'-0003) are available at 3RD.) We are also enclosing three copies of Westinghouse's letter of May 13, 1975, requesting approval of the GE recommendation of Poster Wheeler and three copies of Mr. Reardon's memorandum of May 23, 1975, which contains SAN's evaluation of the Westinghouse recommendation and in which Mr~ Reardon reiterates his recommendation of May 2, 1975. In the iinpl'cientation of the arrangement in which SAN was designated to perform ~.he ERDA Field Office review of CRBRP prccurements originated by GE and Al, Mr. Reardon and I have agreed that* I would accept his recommendation on these procurements. Accordingly, I recommend approval of the procurement, subject to satisfactory resolution of issues detailed in Attachment 4 to Mr. Reardon's memorandum with respect to the type of subcontract to be employed (fixed, price versus cPIF). ~#~~$anager / Enclosures: (1 1. D. E. Reardon's memos, dated 5/2/75 and 5/23/75 (3) 2. Wescing~.usc letter, dated 5/13/75 (3) cc: D. E. Reardon, Acting Manager, SAN, yb enc].s. ~tUTIO,~, ?. E. Murley, Acting Director, for CRSRP ~ 4~. Project, RRD~flQ, w/o ends. PAGENO="0201" 263 UNITED STATES ENERGY RESEARCH AND DEVELOPMENT ADMINISTRATION CHICAGO OPEU.TIDNS OFFICE $100 SOUTH CAtS AVENUE ARGONNE, ILUNOIS 1043$ MAY 2? ~ J. L. S~.tth, Director Division of Procurec*nt, EQ R~~A?IO~I FOR ~TRACT 7~ThS~D TOn CIC~PP SODIUM EZATED S?L7.M I~nc1oead for your infornation are three co~Les of D. H. Beardon' s ge~oren~ba~ of ?4ey 2~ lt)75, in wi~ich ho reoo~~an3a the selection of Ato~ics Intcrnational Divieion of nockvefl International Corporation * (!~I) for final denign an~ fabrication of the prothty~e eM fabrication of ton (10) Plant 3tcan Generators. (Co~1eto copies of tha ~ suIc~ission (PU~ 0003) are available at flP~D.) Vs axe alto cnclo~ing three cotdos of Woattn9house'B letter of !tay 13, 1975. re~uostin~ a~rova1 of thc ~ rccc~ene.ation of Foztur W~teeler ~.rri three copies o~ ?~r. Pcaracn's oran~hv~ of r.ay 23, 1973, which contains t.~~'s evaluation of the Wcst1n~house reearron~fation aM in which nr. Renr~on reiterates his recorrs~rdaUon of flay 2, 1075. I~ the lenentation of the arrangenont in which SA"~ w~ designated to ~`orforn tho tr.~A }`1o34 OffIce review of C~1RP Drocurc~cnts oriç'inat'3'3 by CS and Z~I, fir * icnr~'on and I have a~reod that I would acco~t lii~ roco=e.'tdation On t~ese 5xOcurc!aeflts. cor~iin~j1y, I reco~rmer.d a~proval of the procurement, nub3ect to satitifactory rezolutic'n of incuas datailci in Attacir~cnt 4 to Sir. Raar~on `5 crand~rs with respect to the type of subcontract to be .nployed (firM irico versus cs'rn. Pobert H. 3auer~ Manager Enclosures: . a * ~ piant Componenta BraDCb4 1. D. L. ~eardon's nocos, dated 5/2/73 and 5/23/75 (3) 2. Mastinghouso letter, dated f./13175 (~S) cc: 0. H. Peardon, ~cUng flanager, f~1* v/c ends. ~ Rptin~ircctnr~forJ"~P- *t ~ PAGENO="0202" 265 The steam generator modules are major developmental and schedule critical components for CRBRP. A prototype unit will first be designed,, fabricated, and tested to verify the reliability of the current design cOncept. ~ Design and manufacturing conllexities of the~sc components, including-an estimated fabrication span of some 24 months, dictate that prototype development proceed as rapidly as possible to assure timely delivery of the follow on CRDRP plant units. General Electric (GE), under its contract with Westinghouse Advanced Reactors Division (AND), is responsible for the procurement of the steam generator modules. The San Prancisco Operations Office (SAN) provides ERDA field office surveillance of Ct's procurement activities in support of CRBRP. In early 1974 the "hockey stick" design concept, which had been developed and tested by AX, was selected as the reference for the CItBRI'. Subsequent to this decision, on May 31, 1974, Al submitted an unsolicited proposal for design and fabrication of prototype and plant unit steam generators. At the time Al's unsolicited proposal was received, it was the view of AEC management that competition -should be sought for this procurement in an attempt to obtain the lowest possible price. Therefore, Al's initial bid was rejected and AND and CE were directed to solicit competitive' pro-' posals. Subsaquently, fixed price proposals were requested from Al, Babcock and Wilcox, Conbustion Engineering, Poster Wheeler Energy Corpor-' ation (FWEC) and Westinghouse in July 1974. The only proposals received were from Al and FWEC, neither of which was totally responsive to the RPP. After extensive negotiation, the final prices excluding materials were as follows: - Price Subcontra~ Contract Typ~e )VEC Al Prototype CPIF $ 6.7)! $ 9.0)1 Plant Units Fixed Price $13.7)! $],7.4M * $20.4)4 $26.'IoM ~s. i~.iM. It is currently estimated that materials will add some $8-'lO million to the total cost. The initial CE fair cost estimate tot the prototypes mad plant units totiled $11.7 million excluding materials. Subsequent to the receipt of bids, CE adjusted this estimate upward to $16.1 million. PAGENO="0203" Discussion: 266 After the release of the RIP and coincident with the evaluation of the steam generator proposals by the Project, a reassessment of our approach to procurement of critical major CRZRP cotnpon'ents was concluded. The primary result was a determination that it vu in the best interests of the Project that certain major components should be directed procurements rather than competitively bid. Consistent with that conclusion, IWEC was 0 selected on a directed basis to design and fabricate the CRBB.P Inter.~ mediate Beat Exchanger (IRX). Had the reassessment of our procurement approach been concluded before the steam generator procurement was initiated, it too would also have been a directed procurement. The overconcentration of major plant hardware with one vendor, such as would result if FWEC were selected for both the IHX end steam generator, is simply inconsistent with the overall objective of establishing a viab]i industry base for the supply of L~IPBR components. GE, in evaluating the competitive proposals for the steam generators, concluded that Al and FFEC were both qualified from a technical stand- point as steam generator supplier,s and they recomsended award to IWEC, based primarily on differences in proposed prices. AID concurred with the CE recoiendation. SAN, acting as the contracting office, reviewed the GE recommendation, and concluded that: 1. Considering that Al has developed the reference design concept and has built and successfully tested a unit of smaller dimensions than required for CRBRP, it would be most logical to have At design and fabric8te the CR.BRP steam generators. 2. The wide disparity between the Al and IWEC bids, and the CE fair cost estimate, indicated that selection of a vendor on price alone would be unwise, and 3. The relative immaturity of the preliminary CRBRP design is indicative that a cost plus incentive fee type subcontract would be more appropriate under the circumstances than the fixed price subcontract recommended by GE for the plant units. SAN's complete analysis of the CE recommendation is enclosed. After intensive study of recommendations from the cognizant Reactor Manufacturers and the field contracting office, I am persuaded that subcontracts for the prototype and plant unit steam generators which are among the mast critical components in the CRUR? should be directed to LI for the following reasons: PAGENO="0204" 267 A. A viable component vendor base for LP~DR components must be estab.' 3.ished. Overconcentration at FWEC or any other vendor is high].y ,.mdesiroble from a prograumatic standpoint. AX has stated a willingness at this time to commit corporate f~mds to constructing the manufacturing facilities necessary fo,r this contract. If this offer is rejected, it is uncertain if Al vii]. reextend the offer to the L~ffBR program at sister date. B. The base of previous experience must be maintained mutil such time as the volume of UIFBR work allows wide industry participation. In the last five years, only Al has designed, built (at their awn expense) and tested a sodium steam generator in this coumtry. Similarly, FWEC has designed and built the only large ThX. Other potential suppliers of large beat exchangers have only yater reactor, gas co lad reactor or non~'nuclear experience. Dotr ~.a.t £uwuç~4 ~ 1~ cosvwui*~e~ o~4~Lsco~~at ~a L4&à1L~ 1~V~MO~A C. Experience supports the' fact that final design and fabrication of £44 P~. major de4olopmental items, such as the steam ~en5rator, by the party who developed the design concept and preliminary design is must conducive to timely and successful contract performance.' Considering recent steam generator problems experienced by the Bussians and British, it is apparent that success of the steam generator contract will be a key factor Sn the success of CRBRP. The views of the Controller and Director, Division of Procurement have been communicated to me and were* carefully considered in my evaluation of this procurement. Formal comments, transmitted to me by the Director, Division of Procurement, are enclosed for `information. Zn s*sary, I believe quite strongly that both the technical and program~ marie aspects of this procurement dictate placement of this subcontract with LI and I plan, to proceed with this action. As with previous CRDRP contracts, I have instructed my staff to give particular attention to assuring that the proposed subeontracts contain provisions (phased fumding~ flexibility in adjusting schedule milestones, etc.) which will accoisnodate the recently identified, rearrangement of Project activities. ~ciosures: 1. Malysis of CE recommendation 2. Co~ts from Procurement Prepared by: EBB: T. A. Wemz.k/bsc: 9733773: `8/21/75 PAGENO="0205" 269 o A! was selected because: - The hockey-stick design concept selected for the CRBRP was developed by Al offering advantages to the Govermsent through Al's existing~ expertise on this concept. A! designed, manufactured, and successfully tested a 30 MW version of the concept. Al possessed directly applicable experience in relevant technical areas such as sodlian chemistry, high temperature design, high tech- nology component design, and fabrication. - Al offered advantages related to steam generator testing. o It was concluded that Al's strengths offered significant advantages in terms of schedule, quality of design, and ultimate cost. o The bids rece ved contained numerous contingencies. It was recognized that numerous technical uncertainties existed. ~1xed-pr1ce contracting was not used because of the highly developmental nature of the component and concern that It might result in a higher cost to the program. o ERDA agreed with the SAN recommendation that the steam generators be procured from A! on a Cost Plus Incentive Fee basis as most beneficial to the Govermnent and cheapest. 89-405 O-82---18 PAGENO="0206" 27]. Congressional Approval Source: Nashville Tennessean, July 2, 1981 (By Ed Gregory) Allegation: Back in those days, no contract went through ERDA without the approval of certain members of Congress, who, It appears, were Interested In protecting the Interest of Atomics International ~N Stockton said. Response: There was no requirement for Congress or any member of Congress to approve Clinch River Breeder Reactor Plant contracts. The Deparbnent of Energy Is not aware of any basis for this allegation. The steam generator contract was awarded to Atomics International based on an extensive and detailed review by ERDA. This review concluded that award of this subcontract to Al offered significant advantages to the Goverrinent in terms of schedule, quality of design, and ultimate cost. PAGENO="0207" 272 Appendix 7 Issue 718 Alloy Contents Tab Tftle i Discussion 2 Abstract from White House `Technological Turkey' Paper 3 March 16, 1981, letter from James Hunter to Caffey, Bauer, Williams, Hart, and LaGrone, "Materials and Structures Program--Mechanical Properties Design Data, Alloy 718 Program Review Meeting.' 4 Technical details of March 31, 1981, meeting 5 April 8, 1981 letter from James Hunter to Caffey, Bauer, Williams, Hart, and LaGrone, "Materials and Structures Program--Mechanical Properties Desi~n Data, Alloy 718 Program Review Meeting. PAGENO="0208" 273 Discussion An issue brought up by the previous Administration concerned the suitability of using mechanical fasteners in the CRBRP upper internals structure. This was raised in the previous Administration's Technical Turkey Paper, and was not agreed with by the DOE Technical Staff. The CRBRP upper internals structure operates at high temperature and is subjected to high cycle fatigue conditions due to the mixing of sodii~ streams at different temperatures above the core. Alloy 718 has been chosen as the structural material because of its superior fatigue resistance over more conventional materials such as type 316 stainless steel. However, in the thicknesses needed, Alloy 718 exhibits poor weldability and thus structures fabricated of this alloy require the use of mechanical joints and fasteners. No better material or fabrication method has been identified for this application. Thus, the use of Alloy 718 for the upper internals structure represents the current state of the art. There have been studies on an alternate heat trea~ent for this alloy aimed at improving its weldability, but recent data show that this heat trea~nent degrades fatigue resistance, thereby reducing its usefulness in applications such as the upper internals structure. All data and tests indicate that mechanical joints and fasteners can be used for the CRBRP upper internals structure. The technical experts agree that this is not a design problem. It is expected that Alloy 718 can be satisfactorily used for the CRBRP upper internals structure. However, more data on Alloy 718 Is being developed. The design analysis of the CRBRP upper internals structure currently in progress is utilizing this data and information to demonstrate the adequacy of this component. PAGENO="0209" 274 THE CLINCH RIVER BREEDER REACTOR PROJECT AN END TO THE IMPASSE MayII,1979 A WHITE PAPER PREPARED FOR THE CONGRESS PAGENO="0210" 275 III~4 CRER Design vs. R&D Prog~arn Advances Xn addition to plant design changes resulting from the licensing process, the state of the art in plant, component, and systems design has undergone rapid change. Since the CRBR design concept was frozen in the early 1970's, continual management assessment was required to balance the desire for improvements and the effect on escalating costs and tight schedules. Some examples are: o Complex Design of Reactor Vessel Upper Internals: Due to expected severe thermal transient conditions at the core outlet, it was recognized that austenitic stainless steel, a common construction material, would not have adequate fatigue resistance for certain parts of the upper internal Structure. Alloy 718, a material with better fatigue properties, was selected for these parts. Alloy 718 had to be used in a ~heat-'treat" condition which is not suitable for welding, since the material properties data needed for design analysis were lacking on Alloy 718 with alternate heat treatment luitable for welding. As a result, the design is complicated by the need to use various types of mechanical fasteners instead of welds. Welded construction would permit a less complex design at lower cost. A technical program is in progress to obtain supplementary materials data on Alloy 718. PAGENO="0211" 277 MEETING AGENDA March 31, 1981 Mechanical Properties Design Data (Alloy 7181 Time I. introduction C. Beds (DOE) 0830 II. Objectives: C. Beds (DOE) 0835 o Review of the current status of the mechanical properties testing program for.Afloy 718 o Review of methods for data evaluation and development of mathematical and graphical representations o Discussion of follow~on work III. Review of Agenda Items C. Beals (DOE) 0840 IV. Alloy 718 Development Program Status Review 1. Conventional Heat Treat Material Tests G. Korth (INEL) 0850 tensile, creep.rupture, fatigue, aging 2. INEL Heat Treat Material Tests G. Kov~th' (INEL) 0920 tensile, creep~rupture, fatigue, aging, (base metal and weld metal) 3. Status of ASME Code Case G. Korth (INEL) 0950 BREAK 4. Sodium effects on base' material and weld W. Ray (WARD) 1030 material properties 5. Creep effects on crack propagation, fracture D. Michel (NRL) 1100 toughness LUNCH 1130 1230 V. Comparison of hi~h cycle fatIgue properties of G. korth (TNEL) 1230 1~pe 316 Stainless Steel and Afloy 718 base material given the conventional and INEL f~eat treatments and weld metal givefl the ~NELThi1~ treatment including grain size effec~ PAGENO="0212" 278 VI. Stress Rupture Properties, t~àTuat1on afld Interpretation iUthe Data 1. Reactor Structure Requirements for P. Falk (WARD) 1300 Stress Rupture Design Curves end Present Approach (NSMH) 2. ASME Code Practice In the Development A. Snow (WARD) 1330 of $47 Stress Rupture Design Curves 3. Booker Design Curve Development N. Booker (ORNL) 1350 * Description of data base: heats, heat treatments, aging, grain size * DevelopmerYt of curve representing mean of data * Development of minimum (Design) curve * Comparison of mean and minimum curves to actual data 4. Discussion of Results General 1450 * Comparison of Booker, NSMH, P1~47 and Discussion curve based upon Code practice using Booker data base VII. Discussion 1530 VIII. Agreements and Coiunitments 1630 PAGENO="0213" 279 ALLC~ 118 )~ECRANICAL PROPERTIES DESIGN D~Th PROGRAM REVIEW MEETIN3 O~ MARCH 31, 1981 Th~. sub)ect program review was held St DOE, Germantown on Mav~b 31, 1981. The meeting was attended by DOE MS/LWR, CikR?.P/P0, WARD, Naval Research Laboratory, XNEL, GE..AASt, anti the Materials and Structures Technical Management Center. Met.'..~ngs of this sort are held aimually in July and August of cieoh year. W~Akb re~usted this particular program review cneeting to be held ear1y~to optimize the benefit to MD deciçners (upper internals struoture), the principal users of thc. data at this time. T:ic fo11ow~.n~, objectives of the meeting are takon fro~i the m~tir.g agenda: C) Roview the current status of the mechanical properties testin; program for Alloy 718. o Re"ie~ the methods for data evaluation ard development o~ mathomat~al an~ graphical repreae~ttatjons. 0 Di8ct.asion of follew-on work. `jne second ob~,octivc wa~ the ucst t~inely for ARD to utilize the iateat available d&t~. Tho piinciple discussions revolved n:oa~d determining the "righi.' dependent vilriable of atress~ it ptu~~ curves, Prom s. pure:.y statistical point of view, life should be taken as the dependent variah1~, bui es flotet9 by ti~e design~:ro at the meeting, life as a depen~e~it variable resuit~, in aJ~.x.irnun atress-rupture ct~rve sig~itic~nt1y ~ver~onserv~,tjvc in some portions of the curve, whoteas, i~ ctres~ is taken es the dependent variable, the minimum Curve ~c11o~~~ tbs dati~ much more cloiely. !I'his appears to be ap~r~p:iate basod on the conaisten~y of the data, It was g~nerai1y concluded that wh~.le a "itatistical" best fit is mttI~ematically correCt, to achieve mea~ingfu,, rea1i~tic standa~'i errors on life, more data need to be generated in ot.~tai.~ portio~ui of the curve. ~RZ baa and will cOntinue to `ir~ e'o~ervatjve design rules in design of tht~ CR~RX' core *pnr1r~anent structures. This iB in addition to ARD's use of 1~ to mitigate the e~tects of thermal striping - ef foot uot ac~ountea for in other u.s. and foreign I~4PBR designs. r sub~ect~ sjj(:~ as fatiguc crack propagation, time ard ~c]~ fraction dainoge law, and tl'e effect of surface oc~ndition~,./ a~ains on life supported the MD app~oech to the UXS design. It was also agroed that data on Alloy 718 are still sparse and that much more data need to be generated to reduce o,?roonselrvatiam and cost. PAGENO="0214" 281 Meeting Report Subject: Alloy 718 Program Review Date and Place: March 31, 1981 Germantown, Maryland Attendees: (See Attached List) Ajreements: (See Attached List) Discussion: A meeting was held at the Department of Energy, Germantown, Maryland, among representatives of MS/LWR, CRBRP/PO, WARD, MSTMC, NRL, ORNL, INEL, and GE-ARSD on March 31, 1981. The objectives of the meeting were to review the current status of the mechanical properties testing program on Alloy 718, to review the methods for data evaluation and development of mathematical and graphical representation, and to conduct a discussion of the follow~~on work. The high- lights of the meeting are as follows: The speakers presented viewgraphs and handed out copies of their presentations to the meeting attendees. The volume of these handouts is sufficiently large to preclude attaching the handouts to this report. Each meeting attendee was provided copies of the handouts. Considerable time was spent discussing the interrelation of the various Alloy 718 materials properties that are being measured on the program and the comparison of this data to that data delineated in the Nuclear Systems Materials Handbook (NSMH). It was recognized that the Alloy 718 properties In the NSMH were extracted from the available literature several years ago. In some instances, the Alloy 718 data being generated on the program tends to indicate properties which are degraded from those predicted by the NSMH. The Agreements of the meeting address areas where additiopal Alloy 718 data is needed and/or areas where revision is needed in the development of mathe- matical and graphical data representations. Consideration will be given to implementing the Agreements of this meeting on the Alloy 718 Mechanical Properties Program on as expeditious a schedule as permitted by available funding. 2 Attachments PAGENO="0215" 282 ATTENDANCE Attachment 1 Alloy 718 Mechan~ca1 Prop~erties Meetij~g March 31, 1981 Nane Claude Beals Chuck Brinkman Bill Pennell Wil1ian~ E. Ray Chuck Schnidt M. K. Booker .Iin~ Horak Vic Storhok Dave Michel A. W. Dalcher A. L. Snow P. T. Falk D. ~. Hornstra D. B. Peters Gary Korth .~. R. Hunter C. M. Purdy C. C. Bigelow Or~ani zat ion MS/LWR ORNL WARD WARD GE~ARSD OR!~L MST.MC EG&G Idaho NRL GE-ARSD WARD WARD ~RBRP/PO CRBRP/PO INEL MS/LWPS MS/LW? MS/LW? Telc--~c~c ?TS 23~-4329 FTS 624-54CiC 412-72»=-529~ 412~722-5512 4C8-92-~54~ FTS 624-5]1~ FTS 624-5175 p:'s 583-81~5 202-7C7-2C21 4O8~-738-74E4 412-722-5518 412-722-S45~ FTS 626-6110 FTS 626-6152 FTS 583-0346 FTS 233-5233 FTS 233-5234 FTS 233-429~ PAGENO="0216" 283 Attachment 2 March 31, 1981 M]I~ ilk Meetin~ Air~eements I. The data base involved in the ORNL analysis of creep rupture data for Alloy 718 included four especially weak heats that were apparently small experimental heats (`vlO ibs). It was agreed that ORNL will reevaluate the data base excluding these four heats and propose revised stress-rupture design curves based on the modified data base. These curves will be submitted to all of the organizations present at this meeting by May 15, 1981 (CRBRP Request). 2. It was recommended that the Code package be amplified to include a study of the factors appropriate for deriving the fatigue design curve from the fatigue failure curve, i.e., the factors of 2 and 20. 3. It was recommended that additional test data for forged bars should be generated to provide verification of th? stress-rupture design curves for this category of material. In particular, these tests should be concentrated so as to define the behavior of this category 0f material In the region where the stress-rupture curves develop sharp slopes, presumably due to overaging. It was concluded that a number of creep-rupture tests0should be started with failure times inexcess of 20,000h at 649 C (1200 F) to fully characterize the apparent metallurgical overaging. 4. It was recommended that additional creep and rupture data should be generated in the temperature regime from 427~482 C (800-900 F) so as to provide an Improved basis for the stPess-rupture design curves in this regime. 5. It was recommended that an evaluation should be made of the applica- bility of the time and cycle fraction damage law to Alloy 718. Further, that a damage law accounting for creep and fatigue damage be est*blished if simple time and cycle fraction summation is not appropriate. 6. WARD stated that their current design approach Is sucP to preclude the onset of both fatigue and creep crack propagation. The data from ongoing programs presented at this meeting supports this approach. 7. It Is recommended that added emphasis be placed on the point that present Inconel 718 components are subjected to surface (as contrasted with full cross-section) strains which are thermally induced. Therefore, testing of specimens with prototypic, sodium-corroded surfaces under conditions of thermally-induced strain Is needed to clarify prototypic crack initiation! propogation kinetics as well as the significance of surface finish. 8. It was recomended that methods be developed In fatigue testing In the high cycle fatigue region in air that would allow emphasis on characterization of surface phenomena, i.e., surface finish, tensile mean stress, etc. Results presented at this meeting suggested that high cycle fatigue testing of simple uniaxial 0.25" dia bars may not fully account for surface related phenomena. Thin wall specimens of only several grain sizes in thickmess should be avoided. PAGENO="0217" 284 9. It was recornended that INEL reevaluate the available uniaxial strain and load controlled fatigue data so as to effect a separation of load .~nd strain controlled data. It appears that since thermal striping is a strain controlled phenomena that some design advantage can be gained by making this separation. An attempt should be made to extrapolate the strain controlled data, with the help of F. Snow, out Into the high cycle region. The results of this analysis should be included In the currept fatigue analysis for the NSMH. INEL will also consider running additional high cycle strain controlled fatigue tests. 10. It is recomended that methods be developed so that creep and fatigue data obtained by thermally aging specimens at zero stress and then mechanically testing can be related to information obtained through extended duration mechanical testing at the temperature of concern. 11. It was strongly recomended that an effort be made via our foreign exchange activity to obtain experience from the U.K. on operating experience in PFR regarding thermal striping. 12. It is recommended that a target date for transmittal of a completed Code package to the ASME be established. Some of the evaluations which are not yet complete are: aging limits, time~temperature limits below which creep effects need not be considered in design, an evaluation of the stress rupture and fatigue notch sensitivity, design procedures for less than maximum mean stress effects in fatigue, toughness limits, and local rupture limits. The incomplete items should be identified and scheduled for completion, consistent with the target end date. The complete Code package should be transmitted to this meeting's attendees for comment prior to transmittal to the ASME. P. T. Falk William E. Ray Gary E. Korth Claude C. Beal.s C. R. Brinkman PAGENO="0218" 285 Appendix 8 Issue Site Selection and Licensing Co tents Tab T1~e 1 Discussion 2 Letter Dircks, NRC, to Howard, GAO, dated June 25, 1981. Response to Schneider questions on CRBRP cost and schedule asSociated with licensing 3 Letter Dillon, DOE, to Howard, GAO, dated June 24, 1981. Response to Schneider questions 4 Letter Peach, GAO, to Schneider, House of Representatives, dated June 26, 1981, subject: Updated cost information contained in previous GAO report on specific aspects of CRBRP Project 89-405 O-82----19 PAGENO="0219" 287 to permit the resumption of the hearings in an effective and timely manner. The Project has evaluated the NRC documents rule and regulation changes for nuclear reactors since then and has modified its design to keep current with the changes, as appropriate. NRC has been kept informed of these changes by amendments to the Preliminary Safety Analysis Report. In November 1978 NRC provided a summary of unresolved items. The Project has provided Information to NRC on 44 of these. Additional information will be provided for five of the items, and it has been determined that meetings with NRC will be necessary before responses can be provided for the remaining six. In a June 25, 1981, letter from William J. Dircks, Executive Director, NRC, to the GAO, it is stated that `. . .it would require about three years to issue a Construction Permit for Clinch River under the best of conditions. This is based on the assumptions that Congress would exempt certain NEPA issues relating to the CRBR site from the licensing process. . . ." Telephone conversations with the NRC staff have revealed that the exemptions referred to were to delete the consideration of the utilities' need for additional electrical capacity and the examination of alternate sites. These matters would not require the exemption from the provisions of the National Environ~ mental Policy Act as was stated in the June 26, 1981, letter from the GAO to Representative Claudine Schneider. The latter letter apparently misinter.. preted the NRC intent. Site preparation activities can begin before issuance of a Construction Permit since enviromental matters are addressed and decided by the ASLB. The CRBRP site in Oak Ridge currently meets all regulations pertaining to dose limiting criteria and population density limiting criteria including 10 CFR 100, Regulatory Guides, and general design criteria. The NRC contemplates establishing new demographic siting criteria. The new criteria wereproposed by NRC at the Advisory Committee on Reactor Safety Joint Subcommittee Meeting on Site Evaluation and Reactor Radiological Effects, held April 30, 1981. The CRBRP is so located that it does not violate these proposed new criteria. PAGENO="0220" 288 ~ ~ UNITED STATES * NUCLEAR REGULATORY COMMISSION WAIHSNGTON. D.C. ~OI55 JUN 2 51981 Mr. James L. Howard Associate Director U.S. General Accounting Off Ige Washington, D.C. 20548 Dear Mr. Howard: This is in response to your June 11 questions regarding the time and costs associated with the licensing process for the Clinch River Breeder Reactor (CRBR) project. As you suggested, we discussed your request with Mr. Cliff Fowler of your staff. We estimate that it would require about three years to issue a Construction Permit for Clinch River under the best of conditions. This is based on the assumptions that Congress would exempt certain NEPA issues related to the CRBR site fi~om thelicensing process and that additional NRC staffing and funding would be made available to cover anticipated requirements. I must emphasize that this latter assumption concerning the availability of~ - resources is critical. Our current budget request for FY 1982 does not con- tain adequate funding or staffing to process the CRBR license. Furthermore, since many of the critical staff skills required to process a CRBR license are currently engaged in processin9 a large backlog of light waterreactor license applications, assembling a CRBR licensing team without further impacting other areas may prove difficult. A minimum of three months will be necessary to establish a new licensing team. Between 50 and 60 staffyears and approximately $4.0 million for tech- nical assistance are required to issue a Safety Evaluation Report and to complete the hearing process. Further, although not directly associated with the licensing process for CRBR, between $8.0 and $21.0 million would be required annually for safety research in support of CRBR and a broader-based national breeder program. The uncertainty in this NRC research estimate is largely the result of not knowing the extent to which DOE will provide an adequate breeder research base. In your letter, you asked us to confirm that the licensing process would not have to startwith a completely new application. That is correct. The NRC staff estimates that its technical review was about 60 percent complete when the review was suspended. Whether substantial re-review will be required in some areas depends on the nature of the applicant's response to the open issues, and assianes that the newdesign changes will not significantly affect the previous review provided by the applicant in responding to a nianber of questions which were then outstanding. We have assumed that the majority of the review that was previously conducted remains valid and that only the open issues identified in 1978, the 1141-related issues, and other new require- ments will need to be resolved. We are currently updating our resource estimates for CRBR and will continue to refine them as the present Administration position is articulated. We hope that this vi II provide you adequate support to answer Representative Schneider's questions. Please let us know if we can be of further help. Sincerely, Distribution: William J. Dlrcks EDO rdg Executive Director for Operations WJDircks EKCornell AJBürda CON ~$`r, RES Dir, NMSS Dir, NRR EDO control 10572 TARehm PAGENO="0221" 289 `JUN 26 1981 The Honorable Claudine Schneider House of Representatives Subject: Update of cost information contained in a previous GAO report on specific aspects of the Clinch River Breeder Reactor Project (EMD-8l-112) Dear Ms. Schneider: Enclosed is the updated information you requested on a report we issued to Senators Henry Jackson and Howard Baker on June 23, 1977. The report dealt with some specific ques- tions they had at that time on funding for the Clinch River Breeder Reactor Project. Specifically, you requested up- dated figures for the cost and schedule data we had provided earlier on various licensing scenarios for the Clinch River facility. Enclosure I to this letter provides the informa- tion you requested. Also, for your convenience, we have in- cluded a copy of our June 23, 1977, report as enclosure II. In providing you with this information, we wish to emphasize that, as agreed with your office, we relied on the Department of Energy and the Nuclear Regulatory Commis- sion to provide us with the updated information. Further, as also agreed with, your office, we did not independently verify or evaluate th.. data that was presented to us. Con- sequently, the information we obtained from these agencies form the basis of the updated cost and schedule figures presented in enclosure I. If you have any questions, or if we can be of any further assistance, please let us know. Sincerely yours, J. Dexter Peach Director Enclosures - 2 (302552) PAGENO="0222" 290 ENCLOSURE I ENCLOSURE I UPDATE OF COST AND SCHEDULE DATA CONTAINED IN A PREVIOUS GAO REPORT ON FUNDING FOR THE CLINCH RIVER FACILITY (B-1l5398, June 23, 1977) As part of our June 23, 1977, report, the Energy Research and Development Administration (ERDA)--now part of the Department of Energy (DOE)--provided us with some cost and schedule information for the Clinch River Breeder Reac- tor Project as it related to three different licensing cases. At the time, the Administration was attempting to terminate the Clinch River Project. And, then, as now, it was a topic of heated debate within Congress and between Congress and the Executive Branch. Consequently, it was against this backdrop that we asked ERDA officials to pro- vide us with specific cost and schedule data for the Clinch River Project assuming it would be terminated and then re- started about 4 months later, after Congress had an oppor- tunity to fully consider whether to go ahead with the entire breeder reactor program. At the time, we used the 4 month lapse as an estimate that would provide an indication of the impact the project termination would have on the Clinch River Project's cost and schedule. Under these circum- stances, ERDA provided us with the following information, which is excerpted from page 10 of our June 1977 report: "1. Assuming the licensing process could begin where it was stopped, project costs would increase by about $346 million and plant operations would be delayed between 1 and 1-1/2 years. To restart the project where it was terminated in the licens- ing process, however, probably would require leg- islation that would, in effect, circumvent some of the normal licensing processes. 2. Assuming the licensing process would have to begin with a new application, project costs would increase by about $546 million and plant opera- tion would be delayed over 3 years. Neither this assumption nor the first account for the possi- bility that ERDA may be required by the Nuclear Regulatory Commission (NRC) to locate the plant at a different site if projected plant operation is delayed. Such a relocation appears to be a distinct possibility based on past NRC proceed- ings on the Clinch River Project. In fact, the Deputy Director, Division of Site Safety and PAGENO="0223" 291 `ENCLOSURE I ENCLOSURE I Environmental Analysis, NRC, told us that if the CRBRP is delayed for 2 years or more, it would be very difficult, if not impossible, for the NRC staff, in its analysis, to conclude that it is cost beneficial to locate the demonstration re- actor at the Clinch River site. 3. Assuming the plant would have to be relo- cated, project costs would increase by about $1.1 to $1.3 billion and plant operation would be de- layed 5 to 6 years.' In response to your inquiry, we asked DOE and NRC for more recent data to update the cost and schedule information quoted above. The information these agencies provided us for each of the three licensing cases is as follows. CASE 1. Continue licensing process where it stopped. The current cost estimate for the Clinch River Breeder Reactor plant--$3.l97 billion--is based on this licensing assumption. Specifi- cally, the $3.l97 billion estimate assumes that the licensing process for the plant will resume where it had stopped in 1977 and that initial plant operation will be achieved by February 1990. However, it should be noted that DOE has built some assumptions into the cost and schedule estimates about the incre- mental time and effort required by NRC to re- mobilize its staff and prepare for the public hearing process. Specifically, DOE has as- sumed that NRC can remobilize its licensing team in about 5 months and that a construc- tion permit could be issued in about 3 years. NRC, however, contends that to pick up the Clinch River licensing process where it stopped and to Issue a construction permit in the 3 years now estimated by DOE would probably require a congressional exemption from the provisions of the National Environ- mental Policy Act. CASE 2. Completely restart the licensin9 process. Ac- cording to DOE and NRC it would not be plau- sible to restart the licensing process for the Clinch River Project since the license application has never been withdrawn. A re- start of the licensing process would only be a consideration under a situation where the project was terminated, which it has not been. PAGENO="0224" 293 Department of Energy Washington, D.C. 20545 June 24, 1981 Mr. James 1. Howard Associate Director Energy and Minerals Divi Si Ofl United States General Accounting Office Washington, D.C. 20548 Dear Mr. Howard: This provides the Clinch River Breeder Reactor Plant information you requested. Updated cost and schedule information was requested for three alternate cases, which had been discussed previously in your June 1977 report, as follows: 1. Assuming the licensing process was.resumed where it stopped. 2. Assuming the licensing process would have to begin with a new application. 3. Assuming the plant had, to be relocated. The current reference planning bases for the project assume that the plant will be constructed at the planned Oak Ridge site and that the licensing process will be resumed where it had been stopped in 1977, subject only to the incremental time and effort required by the Wuclear Regulatory Coniuiscion to properly staff the effort and to prepare for the public hearings process. The total estimated project cost associated with this plan is $3.197 billion in year of expenditure dollars (includes estimated escalation). A summary of this cost estimate is as follows: Millions of Year of Ex~pend1ture Dollars Utility DOE DOE Gross and Other Budget Budget Costs Contributions Outlay Authority Estimated Funding Through FY 1981 1154.8 118.4 1036.4 11.19.3 Estimated Remaining Funding 2041.7 ~j~3 1797.4 ~flj~ 3196.5 362.7 2833.8 2833.8 PAGENO="0225" 294 This plan is based on achieving Initial plant criticality in February 1990. key milestones are shown below: Milestone ~çhedule Nuciear Regulatory Commission Staffed to Review Clinch River Breeder Reactor Plant License Application 11/1/81 Limited Work Authorization Issued by Nuclear Regulatory Commission 4/1/83 Start Site Preparation 4/1/83 Construction Permit Issued by Nuclear Regulatory Commission 6/1/84 Start Mat Placement 6/1/84 Start Sodium System Test 3/15/89 Start Fuel Load 9/15/89 Achieve Initial Plant Criticality 2/15/90 Start Full Power Operation 9/15/90 Complete 5 Years' Demonstration Operation 9/15/95 As indicated in your letter, the second scenario is not a plausible case since the license application for the Clinch River Breeder Reactor Plant has not been withdrawn; cost and schedule information for this case is therefore not being provided. The third scenario described in your letter-~relocation of the plant to an alternate site-.~would result in a delay to the reference schedule of an estimateo 43 months. The amount of increase in the estimated project cost would depend on the alternate site. The alternate sites considered in this assessment include the Hanford Reservation, the Idaho National Engineering Laboratory, and the Savannah River Plant complex. The estimated cost increase over the reference case for each of these sites is sianmarized below: Incremental Cost MiliTons of DolTars Hanford $1577 Idaho 1654 Savannah River 824 A detailed breakdown of the cost Impact associated with this scenario i~ provided In the enclosure. The 43.month delay is an estimate of the overall schedule delay that would occur if the plant were required to be relocated and includes the addi tional time required for such activities as enactment of appropriate legislation, gathering of site data, and submittal of a Final Environmental Statement. Please advise if we can be of further assistance. Sincerely, az& Thomas A. Dillon Deputy Assistant Secretary for Nuclear Reactor Programs Office of Nuclear Energy Enclosure PAGENO="0226" 295 ENCLOSURE ESTIMATED IMPACT OF RELOCATING CLINCH RIVER BREEDER REACTOR PLANT TO ALTERNATE SITE Incremental Cost Item $ (Million) Sávinnah Hanford Idaho River Escalation 601 601 601 Staff and Support Stretch Out 164 164 164 Equipment Procurement 6 13 10 Relocate Project Office 7 6 5 Additional Travel 3 3 1 Difference in Prevailing Labor Rates 429 376 .51 Site Studies Other than Geological 1 1 1 Site Studies Geological 4 4 4 Site Work Package 1 1 1 Seismic 0 250 0 FoUndation Materials and Walls 2 3 2 Site Adaptation Redesign 15 15 15 Excavation (15) 0 (6) Water Supply Line 1 1 0 Environmental Report Rework 1 1 1 Preliminary Safety Analysis Report Rework 1 1 1 Reduced Revenue from Sale of Power 356 .~214 _f~gfl TOTAL COST IMPACT ADD 1577 1654 824 PAGENO="0227" 296 ~ELOCATIOH~O'A1.T*NATE sis, The 43 mo~th del*~ ~n ~s~5du1e is bssød qø the *ssuinp~tion thot It will tsk*, ~rntsi October 1, 198z, for ~RCt~.re~~roqp their L$tbk steff. v~*yi.w the larg, v~l~m~ of ~.t* s'tve~dy subn~i~ted, *~id develop sdecS~ion $Mt * tPi~ ProJ*ct must r~1ec$te The `enictine of ti~Viihi~n l,gisst~lon gáthêr4np ~it1.d.t., *~b~tte1 of a øew U, arid cçmpl.tion Or * new PU may take *~ e'~h a~ 43 ~nths or tll.May.t,lPB8. . *` *, :. Initial cri~Ic.1it,v wfll b&d.i.~'ed 4~ months ?rOnth~ be*e case of * rebrust~y it, 1*90. until $eptpinber 1$, 19*3. : .. * * CS1*t~1OI1 * ** Seas Os. ?pC( f~r ?`øbruir.y IS, f990, 4niti~l cefticality $3,tB * Costed thr~u~h Oëtobér 1. 1902 ** * Cost to 90 11 Of Oc%*er 1. 198k $190 * 4~ month .5c519ti,n U~1.rttJup.p.P. $tr~tcKOlt~ tho cost ~f staff *fld sv~povt jg ~ ,mbrlzc( In the 0 lowIrip ~sb1. for a 43-month de~~yv * `. 434loritPi L~1 ` * ** : ________ * ** Pro,lect Office * ~` * P.actor MenufecturO. * . ** ill * Architect tngineerlng 19 . Construction . __~j .`* * * $1&4 ~ t&~~e,ie~i. .. ,~ ~. $nf~rm.t1pn was obtained from the other thrt~ .1~s~t,io~n4 ~n today's. r.tcs--craft by craft. An *v.rede to%91 w*g9 ~W~s ~ØicU!itiLI Mi we:fs~itimp each craft by Its p~rcontsg. *f the ,lOrk. ~ s~ainst *V, O.k Ridge *vere9e end a delta ealculited acCQrdirip *0 tIe !iU4*r ~f man-hours Workød year by y~.ar. . *, * Del Rj~t Oak Rldpe Sees case hanford *71% 4*8% $.vsnvSsh R1v~r ,~ ~1O% , ` `. ..; ~ ` PAGENO="0228" 297 * *.. * .:. ~n~e.se cost at $d.Po because the 1e$sffi~c Ut incrVss'ós t~~s 0 1$~ to U$ an $Plc,ease lit NI bvl1~$nps costs fçr rdestgn 1GM tOt increase in At di.i~n costs far redesip fS lnèr*C~e in N$U/At e~u1pmnt wedltlcstton n tot U tiQ~ *~ ~ll ework . * ;.. fIN U~ co~tfii~*ite~ * * tISOM . 1L~cs.( ~tyviwe. .$tl& .o~.o'&c .` * 4Ay*insh Pitantiol Lg~tu~ ~ Oa6ii $214 ($22) * the *~.vmp 4ion that the CRBRP will replace c~~l.'ffr~d ~enCr$t$or It CCCII * alt.rnstq 1~c~tion is still valid. The r.%atlve vtI.vf Of el*ctrlcêl output Ct cRBRP.would be propCPtiOnöl to the cOst of c*sl at each loee~ tio~ DurinO r~ 1*00 *vera~. coil costa for Its four utilities were as * fol?owi~ * * * * ...* . . . r~*. *i.tiô.t * . * . :s~J~. . IvA 152,92 1.0.. P~c4f1c ~`*ier S Light * ti.92' * * ,40 ` * * . Utah $ Light * * 11~.$ * . ~$. * South Cerolinø Electric $ Gas 11, 31 , **4** * * . * %* * * *I (1) ~ 1~g~,4E1A 0015. PAGENO="0229" 299 - *... . ....~ CENERAL OF THE UNITED STATES WASHINGTON. D.C. Zosis B-115398 3ur*e 23, 1977 The Honorable Henry P4. Jackson ylce Chairiran, Joint Cornittee on Atomic Energy Congress of the United States Dear hr.. Vice Chairman: This replies to your letter of ~:ay 26. 1977. in which you and Senator Baker asked that we review deferral runber D?'i-5~ tran~itted by the Pres~dent to the Congress on ~ay l~. 1;I~. By this acticn the President proposes to defer $3l.~ ~iliion in budget authority appro~riated for tne Clinch ~iver ~ree~er Reactor ?ro~cct (CR~R?). Because you beiieve the acticn taken by the ?~esidar.t should have been ero~osed as a rescission rather than as a deferral of budoet autnoritv. you as~ed that we review this ratter to see if it has been correctly clsssL~ fled. You also asked if any actions c~r:en~lv underta~on or proposed by the executive branch to~:ard significant curtail- inent of the C?BR? exceed or viii exceed controlling Etatu:Crv authorities. Based on the facts currently available, we conclude that the action proposed to the Congress was correctly classifie~-- it is a deferral of bud~et authority. Eowever. we will r~onitor the situation and will ~ron~ptiy report to the Congress any future actions constituting a rescission or deferral under the lmpound~ent Control Act of 1974. ~~ith respect to the second question, we believe that the Mrinistration's proposed curtailnent of C~?~? objective is substantially inconsistent with that set forth in the CRBRP prc.~ra~ criteria that were aprrovc-d. as required by law. by the 3oint Connittee on Ator~ic Enerç'y (~~CAE). ~ also believe the curtailed program is not in accord with the stat- ute authorizing the CP~PP. In our view, for these reasons the Energy Research and Developrent Adnir.istraticn (E~DA) lacks the legal authority to inplen~ent the Presidents plan. Accordingly, expenditures of Federal funds to fully irple- snent the revised CRBRP program would be irproper unless ERDA first obtains the necessary authority to undertake such actions. PAGENO="0230" 300 f~.ik~ *~;~~` b~''~ ~.*` 1NPA~T ~ , 001367 ~ CNA~iG1NG~C~B~P 70 ~4,U~MAU SIYL' . g.,bq.rd ~td.ha ~ ~01 4011 staff and $up~brt £tritch but 164 164 134 `tqufpment'P#DCurI0I3~~t . 13 10' *eiocát. Pr~~.çtOffiei 7 4 j `Adaitlonal trivel 3 3 ptfferár~ce In Pr,v.11iri3tab~r Rates 42? ,. `3,6 $1 Site Ss~dIes * Other then ~.o1oica~ * I * 1 ` I Site $t~.dit$ Goo~øp1~sl 4 4 4 Site ~Jork PaekagQ ~,° , I .1 * I Seismic 0 360 U ~QI1pIdltfe~ .Leriiisánd w.ii~ : .1 : 3' `.~e , Sit. Ad.pta~Ltw1jI~de$i3n , . : . * `0$) , b (6') Meter Supp' Line *`: I' * 0 LRRcwDrk I I I PSMt f(DwøYk r I Reduced #tvefI'O from Saf~~ el $~owr J$~ ~1L. __(tj~, I0TAt~ CUS~1 INPAC? ADD 1~77 *654 *N * me ;sm *~ the sppttca~~t's reference 4S'-piunt~h 4~1.y ~ u~s~d in * the ?lnai tnvIrerm~øt.~ Statement d.t.d Pbrui'~y ~97? ($~JME$.0139).' PAGENO="0231" 801 Should ERDA proceed to use CRBRP funds to isplement the Presi- dent's proposed plan without havina secured such authority. this Office will review the specific actions taken with the objective of taking formal exception to such expenditures. * There follows a detailed discussion of our findings and conclusions. 1. BACKGROUND: A. Proj~s to Date. Before discussing the legal issues raised by your letter. it is e~propriate to discuss the history ar.d facts surrour~d~rc theproject and the effects of the r~ost recent executive bre.~ch actions on the CR~RP. In reviewing the President's actions. we met with ERDA and contractor officials both at headguarters and at the project office site. Prior to the recent executive branch actions. the Clinch River Breeder Peactor De~onstraticn Plant ;~as scheduled to be operational by early 1964 and was to be the nation's first laroe-scale licuid metal fast breeder reactor (L~F~) de~on- stration plant with a 380 ~ecaw~tt capacity. Presently. desicn. procure~ent. and corpcnert fabricatic~ for theprojeCt are about 25 percent complete. although no site preparaticn or actual plant construction has yet begun. Accordir.g to ER~A estimates. the project. if complet~d. will cost about $2 bil- lion. $270 million of which will be contributed by Industry participants. As of May 31. 1977. ERDA had spent about S254 million and industry participants a little over $99 million. B. Origins and Statut~f.CP!~. The CRBRP had its origins in 1969. In that year the Atomic Energy Commission (AEC) waS specifically authorized to study the ways in which an LI4FBR demonstration project cculd be designed. Sectinn 106 of Public Law 91-44. ap;rovcd duly 11, 1969. stated: NSec. 106: Liquid Hetel Fast Breeder Reactor Demonstration Prooram--ProjeCt Definition Phase.~-(a) The Commission is 89-405 O-82--20 PAGENO="0232" 303 * arrangement or amendment thereto which the Commission proposes to execute (including the name of the proposed participating party or parties with whom the arrangement I.s to be made. a general description of the proposed powerplant. the estimated arourLt of cost to be incurred by the Commission and, by the participating parties. and the general features of the proposed arrangement or amendment) shall be submitted to the Joint Com.mittee on Atomic Energy. and a ~eriod of forty- five days sI~a1l elapse while Congress is in session (in cor~uting such forty- five days, there shall be excluded the days on ~zhich either House is not in * session because of ad~ourrment for more than three days): Provided. however. Thet the Joint Cornlttee. after heving receiveo the basis for a promosed arrangor~ont or amenc3ment thereto. nay by resolution in writing waive the ccnditior.s bf.- or all or an'.' protion of. such forty-five day period: Provided. further. That such arrangement or amenc~ent snail be entered into in accordance with the basis for the arrangement or amendment submitted as provided herein* * ~." (Emphasis added.) This basic scheme was retained in 1975 when section 106 of the 1970 act was amended by section 103(d) of P:~blic Law 94-l&7. December 31. 1975: `~Sec. 106. Liauid tietal Fast ?reeder i~eactor Dc-rrmnstraLicm Progra'r--FOurti) Round.--(a) The Enercy!se~_!fl.~ Development Administrat~cn (E~D~ is hereby authorl2ec to enter into coc~era- tive arranosnents witz~ reactor n.~nu:a:- turers and others for m~.rticaOat~Cr in he researcn and deve~c'c~en:. n. construction; a ooi~tiCn Of aLicuid PAGENO="0233" 304 Betel Fast Breeder Reactor Dowerolant. 3Wiccorciance with_criteria ac:rcved by the Joint ~ ~ without reoara to tne provis~c~s or sec~ tlon 169 of the Ato'~ic Energy Act of 1954. as an~ended. Appropriations are hereby authorized * * ~ for tne efore- mentioned cooperative errargerentc as shown in the basis for arrar.ge.~e~s as submitted in accordance with s~bsection (b)hereof. * * * ~(b) Before ~~A_e~~f_____ arranc'ement or e~Z~ent z:.ere:~ ~:er the r~t~or~z.v ___________________ ~cticn. t~c zrris ±:r :~ :~: or e~enZent t~.cre~.c ~:~c _______ to e~ec~te (c~.~r zre .~ ~ooosec ~ with whicn r.~e erran:a~er.t :c ~e a cer:era~ oescr~ot~cn o: :r.e oro- Dc'sec :c;:e. ______ of cost to ~e c~rrt~ ~` _____ the o:rt~ci~at:r~ crr:irr. _________ ~ or .enc-.er.zi s~i~ __________ Joint Cor~:ttee o~ ~:~-~c L~er;v. and a pcric~ of ro::y-±~ vs cayr s.~a~1 s~a;se while Congress is in session (in co~put- ing such forty-five days. there shall be excluded the days on which either souse is not in session because of adjourn- ment for more than three days): Provided. however, That the Joint Co~vrittee. after having received the basis for a prcposed arrangement or amendment thereto. may by resolution in writing waive the conditions of all, or any porticn of. such forty-five~ day period: ~ovided._further. That such arrangement or anen ent snaI~ be entered into in accordance with the basis for the arranoement or amendnent sub~itted as pro- vided herein:* * *" (Empharis added.) PAGENO="0234" 305 Pursuant to the 1975 law. ERDA proposed criteria to the JCAE for its approval. On April 29. 1976. the.~CAE approved the most recently submitted criteria. Those project criteria appear at page 63 of Nodificatj~.~j~,,the PrC~!CLArrer.Ce~ents ~ ~eactorDe~onEtr5~ ioi Hearings SeforeTI~ Joint CorurIttee on ~to~ic Zr~ergy~~TE~ Cong.. 2d Sess.. April 14 and 29W. 1976 (1976 Hearings). C. The_Present CF9RP_Criteria and_Contract. As a result of the JCAC's action, of April 29. 1976 (a rollcall vote), the L.MFBR demonstration program at the Clinch River site is governed by criteria that call for the desicn. construction. and operation of an L~FER plant. These pro~ram criteria state that the C~SF~P's major objectives are to demon- strate the technology pertaining to. and the reliability. safety. and economics of. L~F3R powerplar.ts in the utility environment. Other objectives are to: ..._provide for meaningful identification of areas reç_'iring emphasis in the L>3FSR research and 4evelo~ment program; --validate, to the extent practicable. technical arid economic data and information pertinent tc the total L::FB~ program; --assist in developing an adequate industrial base; --provide for meaningful utility participation and experience in developing, acquiring. and operating L!~F9~ plants; --help assure overall program success; and --demonstrate and maintain U.S. technological leadership. The criteria also specifically set forth design rea~'ire- sents and pl~tt objectives stating. among other things. that the plant's first core `is to use mixed oxide fuel consisting of uranium and plutonium and that it be designed. fabricated. constructed, tested. operated. and maintained in c~nformance with established engineering standards and high quality assur- ance practices. PAGENO="0235" 307 * statutory authorization nay be in order if the President's program revision is~ to be implemented. Mr. Fri stated: ~At the direction of the President. and in compliance with Section 106(b) of Public Law 91-273. as amended. ERDA here- with submits ~he enclosed amended progran justification data ~fIectirc Econ~U- ance of the C~PP ProTect. exceot for con- ~ThtT~n 0]. S s eesT~n so as~ ~ei~ identify er.gincerir.q pro~le~s that will have to be solved in developinç alterna- tive types of reactors. The statutory criteria_will likewise recurre co~en~ surete revision. "Aotrooriate recotiations_will, of course. have to oe_ererz en arc ci~ v~tn the otner ?:o'~ct ~articir~~.ts. ____ tr.~ ob2ecrveo±3~ntn'ic ~ ~rc~seo actirn concerr2~ the ±-rciec:._ant coo:eretive rrran~enent a~~ec~ i~lv. _____ T~ticn `:itn restect to t:~e zaric e~a~inc _____ ~av be in or ~er. "For the prescribed statutory period during which this revised basis of arrangenent is reguired to lie before the Joint Conmittee. new obligaticns for the Project will be kept to a mir.imum consistent with prudent Project manage- ment. A deferral (No. D7~-58) is being reported for the $31.8 million of C?.~RP Project budget authority that will not be available during this period. Fo1~ lowir.n such ceriod EPDA will ~roceeo witn a~roDr1ate inoier~entinc actions." (Emphasis adO~.) In an attachment to his letter. Mr. Fri discussed the existing four-party contractual agreement and those contract amendments that would have to be made in order to limit PAGENO="0236" 309 funds to continue the project on Decerber 1. 1977. We chose a Deceitber 1. 1977, date because it allows the Congress an opportunity to consider fully whether to go ahead with L::F~ efforts and the associated funding. Although it is uncertain -when the Congress will sake its decision on the project. and bow quickly or corapletely ERDA may implement the proposed discontinuance of the Drocran, we believe that the ~ecenber date provides a good indication of the impact a project ter- inination will have prior to Congress having an opportunity to fu1~y consider the ratter. ERDA provided us with cost and schedule information using three assumptions: 1. Assuming the ~licensing ~rocess could becin where it was stopped. project costs would increase by about $3~6 million and plant operations `eou~d be ~ayed bst~.een 1. and 1-1/2 years. To restart the project wnere it was terminated in the licersin~ process. however. ;rcoaoly would reçuire 1sgi~lntior. thot wculc. in effect. circ.m- vent some of the normal licensing mroce!ses. 2. Assuming the licensing orocess would have to begin with a new aoplicatiofl. oro~ect costs would increase by about $346 million and pla~.t~cperat~cn would be delayed over 3 years. 1~either this cssumpticn nor the first accco'int for the porsi'oility that £R~ may be reguired by the Nuclear Regulatory Co~nission (NRC) to locate the nlant at a different site if projected plant ooeration is delayed. ~Suc)~' a relocaticn appears to be a distinct possiblity based on past NRC proceed- ings on the Clinch River Project. In fact. the &eouty Director. Division of Site Safety and Environmeflt~l Analysis. NRC. told us that if the CR3R? is delayed for 2 years or more, it would be very difficult, if not impos- sible. for the NRC staff. in ~ts a9?lyEiS. to conclude that it is cost beneficial to locate the demonstration reactor at the Clinch River site. 3. Assuming the plant would have to be relocated, project costs would increase by about $1.1 to $1.3 billion and plant operation would be delayed $ to 6 years, PAGENO="0237" 310 Although we did not have the opportunity to evaluate EflDA's estimates in detail, we believe they provide a reason~ able indication of the magnitude of the costs .anã extentof schedule slip~eges that might occur it the project were ter- mlnatec3 on July 26, 1977, and the Congress.decided to restart It at a a later date. By comparison, if ERDA were fo delay project termination until Pecember 1. 1977. by honorir.c ör~- going contracts but not entering into additional contracts not essential to ongoing work, the estimated costs would be Increased by about $61 million. B~sed on the information set out above, it wculd seen that terminatir~ the project prior to congressional deli~era- tions could nake restarting the project so cnsti:.' as to out- weigh its benefit. Thus, in effect. the executive brsnch. if it i~ successful in prom~t1~ i lerentirc its present plan. may well have nade a major policy decisicn u Ia :~li~.' thro administrative trocedures which should have been nade throunh the legislative proccss. The docun.entation we have exa~irsd disclosc~s no intention on the part of the executive brancn to proceed with ccmcietion of an L!~F3R demonstration plant at Clinch River in the future. 11. THE 1hPOU:;D;~ENT CONTROL ACT OF 1974: Under the Impoundment Control Act of 1974 (Act). title X of Public Law 93-344. 86 Stat. 332. July 12. 1974. 33 U.S.C. 1400. et sec.. there are two types of imuner.ts--de~errsis and rescissions. The distincticn between the two cateoories Is the duration of a proposed withholding of budget authority: a deferral is a pro~osa1 to withdraw temporarily budget author- ity from availability for obligaticn; a rescission is a repuesz to cancel, i.e., rescind, previously a~prcpriated funds--in other words, a permanent withdrawal of budget authority. In both cateaories of withholdinos there exists a comnon characteristic--irpounciment. 1~hile the tern "impoundment" is not defincd by the Act. we have operated under the view that an imooundnent is any type of executive action or inac- tion that effectively thwarts the obligation or expenditure of budget authority. This does not mean, however, that impoundments always exist when budget authority is not used to implement all authorized activities. PAGENO="0238" 311 * *41 ~ s..or~e.~x.al;~Q t~euthc,r~.t~. ~ Thus. a lump-sum aPpropriation for crograns A. S. and C used to carry out only program C would not necessarily thdicate t~e existence of impoundments regarding programs A and B. So long as eli budgetary resources.were used for program C. no impound~ent would occur even though ectivitiesA and B re- inaineO unfunded. Consistent with this construction of the Act. sections 1012(b)" and 1013(b) of the Act. 31 U.S.C. 1402(b) and l403(b~. respectively. provide that when proposed rescissions and defer~ rals are rejected the impounded budget authority must be "r~ade available for obliestion.' If this id not done the Ccrptrolier General is authorized to bring suit to compel the cessation of the withholding. 31 U.S.C. 1406. in this cor.nection. the requirements of the. Act clearly areto mandate the release of withheid funds. Significantly. no mention is made in the Act with re?~ect to the uses to which the released funds are put. The Co:ptro~ler General can only seek. and the court can only grant. an. order ccmpeiiir.p the President to release the funds. I~eithcr theCcmmtrcller General nor the courts are aut~crized under the ~ct to constrain the executive branch in the vay the fur.ds are to be used once released. Concerning the CRPF~P. we have determined that. except for the $31.8 million held in reserve for deferral D77-5S, all funds have been made available for obligation for either incurring or liquidating obligations associated with the project. ~egarding the $31.8 million proposed for deferral. these funds also are planned for use. That available funding is beir.q and will be used is the critical determination under the Act. in this liaht, we must presently conclude that no evidence sucgests an intention not to utilize (.t.e.. a rescis- sion) the $31.6 million in the future. Thus. we are satisfied that the deferral has been properly classified. Eowever. should we later determine that the executive branch has allered its plans for thc use of the $31.8 million and has decided that a portion of the funds will not be used at. all. we will, at that time, take the necessary action to reclas- sify the impoundment to a rescission. In addi t ion ~ ~ involved in the award of sub- contracts currently being reviewed by LRDA. If we decide PAGENO="0239" 313 This construct.ión of section 106 is supported both by the language of the statute and by its legislative history. Sub- section (b) of section 106 provides not only that the basis or description of the amendment shall lie before the JCA! for 45 days. but also that the an'ended cooperative agreerrent ERDA is authorized to execute after the 45-day period is t6 be entered Into "ur.der the authority of subsection (a) of this section.' Subsection (a) authorized ERCA to enter into cccperative agree- ments only in accordance with the statutorily approved ;rogran criteris. Those criteria, effectively a part of the statute itself.. cor:e~plate the eventual operation of an L~. po'~:er- plant. Therefore. ERCA's euthcrity to initiate the running of the £5-day period after which It nay proceed to i~le~ent its plans t~ a'end the cooperative egree~er.t. is constrained to offering to the JCAE a~bnsis or description of a~end~.ents that are conpatible with the oojectives of the pro~ra~: criteria and of course the hsrronious objective of the au~ncrizaticn act--operating an L~FSR denonstratibn plant. Our ccnstruction of section 106 is suppcrtcd as well by discussions' of the 3CAE. For exa~ple. during debete on the most recently zu:~itted oroject criteria, the following exchange took place between Representative Xoss and ~!r. ~ ~a:ier. Comrrittee Counsel. JCAE: "Representative ?~oss.' ~f there is a conflict between the contract (the cooperative arrangement) provisions and the criteria, which contrcls? "Mr. Parler. The criteria and the justification data which the cor.mittee (3CAE) approved. "Representative i:oss. In other words. at all tines that becomes the dominant factor in interpreting any contract (for the CRSRPJ? It must be consistent at all times with the criteria? "Mr. Parler. That is my opinion, tir. Moss; yes, sir." 1976 }iearings. page 4. Moreover. on April 29. 1976. Mr. Parler said: PAGENO="0240" 315 that language is to the contrary--that Congress has a strong interest in maintaining the program objective fully in accord with criteria approved by a coirmittee of Congress. ERDA aasumes. we think without a sound basis, that the actions it taker preparatory to abandoning the program it has comi'ence.d will not be tantamount to an amendment of the cooperative agreerrent that represents the commitment to go forward with the orioinal program. and therefore that the actual changes. however dra- matic. need not be of concern to the JCAE. This view limits the Corr.~ittse'5 role to deciding whether to accuiesce in ERDA's subseg~ent recommendation to change the statutory criteria after ERDA'S actions to change the statutory objective are already effectively accomplished, and appropriated funds are already obligated for the purpose of discontinuing ir.ste~d of fulfilling the program objective of the statutory criteria. ~e cannot agree the law was intended to so operate. Our view, as we have stated. is that before ORDA can invoke the authority rI subsectiOn (5) to implement new plans tna: dapart in any significant way from the major program objectives oi the statuto~ily apprOved criteria, it rust first. uer sub- section (a). secure JCAC approval of new criteria. Since ~;e believe section 106(b) contecclates amendment! the thrust of which is to fulfill the major objectives of the statutory criteria, we must also conclude that. because the ~ay 19. 1977. proposal does not so accord wit1~ the criteria, it did not trigger the 45-day mechanism of section 106(b). Moreover, while the 3CAE's authority to approve criteria Is broad. the statute under which the President is acting authorizes only efforts leading tO the construction end opera- tion of a reactor. Thus. the President would be com;ellc-c to obtain amendatory le9islatiofl to section 106 to authorize only the limited cr0 diff~rent objective of L~FER systems design. and to repeal those parts of the statute that speak to efforts beyond such activities. The leqal effect of this conclusion is that the status of the CRE~P remains unchanged. except for the current $~l.8 million deferral now before the Congress. Eederal funds may not be expended to implement the President's plan of curta~l- ing the program. without appropriate change in the authori- zation statute and the program criteria. To Implement the President's plan without such necessary authority would be in violation of law since such exoerditures would be for purposes inconsistent with those for which the appropriations were made. In this regard. 31 U.S.C~ 628 provides: "Except as otherwise provided by law. sums aT)Drcmriated for the various branches of expenditure in the p~b1ic service sh~1l bearol ~c so1el~ to ~ Ct ec~ `or ~ the~~E ~ others. (Lnpn~Tis aO~ed.) ice hope the foregoing responds to your cuestions. A similar letter today is being sent to Senator Baker. Sincerely yours. - ~. s~;-~ Cooctroller General of the Cnited States PAGENO="0241" 316 `JUN 26 1981 The Honorable Claudine Schneider House of Representatives Subject: Update of cost information contained in a previous GAO report on specific aspects of the Clinch River Breeder Reactor Project (EMD-8l-ll2) Dear Ms. Schneider: Enclosed is the updated information you requested on a report we issued to Senators Henry Jackson and Howard Baker on June 23, 1977. The report dealt with some specific ques- tions they had at that time on funding for the Clinch River Breeder Reactor Project. Specifically, you requested up- dated figures for the cost and schedule data we had provideci earlier on various licensing scenarios for the Clinch River facility. Enclosure I to this letter provides the informa- tion you requested. Also, for your convenience, we have in- cluded a copy of our June 23, 1977, report as enclosure II. In providing you with this information, we wish to emphasize that, as agreed with your office, we relied on the Department of Energy and the Nuclear Regulatory Commis- sion to provide us with the updated information. Further, as also agreed with your office, we did not independently verify or evaluate the data that was presented to us. Con- sequently, the information we obtained from these agencies form the basis of the updated cost arid schedule figures. presented in enclosure I. If you have any questions, or if we can be of any further assistance, please let us know. Sincerely yours, 3. Dexter Peach Director Enclosures - 2 (302552) PAGENO="0242" 317 ENCLOSURE I ENCLOSURE I UPPATE OF COST AND SCHEDULE DATA CONTAINED IN A PREVIOUS GAO REPORT ON FUNDING FOR THE CLINCH RIVER FACILITY (B-l15398, June 23, 1977) As part of our June 23, 1977, report, the Energy Research and Development Administration (ERD~)--now part of the Depart~rent of Energy (DOE)--providrd us with some cost and schedule information for the Clinch River Breeder Reac- tor Project as it related to three different licensing cases. At the time, the Administration was attempting to terminate the Clinch River Project. And, then, *as now, it was a topic of heated debate within Congress and between Congress and the Executive Branch. Consequently, it was against this backdrop that we asked ERDA officials to pro- vide us with specific cost and schedule data for the Clinch River Project assuming it would be terminated and then re- started about 4 months later, after Congress had an oppor- tunity to fully consider whether to go ahead with the entire breeder reactor program. At the time, we used the 4 month lapse as an estimate that would provide an indication of the impact the project termination would have on the Clinch River Project's cost and schedule. Under these circum- stances, ERDA' provided us with the following information, which is excerpted from page 10 of our June 1977 report: ~l. Assuming the licensing process could begin where It was stopped, project costs would increase by about $346 million and plant operations would be delayed between 1 and 1-1/2 years. To restart the project where it was terminated in the licens- ing process, however, probably would require leg- islation that would,~in effect, circumvent some of the normal licensing processes. 2. Assuming the licensing process would have to begin wIth a new application, project costs would increase by about $546 million and plant opera- tion would be delayed over 3 years. Neither this assumption nor the first account for the possi- bility that ERDA may be required by the Nuclear Regulatory Commission (NRC) to locate the plant at .a different site if projected plant operation is delayed. Such a relocation appears to be a distinct' possibility based on past NRC proceed- ings on the Clinch River Project'. In fact, the Deputy Director, Division of Site Safety and 89-405 O-82---21 PAGENO="0243" ENCLOSURE I 319 ENCLOSURE I Consequently, no cost and schedule data has been provided for this case. CASE 3. Reloca~ion of the plant. to another site. Under this licensing scenario, DOE has esti- mated that it would result in about a 43-month delay in the current schedule. That is, the initial start date would be delayed from about February 1990 to about August 1993. The amount of the associated cost increase would depend on which alternate site was chosen. For instance, DOE estimates the following cost in- creases for three possible sites: Incremental Cost Increase Location ltlillions of Dollars) DOE'S Hanford Reservation (Washington State) $1,577 DOE's Idaho National Engineering Laboratory $1,654 DOE's Savannah River Complex (South Carolina) $ 824 According to DOE, the 43-month delay is an estimate of the overall schedule delay that would occur if the plant were required to be relocated and includes the additional time required for such activities as enactment of appropriate legislation, gathering site data, and submittal of a Final Environment State- ment. PAGENO="0244" 320 Appendix 9 Issue Steam Generator Cost Increases Contents Tab Htle 1 Discussion 2 Steam Generator Cost Responses to newspaper articles 3 Al Contract Itself is Mighty Suspicious' PAGENO="0245" 321 CRBRP STEAM GENERATOR o CRBRP steam generators are an extemely important advancement in many technological areas, and are an accomplistinent which puts the U.S. in the forefront of this area o Numerous major' advances in fabrication, inspection, and analysis techniques have been required and successfully accomplished o The stringent requirements for the steam generators includes achievinQ an assured level of performance, reliability, and safety In these first large scale LMFBR steam generators comparable to traditional applications o A substantial portion of the cost increases on the CRBRP steam generators was caused by the delays resulting from the policies of the previous Administration o Other cost increases resulted from changes in regulatory requirements, design evolution, and responding to design and development activity results showing how reliability and safety could be improved o Atomics International was selected because: Al was judged to provide the best assurance of success The experimental and developmental nature of the undertaking best suited Al's capability Selection on basis of price alone would be unwise ot uncertainties Technical continuity was required o The decision was a difficult decision which received the attention of two operations offices and the senior officials of ERDA. PAGENO="0246" 322 Discussion The approach to providing steam generators for CRBRP reflects the highly developmental nature of these components and the potential major impact they can have on nuclear plant availability and economics. Such a major impact is illustrated by the steam generator difficulties plaguing PWR powerplants which, in some cases, have accounted for approximately 25 percent of plant downtime and have resulted in plant outages for more than 1 year to replace these components. LMFBR steam generators present even more demanding requirements since leakage results in the interaction of sodium and water. Several LMFBR powerplants have suffered lost availability (PFR in Great Britain, Fermi in the United States, BN-350 in Russia) as a result of sodium-heated steam generator leaks while other sodium plants (SRE, Hallam, EBR-II in the United States, and Phenix in France) have avoided the problem by utilizing extremely conservative designs not suitable for extrapolation to commercial plants. With the power costs for plant outages running on the order of $115 million! year for a CRBR-size plant and $900,000!day for a 1000 MWe plant, there is tremendous pay-off from conducting extensive development and specifying a high level of quality to assure the availability of reliable steam generators. Current development programs in the U.S. for the Developmental Plant, in France for Super Phenix, in Germany for SNR-300, and in Japan for MONJU reflect this approach and include the design and testing of large models of at least two different steam generator concepts. The program for the CRBRP steam generators also reflected this concern and attention, involving extensive development and testing, utilization of a concept that had previous successful test experience in the U.S., and speci- fication of high quality in all phases of design and fabrication. To put the subject in proper perspective, the cost benefit in terms of real dollars savings to the CRBR Project and future LMFBR plants in developing a reliable steam generator is staggering. A properly designed component, like the Al steam generator, could save one or two years downtime in the plant operation or at reduced power as the British Prototype Fast Breeder Reactor has experienced. A two year saving it downtime would translate to $230 million in revenues for a plant the size of CRBR--these large leverage numbers help explain why the DOE is investing a significant portion of their R&D budget in steam generator technology development. PAGENO="0247" 323 STEAM GENERATOR COSTS The cost of producing `the eleven CRBRP Project steam generators has substantially increased. A letter contract was entered into between GE-ARSD and Al on September 19, 1975, with the expectation that the prototype steam generator could be delivered by November 1977. The letter contract was supplanted by a definitized contract In February 1977, with the expectation that the prototype could be delivered by October 1978. By February 1977, there had been many major changes to the design induced by a better understanding of the instrument and by the very substantial changes on Project deslgn,crlterla imposed by the NRC since September 1975. During fabrication of the prototype, which began in January 1977, the pace of fabrication was affected by such changes and by developments in metallurgy and in welding techniques done as a part of the Al scope of work and' in other de- velopment programs, striving to Improve upon the world's knowledge of such matters and to be able to incorporate the new learning and techniques into the plant units. Materials acquisition, piece part fabrication, and subassembly work on plant units was begun, but was also constrained by the development activi ties. Beginning In 1977, as the direct result of the National Policy Debate over the future of the Project, fabrication work on plant units began to be affected by the doubt over the ultimate need for them,' and the pace was; slowed and later stopped. This forcing function on the whole Al job caused a substantial cost increase upon the prototype unit and'upon the plant unit work that was dQne because that limited part of the whole job then had to bear all the cost burden of planning, design, tooling and other startup costs and the associated overhead that would have been distributed over a larger manufacturing job. There has been the subtle but very real effect of cost Increase resulting from the loss of synergism on a shop load that had planned to have eight or nine units in progressive stages of fabrication at one time. The cost increase consequences of such a drop in shop load as was forced by the NPD had a real obvlous'slde too. The loss of opportunity and flexibility to shift trained crews from article to article, progressively on a two or three shift manu- facturing schedule, results In underutilization of crews and undesirably large proportions of startup and shutdown time on each work shift to the amount of productive work to be done. Another cost effect of'the NDP is the cost of storage of the materials, uncompleted subassemblies and Idled tooling and of retaining idled plant. The GE-ARSD/AI subcontract was Increased by adding to It certain materials that GE-ARSD had been procuring but which it became desirable to have Al finish the procurement of. A cost suemary of the growth In the cost of the design and production of the CRBRP Project steam generators Is at Exhibit 1. The scope of work at Al has been reduced to the prototype and one plant unit, with an option to complete a second plant unit. Consideration Is being given to procuring the remaining plant units by a separate contract'actlon, on a competitive basis. Action to solicit Industry interest In such a course of action Is in the planning stages. PAGENO="0248" 325 The Al Contract Itself is NMighty Suspicious" Source: Nashville Tennessean, July 2, 1981 (Ed Gregory) Allegation: The Al contract itself is "mighty suspicious," Stockton added. He said Al and Foster Wheeler Corp., both submitted bids for the steam generators in 1974; Al saying the 11 generators needed would cost $26 million and Foster Wheeler bidding $20 million. Two outside consulting firms recommended Foster Wheeler, but just before the bid was let, the now defunct Energy Research and Development Admin- istration (ERDA) chose to give Al a contract for $57 million, ignoring all bids. Since then, the cost has jumped to $143 million for just two generators. Response: o The Al contract for the CRBRP steam generators is consistent with Goverrinent procurement regulations. o General Electric, a subcontractor to the CRBRP lead reactor manu- facturer, Westinghouse, was responsible for soliciting steam generator bids and for recommending a procurement approach. o The ERDA San Francisco Operations Office (SAN) and Chicago Operations Office monitored the steam generator procurement process, reviewed the General Electric recommendations, and SAN submitted a steam generator contractor selection recommendation to ERDA to procure the components from Al, which was ul timately the approach taken. PAGENO="0249" 326 o A! was selected because: The hockey-stick design concept selected for the CRBRP was developed by A! offering advantages to the Goverrinent through Al's existing expertise on this concept. - Al designed, manufactured, and successfully tested a 30 MW version of the concept. - Al possessed directly applicable experience .in relevant technical areas such as sodium chemistry, high temperature design, high tech- nology component design, and fabrication. - Al offered advantages related to steam generator testing. o It was concluded that Al's strengths offered significant advantages in tems of schedule, quality of design, and ultimate cost. o The bids rece ved contained numerous contingencies. It was recognized that numerous technical uncertainties existed. Fixed-price contracting was not used because of the highly developmental nature of the component and concern that it might result in a higher cost to the program. o ERDA agreed with the SAW recommendation that the steam generators be procured from Al on a Cost Plus Incentive Fee basis as most beneficial to the Goverrinent and cheapest. PAGENO="0250" 327 o The $57 million contract awarded to A! for the steam generators was for a different and increased scope of work than that in the original bid package. o The subsequent cost increases have resulted from a number of factors. Principal factors wore numerous changes in requirements by the Nuclear Regulatory Commission, such as the change in seismic requirements, the cost of scheduler delays caused by the previous Administration, plant design evolution, and component development. o The CRBRP steam generators are a high technology component that are being designed and fabricated so as to have extremely high reliability and safety. The design of this component requires advanced inelastic stress analysis methods, advanced fabrication technology (much of which had to be developed), advanced quality inspection techniques, and many other key advances in the state of the art. This component will allow U.S. industry to be in a position of world leadership in this comply area. PAGENO="0251" 329 Appendix 10 Issue "Why the Westinghouse Contract Allowed Claims" Contents Tab Title 1 DIscussion 2 Memo from P. R. Shlemon, Counsel, to Files dated June 19, 1981, Re: Conversations with Pete Stockton, June 18,~1981 3 Memo, P. R. Shlemon to S. W. Ahrends, P0, dated June 22, 1981, Subject: Westinghouse Claims PAGENO="0252" 330 Issue NWhy the Westinghouse contract allowed claims" Discussion The Westinghouse claims were submitted and processed through the. procedure provided in the Changes clause in both Westinghouse contracts. The clause is, in all material respects, the standard Changes clause which was prescribed by the procurement regulations and provides for an equitable adjus~nent of the fee for material changes in the amount or character of the contract work. The Westinghouse fees were negotiated in a far different a~nosphere than prevailed during the period in which the claims were filed. At the time of negotiation of the Westinghouse fees, it was the intention of all parties concerned that the Liquid Metal Fast Breeder Reactor Demonstration Plant proceed to construction in a speedy manner and it was understood that utilities would be in the market for breeder reactors shortly thereafter. Westinghosue, as the lead reactor manufacturer, would presumably have had a great advantage over its competitors in selling breeder reactors to the utility industry. It was most probably ior this presumed advantage that Westinghouse was willing to accept the contracts for the extremely low net fee of $1.8 million. As matters developed, the originally planned criticality date in 1979 became unattainable and, even today, we are not able to project a firm criticality date. As a result, the advantage which Westinghouse appeared to have over the rest of the reactor industry has become largely illusory and may disappear altogether. Presumably, as a consequence of uncertainty as to the future of the Project and Westinghouse's possible commercial advantage, it sought to bring its fees more nearly in line with its commercial fees. PAGENO="0253" 331 The Westinhouse claims ~re settled on April 3, 1979. The claims totaled $157,314,282 for alleged changed work already performed and for such work anticipated to be performed through FY 1986. The settlement covered only the period from contract commencement through September 30, 1978, and although it provided that Westinghouse would dismiss its pending claims, that dismissal was to be without prejudice to Westinghouse's rights to further pursue similar claims as they relate to work to be performed after September 30, 1979. The mnount of Westinghouse's claims attributable to the period ending September 30, 1978, was $64 million and was settled for $8.4 million. The fee for the period of October 1, 1978, through September 30, 1979, was also fixed in the settlement agreement and by virtue of its being based upon all work which Westinghouse was to perform during that period, also included any amounts to which Westinghouse might have been entitled with respect to its claims for that period. All subsequent negotiations for extensions of contract 2395 similarly took into consideration all of the work which it was anticipated would be performed during the extension periods, including such work as might have been the basis of reinstated claims and, therefore, resulted in a further diminution of Westinghouse's total claims figure. In connection with such extensions, Westinghouse has committed itself contract- ually not to submit any claims, under either contract #2395 or contract #0003, for work performed or to be performed through September 1981. It is the Project Of ffce's intention to negotiate extensions of the contract "freedom from claims' provisions in connection with any future contract extensions. There was an unwritten understanding between the negotiators In April 1979 that the fee to be earned under contract #2395 for the rest of the work to be done after September 30, 1979, would not exceed $20 million but this could not be agreed to in writing because of the uncertainty about the completion of the Project, and the consequent lack of a definite basis for such a written commiteent. PAGENO="0254" 333 that there was no deloy~ Th* xeasou fo~ not reporting the matter to the IC was thatthe Chief Couna*l, ORO. had deter~thed that the dixectiwes for reporting certain matters tQ the FBI *fld other sitters to the TO were. incon~j~tent vithone another end that in a case such as the Praziet matter, he felt that notification to the FBI was zequired and not to the IC. I advised him that the IC subsequently bec~nt~ aware of the matter by virtue of a pen-. odic report prepared by the Manager, CR0, which is Cddressed to both Headquarters' ~ecurity and the IG~ Mr Stockton made. a point that there had been two directives which required notifi- catioli of possible fraud or abuse to the IC. I pointed out that we were veil aware of at least one of the directives, but felt that the more spec2 tic direct3ve requiring not~tication to the PSI took precedence over the mucn broader language of .the direc- tive requiring notification to the 1G. Mr. Stockton asked nt~ it I knew of any other cases of suspected fraud or abuse on the Project, including that which taight have involved contractor -or subcontractor emplàyeei t told hint that 1 had heard of some cases at Al but really did not have ntuch information on thorn except what I learned from Torn Abruzzo of the tG office within this past Week. Ha a*ked bow I got involved in the matter and I advised him that the Project Director bad told me that Morris ~Yu) Ian of Al bad advised that there wis some suspected wrongdoing in their procurement function and the Direc- tor requested that I notify the IC àf the suspected wrongdoing atid refer him to Julian. Mr. Stockton asked if we have any investigators. I advised that we d~ not, but that we have an audItor. He asked ir that was Reeve and I said yea. ~e asked if peeVe conducted investigations and I advised that he did not but that he sornetjn,t~s conducted audits, but more often he obtained audita from other agencies. Mr. Stocktbn asked if I wou~.d normally know if there had been a case of fraud or abuse and p ad~iised that most :often such a case would be brought to my attention, but 1 could not guarantee that - this would be the rule, Mr. Stockton then made a rather curious otctcinent. lie said that in disCussions with Mr. Caffey, Mn~ Ca.c~sy ..uulu not. rememner tne i~5Z' er netter nr tl~e *1 matter until quite some time after he bad been asked whether there had been any cases o~ suspected fraud or øbuse oil th* Project. I advised Mr. Stockton that I could net believe his statement. Hr. a4~k~ ),sil wiw ~ ~ was ~nvç)Ltreo an ens rteCotl a- taQn 0± theW settlement. I ad~aaed that it was Cob ferguson, Bill Snyder,and possibly Ralph slackwell to some extent. In response to his question, I advised that the negotiations took place in Washington. He asked why, and I told him that I assumed it Was because the authority needed to settle was only available in Waahingt~n. This conversation epded with my prom.tse to cell Mr. ~e.Vht..ti bach ~a~bir. wi ilour i~o give nirn a ragure on tue amount of the W settlement and the amounts of the claims that Ve~ settled. 89-4G5 O-82--22 PAGENO="0255" 334 At approxiaat.)y 12*00 noon, I called Mr. stockton beok and advised him that the clairne that were settled were in the amount o. $64 million in addi~iona1 fee and covered work through Septem- ber 30, l978~ I made it clear that W's claims were man amount considerably higher than this, but tEe claims assumed performance' on work through several years beyond T~l979. I pointed out that the' settlement was in the amount of *8.400,000 for the work performed through September 30, 1978. Be asked if I knew the amount of fee paid ~ through FY-1919. 1 advised that I Would have to obtain th~1 fj~ir~ en?! rn1' him back. fle then asked for the gross figure which ! ha.~ ~ ~ i~.he out years. I advised him thAt I would have to obtain that figure also, and call him back. He asked that I aloo obtain the fees which were tobe paid W for work in FY-~19aO and F~-l98l. At approximately l;45 p.m., I again spoke with Mr. stockton and advised him of the following: A. The fees paid w through PY-1979 totaled $23,077,000. but that W bad earned another $200,000 in retai~e4 fee. B. The total of all W' a claims through' the out years was $157,314,282. C. we did not have *pecific fees for F!-19B0 and VY~.t9Si, but that the fee for the 15-month period of October 1, 1979, through December 31, 1980, was $7,400,000 and the fee for the period .~anuary 1, 1981, through ~7une 30, 1981, was *3,150.000--resulting in a total fee of $10,550,000 for the 21..month period from Qctoler 1, 1979, through June 30, 1981. Mr. itockton asked if I knew anything about the ~ompetitibn *bstwee~ Al and 3~onter.'Whcc1er for the steam generator contract. Be advised that it bad been a competitive procurement to begin with, but a do~ision hadbeen made not to continue with the competition but to select Al to provide the steam generator. I advised that I may have seen the steam generator subcontract but I can't be ouro that 1 did~ I stated that I believe the matter had been handled in Headqu~rters and that any decisione about the selection of a supplier were probably made there. Me indicated that he felt Mr. Caffey had been'tnvolved in the decision. I stated that I did not think so because I believe that the deci- sion was made prior to Mr. Caffoy joining the Project. He said that the decision wan made in September 1975--after Pir, CaffeY had Joined the Project. This Conversation was `closed with the statement th*t he would cell me again if he had "any Lurther questions. ,..v,t..,.., ~.* PAUL ~. SI1LEr.~O~ Paul H. Shiemon OC:81-112 , Counsel car' I.. V. Caffey S. V. Ahrends C. C. Crisaffe * P. T. Marquess J. T. Reeve V. P. Snyder PAGENO="0256" 335 beparrmeri~of E~mr8y - CUnc~h RM!r BdrrReecto,~ * Plant Psoject Office RO:BoxU Oak RldgeTcnnessee 37630 June. Z'2, 198].. * S. W. Ahrends, Acting Deputy Project Dr.ctor * WESTINGHOUSE C~.MM~ - T ~.`i1 4 o~ro 4.4 40 *]a*~t~ .n~ ~ uC s~y memUL aziUwS i.o 4.).o £~Ioc~ di~~ ~ ~ ~ ~ my pftone~-Conversat~ons with P. Stockton Qf Congressman P~ngefl's office. In that memoS- ea~e~ `~ tt l-~r' !~.e1i ~ ,ettlement-ceve;ed c~a3.ms tota1~ng 864 fl%lillon for wotic thrf~I~G~~ r4'øm!~ør ~, ~,97$ / I a'so mentioned that the tota2 of all of Westingh,uea's alaima i~ougb the out years (through P'Y*1986) was $157,314,282. This cotii.ci leave the impression that a balance of $93,314,292 in unresolved Westinghouse claims remains on the books. This is not the case. In each contract extension since the sett1em~nt, we have negot~- ated the inclusion of provisions to the effect that no claim for a Ittaterial change in the amount or character of the work may be filed by Westinghouse for any work performed during the period of that extension. AC a result, the portions of Westinghouse's claims that would `have been attributable to the period through 7~ne 30, 19S~ (the cu~ent .xpiraticrn date of the freedom from claims provisions), arc no longer viable, we expect to cont3.nue such freedom from claims provisions through further contr&ct exteru~ions. (~L4 ~? Paul ~. Shl.emon * ` 0C:8~-l18 Counsel CC;, L. W.. Caffey PAGENO="0257" PAGENO="0258" 33? MISCELLANEOUS DOCUMENTS RELATED TO THE CLINCH RIvER BREEDER REACTOR INVESTIGATION NINEVY.4EVNHYH CONONRIS 00052003 RAY 034000005,3 COCas0 JOHN 0. DINOIU.. MICH CWJRMAN pooo.(t0a)ou..45t JIM 000000. 005. 5000 L. MASKS. PA. ~"~o~oos. ~ CONGRESS OF THE UNITED STATES sooss. r. ~ooowrr. a. ~ ~ HOUSE OF REPRESENTATIVES MOE 30030050. JAN00 0. 100000.0. 00.0. SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS 0100. - OF THE COMMITTEE ON ENERGY AND COMMERCE WASHINGTON. D.C. 205t5 September 2, 1981 Mr. *J. Dexter Peach Director, Energy and Minerals Division U. S. General Accounting Office 441 G Street Washington, D. C. 20548 Dear Mr. Peach: As a result of recent hearings by my Subcommittee on the Clinch River'Breeder Reactor Plant, I have become most concerned about the way the project is being managed. Among other things, I am concerned about the methodology used by the Department of Energy, (DOE) and its prime con- tractors in developing some of the key components for the project. Unless DOE contractually specifies the' schedules, prices, performance requirements, and technical sp.eciftca- tions for the contractors and subcontractors `niarn.tfacturing the components for the Clinch River' Plant, then enforces the contracts, the potential for cost increases an4 schedule, slippages is greatly increased. `Moreover, unless the re- actor components going into the plant are adequately tested prior to use, the potential for Cost and schedule overruns is even `further increased. Consequently, in view of the information already developed by my staff,, I would like you to review the effec- tiveness of DOE's efforts in assuring that the major compo- nents now being manufactured for the Clinch River Plant will meet their intended purpose. The results of such a review would be very helpful to the Subcommittee if they were availa- ble for the fiscal year 1983 DOE budget authorization delibera- tions - - about March 1982. As you may know, I announced at the Subcommittee's June 20, 1981, hearing on the Clinch River Project that I intended to ask for a technical audit of the project. , Please include the technical audit in your review of the Clinch River Project. This audit should determine: 1. Current technical status. 2. Technical outlook, including definition of technical questions needing answers before definitive, bindiflg fixed-price contracts can be written for a working, licensable power plant. PAGENO="0259" STATUS, CURRENT PROBLEMS, RECOMMENDED ACTIONS, * AND FORECAST FUTURE CONDITIONS 339 Strictly Private POSITION PAPER ON LNFBR PROJECT July 1973 Strictly Privcito PAGENO="0260" TO Distribution. __________ FRor~ H. H. Young * Corporate Positi~u Reqarcling L~1FBR ?rojcct j.ttached for your review and corrunent is a final ve~s~on of a * position paper I have prepared on the above subject. Tile pa~er recommends a genera]. course of action regarding, the L~11'BR Project which ~ believes shouldba taken. However, because of some of the implicati~zis -of thu infoxort- - tion contained in this paper, we believe it appropriate that a corporate position re9ar~ing the LMFBR Project bsconfirrr~ed. xt is our desire and intentiO~to meet with Mr. Roe on the afternoon of July 17, 1973 to discuss the overall corporate - ~os~tion which- should be taken. I woul~ also like to meet ~ ~ - ~ ~ the positions and recommendations. In ~ questions and comments can be r~solved~rior to the meetieg. with Mr. Roe. - - - - * - . - *. Because-of the sensitivity of' th~ information contained'herein. you are requested not to discuss its content~.y,j~,~~e `her where it might. b~ `sighted r~ others S. Baron * - F. Sccchia/S.CaP1~fl/C.C0~ ~r. F. Byrne * - P. IinLhwQitc/C.~4cTarla~'~~ 11. H. Bose ~. P. Stewart - 340 DATdZ 7/6/73 CONTROL- ~q}IY:sv Ds~ibutio~2: PAGENO="0261" 341 the best ch~nce of' long-tern success on the project an~ to dcc. meat ou~ situation forlater possible scrutiny. Third our po. `tions ~hou1d be developed in a manner to provide us with thc proper financial return in the. most effective manner. To the above ends, firm positions should be taken by T~urnz and in the next few months on LMFBR Project schedules, costs; fcc, and Reactor Manufacturer and client support of our of fort~. T- positions will have to be timed and presented well and `taken ir. consideration of future dovelopment~ on the project. however, even if carried out effectively, they .niay well result in con- * siderable conflict with PMC, AEC, an~ Westinghouse,- protracted negotiations, and probably short-term unhappiness with Burns ar~. Roe, since in the n9ar' future we will~ have `to be saying that: 1. The project schedule will be missed by at least two years on events to ~ * 2. j~0ur total long term project costs are now expected to be ~ aver $40 `million rather than the $25 milliøn originally * L'est'imated because of drastic changes in the way the job is ~or~an~zed ana is proceeding. * * : 3. We want a fixed fee based on a fair percentage of the ~sti- * mated cost of,~Over $40 million.. . ` . 4 The project capital cost estimate i~ 1k~l~ to ~o The. site selested is. likely to be very costly to prepare and could even' be unsuitable. 6. Many of the planned Reactor Manufacturer, engineering effo'rtc are not satisfactory to support our design work. The above positions should be taken when necessary to give us th best chance to do a good job, protect our corporate' integrity ar~ reputation, assure maximum financial return `to. the company, and preempt a poasible later bad situation.with the utility industry and others in which i will be easier for others to blame Burns and Roe for project p~oblems as discussed therein. Because of the' many present and potential political and liccnsir'~ problems on the project, the client will be~ likely to desire to blame project delays and overruns on t))os'c types of pro)4cn~s. We should', in our positions, take proper consideration of the delays and disru~~tion `caused on `the project by outside forces. We ~~zill al-so have ` to take our positions in documented ways whick provide the but chance for adverse information to cone 3nto the possession of those who desire to kill the `L4i~Bfl I)rocR~an. i~ the same time, we must r,ccogni7.e that the Lt4FI3R Demonstration Plant Project ~ill in all likelihood be ~uhjcctcd to clone c~ongrcssional, public, and, utility industry sàrutiny in future PAGENO="0262" 342 years. Therefore, our documentation for the record must be ~ ~ ~~~gctxvc and profes~io~f ana i~co olished ~n a `i ty ~z ~ch `ill _proteqgur~ntcre~andr~putation. This will be a diff3cult and delicate task. Ou~ rEi6~tiparticularly difficult be- cause we are in a very subordinated position on the project and do not have good inside `information and visibility on client aspects of `the project. Notwithstanding the above, in spite of the job Burns and Roe does, the issues we raise, and the record we document, most actions on ~-..the project are out of our control, and it is already clear that. p~ect results nil be c>trere~.J poor ~titrin ome following situation ~fs ~ LMFBR Project * (assuming the project proceeds now): * : . l.~ The start of construction as scheduled ~iill not be~able' * occur because: . * . a. The licensing, variance required will not `be a~prov~c1 because the overall environmental impact of Lt*1FBR'i will not have been resolve&as `reqtiired `by the recent ~`edcral appeal~ court rifling. ` b. ~\ Pi~C* will nbt' be able to certify before start of coz~- ~struction (as they must) that the plant can be built' * . . within current estimates~. . . . . . . ... *`* * `Burns and Roe engineering and design work `may. be slowed be- cause of. licensing and funding pr~bl~ris which arc likely ~o - be involved with the Congress and the EPA and because of - ` limited AEC funding fdr LMF2~ versus j~cfun~4~cLrequired to .bilout~IF. The course of project work is likely to~ * `subject to continuing similar hold-ups and delays to those which have occurred over the past six months.. * 3. The organization of the J~.EC and the PMC-AEC relationahip ~ could well have changed considerably, with an effect on our work'.' During the next year, AEC leadership of the LMFDR Demonstration Plant ?roject is likOly to be hesitant and preoccupied `with other patterS, and the overall project is laYely to bc boood aO~fl 4. Design reviews end changes to reduco capf.tal cOsts arc likely to be in progress based on project cost estimates and better * ` utility industry realization of some plant de~S.gn features. In addition, tho safety approach to the project is likely to hove changed, resulting in consic1er~wlc design changes. These are l~:kel~' to hold 11P c1osiqm and delay the project fur thor. * 5.. The cost of i~r~pnr5~ the Clinch flyer' site will have been proved to be substantiallY mOre than estimated. ~ ~itc costs and ..prO1)~Cfl5~ could, be suc1~ mis to indicate a change of * site. . . * * PAGENO="0263" 343 -4- 6. Burns and `Roo~s reputation on the LNFBR Project nay. be worse than the excellent one we enjoy today, even if we do an out- standing job. Our reputation will depend on how skillful we are in handling and explaining the above situations and in. executing our engineering work. Within the next year, we should follow events on the LMFBR Proj- ect closely and reassess actions required. The steps we take will have to be timed properly and be. based in part on client reactions and events. ** It is important that additional new nuclear power business other than LMFBR be secured to fill In for nuclear projects phasing down and the slower than anticipated pace of I2~FBR.* A special appeal to.key.utilities build around an explanation~of our real LMFBR workload situation shoü~.dbe carried out to counter the present impression that we cannot handle any other new projects. PAGENO="0264" 345 apparent A~C agreement to notify SIPI before signing the contract is a dangerops one if true, since that would permit a preliminary injunction recttaining of forts hcrn~ the dontrect is signed rather than.after, and would -~ thereby not permit payment to Burns maci floe or other project participants for past work. 4. Because of the above developments, theAEC has i~uthorizc~ an extension o~ our current temporary funding arran~jer~ent * (base technology program work) for a period of two months. This extension will permit continuation of our L~:rBR * * project work at the current staff level of about ~o peon]: but will not permit th& return of additional peoolo.to ~ * project staff at thistime. Over ~0 othmle to he r~callci on July 1, 1973 will now have to he continu~.c1 oh otnor we: * 5. If and when the project agreements and the PMC-A1~C con- tract a~e signed, we have been told to expect thr~e-sonti work authorizatiOns from PrIC and Westinghouse which would permit buildup to about 100 people at the end of the period while contract negntiatior~s proceed with .us~ - *B. Burns and Roe Internal ConsideratiOns 1. Asof June 30, 1973, Burns and Roe will .have spent ove~r S800,000 on th~ LMFBR Project this ycai. Of that amount: * . a. Z~bout $575,000 is authorized and funded under a con- tract with Westinghouse. The contract hoc boon * j-', negotiated and signed. . Payment by Westincihounc of 0 first invoice under this contract is imminent. Pay- * thent of sobseguent -invoices each ped should be routine. The funds provided to us. b~ the J~EC under * . this con~act are from th~ LMFBR base technology pro- * grar~. Their authorization for use hyue on the T24~ * . Demonstration Plant work w~ are doiHg could bu o~ questionable legality. If audits of fund use were conducted, certain members of the AEC con)ci be in * *- trouble. b. About $165, 000 was exp~ndcd under aut:hori~ation by PI1C which was contingent upon cxeculiOn of the P4C-; * contract~. Payment by PMC wou3d bncome due to w; on aftdr the contract signit~g 1~z noted above, it is * imuortant to Burns and nec whether ~C aijns the P~iC-hI~ contract and is then rezt:rainc~d by an injunc. * tion or ~hethcr contract signing in de);~çc1. flopc- * fully, :AEC will take the former rou to and frc'o up * funds ~1rcady owed to project pnrtieipont~ OV~'n future work is restrained. Whatever ,~fl~C? C~1fl brought to bear should be applied to ~ t:hC! conL~ signing take place. PAGENO="0265" 347 -s-H 7. We initially projected LNFBR Project billings of about $10.2 million for the 18-month period from Jaiuary .1, 1973 through Juno 30, 1974. Billings arc now e~pccted * tobe about $6.7 million. There is some chance of a further slowdown as discussed above. In the long run, * ~ however, the total amount of billings and the amount of fee should be greater than originally predicted. 8. Engineering Services.reports that other potential clients are refusing to consider Burns and Roe fur future busi- * ness In the belief that LMFBR has, loaded the company down. In actuality: * a. Corporate workload permits new business * b. Less than one-third of planned personnel are actually now assigned to LMFBR work c. The scope of some Burns and Roe work has been reduced * by assignments to Reactor Manufacturers * ,d. `Holmes & Narver shares in our scope-of work. However, securing new business may be a continuing probler on .whic~h special .measur.es must be brought to bear. 9. .PMC and ABC have disapproved use of scheduled overtime fe: * designers and draftsmen as we requested because of market conditions and our inability to hire sufficient designers and draftsmen. An appeal is being prepared b~sbd on our problem plus the benefits to the project which might re- sult from schedule acceleration. Without use of schedu1e~ overtime, It is not clear that the project can be manned and the contract performed. Our market situation may wel:. be worsened by recent actions of M. W. Kellogg to set up a nGw design office in Hackensack at Route #4. 10 * One of the prine cónsidei~at~ions to Burns and Roe with ~.- respect to the LL4FBR Project ~5 that the corporate repu- tation not be damaged by the results of the project, sinc~ it i~ in large measure a key to ou~ future growth. Bechtel has been pilloried for the overall F?I'F renults and schedule delays. however, Bcchtol has ,ipparently not b~cn damaged too badly by the FFTF job bccau~;e of its sir: and the fact that it is an 7~EC job run by i~n'r, which does not enjoy a good reputation with the utility industry. Burns and Roe is more vulnerable on Lt1FI3I~ than Bechtel on FFTF because LmL~BR is a much larger part oJ our business and because it is a job for the utility industry. PAGENO="0266" 348 -6- C. client Organization and Management 1. When Burn~ and I~oo bid the Li'IFBR Demonstration Plant job, it was to be accomplished under the direction of and con- tract. to P~C. Although AEC involvement was expected, it was not provided for in the Request for Proposal on which our proposal was based. Since our selection for the job, the nature of the job has changed drastically to one in which the ABC i~ in total charge of the nuclear Steam Supply System (NSSS) èf fort and PMC only the Balance of Plant. The client organization for conducting the projec: was concocted by ABC (Dr. Ray), TVA (Mr. Wagner),. and Commonwealth Edison (Mr. Ayers) as a means of satisfying JCAE demands for ABC control ove~ NSSS technical decisions and use of public funds. Attachment 1 shows the client * . organization and that of contractors on the project. It is more complex and has more divided responsibility and * interfaces than for any previous nuclear power plant * . development and is not favored by any of the project participants. . . car and acce c to the ABC.. This - leaves the ..job run * lnrgaly by the ABC from i ~ peis~uLiv~. Ev~ti in those cases where PMC clearly has the overall responsibility and * *. *should be taking the lead, it is not, partly because of disagreements with the ABC. There is no ~`client" represent~tive whom Burns and Roe can help maintain the utility industry position. It is not clear that PMC is telling the utility industry its real expectations and fears about the project. The PMC General Manager ~ Burns and Roe to at 3. The ABC (Division of Reactrr Research and Development or RRD, formerly RDT) Is trying to run the progran. Recent similar programs run by the same group have been failures. The LMFBR Demonstration Plant Project Definition Phase(PDP, effort produced few useful results. The FFTF project's cost and sch~~l~reSultS arc a dis.~.ci, in some measure ~ due to ABC. * There is every indication that the ABC will try to run the LMFBR Project the sa~o way as FFTF, with the added complication of the multi-client/contractor approach. Tl?e ABC does not make decisions which are PAGENO="0267" 349 -7.~ necessarilY in the interest of the utility industry; therefore, the ultimate result of the LMFER Project may not be tothe utility industry's liking. The AEC decisic. making process is not oriented toward construction neefa * and ~n FFTF ha~ been characterized by long delays and indecision because of its slow-moving burea~cratiC struc- ture. The AEC is also preoccupied primarily with compone:. * and EM matters. 4 * There have been significant recent changes in personnel and matters affecting the AEC. Therefore, its leadersh~' of the ~rojectin re j~_future is expected tc * *be hesitant and quastionable. Some of the changes are: a * Mr. Shaw has retired as head of RED and has been re- placed by Mr. Neinzek, who is known as a better * administrator, a healer and compromiser, and less of * a technical man. This will mean some changes in ~2C personnel and approaches. This will take a consider- * able period of time to shake out and will likely mneaà delays and changes in decisions.. In addition, the * . PMC-AEC relationship is likely to change somewhat with M~. Shaw departed. This also will take time to * shakedown and is likely to ~nvol~re conflicts between b. Mr. Ramey, whose term as an AEC Commissioner expireñ on June 30, 1913, was not reappointed by President * Nixon because of Dr. Ray's actiye opposition and has retired. Mr. RanGy was a strong ~nfluenee on the * course of the LMFBR Project. In addition, he was ou- highest i~v4,~co~ta ~ ~urce of inside * information. No successor has been named. * c. On Juge 29, 1973, President Nixon proposed to reor- ganize the AEC by: 1) Making the non-regulatory functions of the AEC part of a new Energy Research and DevelopmentS * Administration which would be responsible for all types of energy. Dr. t~ay is a loading contender * to head this organization. 2) Making the five Commissioners of the AEC the head * of a now Nuclaar Energy Commission which would bc * responsible for only licensing and regulatory activities. No also proposed a new Department of Energy and Natur~ * Resources which w~uid relate to nuclear power program~ in some undefined manner and the formation of a new Energy Policy Office in the White flousC, headed by Colorado Governor John A. Love. 89-40.5 O-82--28 PAGENO="0268" 350 -8- Two things seem clear if the Proposed changes arc accepted by Congress. The vigor of AEC efforts to develop the LMFDR may be diminished since a high priority task of the now energy administration seems to be coal research. Also, with licensing and regu- latory functions separated from development, the chances for expedited licensing would b~ much ~orse. d. The JCAE has historically played a strbng role in thc LMFBR program. The future role and relationships of that committee are now uncartairs. A poor relAtiodshL has developed between its leaders (Mesars; Holifield, Hosmer and Price) and Dr. Ray over Mr. Shaw's demise. However, it is not clear that the committee leedershi has control over its members. Further, since nuclear energy is likely to be made a part of overall energy programs, the committee's future role is unclear. If a new Congressional committee were given cognizance over the LMFBR program, project reviews could be extremely difficult in light of the other information contained in this paper. e. Overall responsibility for and approaches to light water and LMFBR reactor safety matters have been unde. * the direàtion of RRD and Mr. Shaw. Recently, light water reactor safety matters were transferred from I~r.D to a new group under the General `~anagez headed by Dr. Kouts. We have reason to believe that with t'lr. Shawgon~,LMFBR safety matters may also be trans- ferred to Dr. Kouts' group. Therefore, changes in AE approaches to LMFBR safety are likely. The group headed .by Dr. Kouts is expected eventually to be transferred to the Nuclear Energy Commission if that * organization is approved by Congress. 5. The overall approach to LMFBR reactor safety matters has to date been based on FFTF approaches and policies es- tablished by Mr. Shaw and RRD which are in many ways con- * trary to those of the AEC Division of Regulation (DRL). For example, Westinghouse and Durns and Rne have been told orally by RRD.and PI'~C that we should not comply with the requirements of 1OCFRSO Appendix A (General Design Requirements) for Lt4FDR where si~ch requirements arise from ~eoretical DRT~ safety considerations and would not * necessarily provide a simple, reliable plant. PAGENO="0269" 351 -9- This approach is being fostered in f~ill knowledge thet it may not result in meeting DRL's licensing requirements an~ that many issues would have to be taken to the AEC Corr~nis- sion~rs for rcsclut~on. It is part of a power struggle / between parts of the AEC~ The LMFBR Demonstration Plant ~7~is viewed as.a test case in which RRD and PMC can knock. II out many theoretical safety-oriented design features whic-. ~cothplicate commercial plants and meke them more expensive, and inwhich a new approach to safety and licensin.g can be established, in addition, the Demonstration Pi.ant is viewed as having to be consistent with FTTF in order to justify the approaches on that project. unfortunately, some safety app:oaches on FFTF were apparently decided on because of the severe cost bind that project is in. WestinghOuse design approaches have been influenced * strongly by this approach. With Mr. Shaw departed and * further AEC reorganizati~Ori a possibility, there are~* * likely to be significant changes in direction on safety * approaches. A number of existing approaches based on FFTF practices are already known as potential problem_araas. These in- * dude the lack of specific sa~ ~3~eria~f6? the project: f. .. present emergency core cooling provisions and natural ,V/ circulation ass~m~ptions; the current assumption tha a *-~7\ double-ended pipe break is not a credible accident; the * / asournptions as to the extent of theHypothetical Core Dis- ruptive Accident OiCDA) and features needed to contain it; * the effects of sodium spills and fires; radioactivity * release above the operating flobr; plutoiüum leakage and * . levels at the site boundaries; and the ability to design * an effective system to contain a core and reactor vessel * . ~ At ~~iS tine, little work has actually been * . accomplished by Burns and Roe in these areas, which are * primarily Westinghouse responsibility. However, current * . assumptions strongly affect the plant arrangements which are proceeding.. The approach by Burns and Roe to date * is to bring tO the client's attention each known case where DRL requirements are not being met, along with * pertinent recommendations, and to cause a specific assess- ment and decision in each case. * 6. The ABC has scheduled issue of a revised, comprehensive Environmental Impnct Statement on the LMF}3R program within eight months. The schedule is essentially impossible and will devour the attention of the tOp personnel in RRD for the foresecablo future. Therefore, proper atteniion will PAGENO="0270" 353 3. Experience to date with the clicnt/contraétor arrangement * planned for the project has shown the following: a. Westinghouse is supposed to be the priir~e contractor for the NSSS and to d~.rect AX, GE, and 3urns and Roe, * However, it does not provide th~ vigorous leadership * required. Part of this is the experience of the * . Westinghouse personnel involved (only FFTF Project or * LMFBR research) and part is th~ role AEC. will permit Westinghouse to play. Westinghouse has been very * upset to find that AEC apparently jntends to provide. the real direction to Al and GE, perhaps via existing contracts with AEC. Westinghouse also is more in- terested in p1~iying ~ a with the AEC and the ~ is~ucC f~eces5ary ~\ and being straightfor~zard ~73th the utilities ~garding * ~ atu~ of p~giç~t~* TO date, Westinghou~Th~iT duckec1~Ehe tough issues and left ~urns and Roe to defend and win the po~itions that needed to be . taken. b. Westinghouse, GE, arid Al are doing a poor job of * developing basic ~riteria, operating philosophies, and * the necessa±y engineering informatioiv needed by ~urns * and Roe in many areas of their responsibilities, * partially. because of limited funding and partially b~&ua~ ~ their basis ~ppzc~chc~. The:sitt~ation i~ * compounded by lack of PMC and AEC. agreen~o.nt on * . operating philosophies and basic approaches and the * : ~ resulting indecision and lack of direction.: Prior~ ;, Bu~ns and Roe problems betwo~n* t~ç,~nginee~~no Project Operations bivisiens over CF na ee~Th~ent 4iill pale in co~ipai~son ~i~HtiTe LF~ZR ~ i~~o~ingT~rms and Roe .c~ntrol over dxawing * àontent and issue schedules is alreadysigr~ificai~tly * * affected. . - : * . ~,c. The manner in which responsibility and authority are * divided has resulted in a ~situation where no one is. * really running the LMFBR Demonstration Plant effort and making it proceed properly. Necessary decisions are i~iot beir~ made and meetings are characterized by vacillation and equivocation on the part of PNC, AEC, and the R~4 `s. The reuults are a confused~ sluggish reaction by the organizations involved. The above, combined with recent Fiscal Year 1974 budget cuts, makes it absolutely clear already that the project PAGENO="0271" 354 will proceed in a manner in which late results and cos{ overr ins will be serious. These events are out of thern control of Burns and Roe and will occur even if Burns ar~. Roe's performance is outstandIng. We are continuing to document in a nice way our lack of support and direction, However, it is a painful process with little positive reaction. B. Project Budgets, Manning ~nd Fee * 1. The LMFBR Project started out as a top national priority, crash effort to complete an L~FBR Dee~onstration Plant by 1980. Since then, all indications are th~t the project pace will be limited by ABC funding decisions between PFTF and LMFBR and that many, of the compromises that have made FFTF a disaster will be dominant~ The NSSS portion of the project will be directed in ways best suited to manipulation of ABC moneys between FFT~ and LMFBR. 2. For example, Burns and Roe submitted a budget of $~,.5M. for FY 1974 to meet the project schedule, includin~ $L5N for the NSSS effort. ABC has decided on allocation of * available funds between FFTF and L~'BR. Burns and Roe will be limited to .~3M for the NSSS, less than half the amount requested. Westinghouse budgets have also been cuL in half. It is Uk~ly thft FFTF dcnar,ds for funds wiil continue to grow, that FFTF will continue to receive top priorjty in ABC decisions, and that budget cuts will also occur in future Fiscal Years. - 3. If equipment orders are not placed until LMFBR program * - environmental questions are resolved, our design work will he sloved drastical3.y. For example, if the turbjne generator is not ordered, little Balance of Plant design work can proceed usefully. *., . - . . . 4. A heavy manpower application axid engineering and design effort early in the project is necessary if the project schedule has any chance of being met. Burns and Roe pro- posed on that basis. Startup dolays.and the budget cuts and other events described above are preventing that approach and will c~rastically affect the schedule. En- closed as Attachments 3 and 4 are. a set of comparison curves showing what happened to Bechtel manning on FFTF, what we proposed, and what is happening to us on LMFBR. * The similarity to the effects on Bechtel is striking. The Juu wi.~.i. accdi L6~t CflO ~.nCZt~c3G;,c cue cc buegeci~ and manning. :. . PAGENO="0272" 355 5. Bechtel costs grew from an initial estimate of $14M to.~ âurront estimate of $42t4 (which we believe must grow further) in large measure because of delays dnd major rework. Our initial cost estimate of $25M was based on minimum rework and delays. We are presently reéstimating our costs for purposes of contract and fee negotiations * and expect the revised estimate to be between $40M and $50M for the following reasons: a. The arrangement for client management and conduct of the job has changed drastically from that specified in the RFP, going from a simple job managed by.PMC to a complex one largely managed by AEC with most AEC funds not flowing through PMC. This arrangement in- * volves multiple approvals, repeated studies and long delays in decisions, and contributed to massivi cost increases on PFT~. b. Contractor responsibilities for the job have been divided. among Westinghouse, Al, GE and Burns and ~oe. * This leads to a ~omplex engineering .interf ace problem, a problem in obtaining component design information, a problem ib completing drawings in a timely manner, and considerable coimeunication and liaison erc,h).em~. We know that much of the work presently assigned to the R~i s will evolve to Burns and Roe and not * necessarily in a formal, controlled manner. We also ~nust satisfy ourselves that the RN engineering is correct if we are to be responsible for drawings. Our * * experience to date with RN-furnished information is that it is incomplete and requires considerable effort on our part to develop needed data. This type of scope change is extremely difficult to address as a contract change because of its bits and pieces nature and sheer v~luxne. C. We will perform our work under two to four contracts * (with PNC and Westinghous~, and perhaps with GE and * AX) rather than one as called for in the RPP. Zn addition, we will be required to administer our work * in accordance with AEC procedures (l8~s)~. Thus, far greater administrative costs are involved. PAGENO="0273" 357 -15- - h. The start of the ~ob has b~er~. delayed by the hang-ups ~in the project agreements. We will, have spent over. $111 before the real sthrt. of the job. It ~h~~1d benotcd. tha't even though our scope of work.was reduced by ~` 0-15% by assignments of ~csponsibi.lities to the Rt1'S, our estimate of the effort required during. PY 1974 for the work assigned to us was about the same as that in our proposal because of increased effort on the work remaining with us. Westinghouse èoncurred in our * estimate for'FY 1974 based on-an independent estimate by them. Therefore, the reduction in our scope by assignment~ to the RM~s has been at least offset by a greater amount * of effort now recognized in the work remaining with us. 5. AEC is exerting strict control on RM manpower application. Manpower buildups. are being limited until experience4 people become a~zai1able fromFFTF. This is likely o - drag out even worse than preser~t budget cuts. . This will severely affect the engineering input.~o and support of our drawings and their schedules. 6. Burns and ROe proposed a 7% ~ee.'f or LMFB~.. It appears~.. * based on B~chte1 FFTP experience and recent checks of A~c practices, that a fee in ~e~anqeo~..4-~% ~nay.he tha max~nuni w'-ich ~n ~e eAmected ~urther all indicat~ons are that ~`MC s measure ~f its negotiating success will be a fixed fee from us for the total job of a very low amount. On an estimated co~t of ~25 million', our fee would be $l-l.5rnillion or less. On-an estimated cost of $45 millic also important since LI~P~R will be a substantial portiOn * of our workload for years to ~ome.. . P. Project Schedule * * 1. ` - 1. In mid-1971, President Nixon set a national goal of demon- stration of breeding by 1980, interpreted to mean by Deconbêr 31, 1979 or earlier. This timetable is still - * being maintained by P1-IC and Z~C. however, in.the inter- vening two years, no c~ntrncts haye been let. It is abOut 18 tnonths since the Commonwealth Edison/TVA pro- posal was accepted bnd over one year since contractor - * proposals were submitted. No planning for work or * personnel assignments subsequent te July 1, 1973.has both * authorized'. Needed and irretrievable time has been lost. PAGENO="0274" 358 -16- 2. In May 1973, PMC(Shewski) informed the Breeder Reactor Corporation that a tentat3.Ve 64-month schedule had been * established for the LMFBR Project (measured from award c± contractS tO initial criticality). He was referring to Westinghouse document de\Teloped in February 1973. Burns and Roe did not and does not agree with that document an: * is so on record. * 3~. Based on recent decisions and expressed intentions of Pi1C * and AEC and on delays in resolution of contract and other * matters, it is now apparent that the project schedule wL ~ be missed by at least two years or more (making it at least a 96-month or ei ht ear schedule or longer). * Corn- pletion of demons ration of breeding is now i e y in late 1981 rather than late 1979. Sonneof the principal reasons for this conclusion are: *, a. The delays noted in 1. above and late manpowe~ application in FY 1974. b.~ Problems resulting from the project budget and cien: - and contractor arrangements described abo~ie. * c. The recant i~iC dccizian to utilizccxtar.;iVc petitive bidding of individual construction packages * to construct the plant, which adds a year to the schedule. d. An extended conceptual design period due to decisions to not utilize the Westinghouse plant design. This period keeps growing longer. ~. Site rock conditions and delays in the site investi- gations due to lack of funds. * Delay in equipment ordering would also affect the ~chedu 4. In addition to the above, LMFBR schedule durations are predicated on unique and timely licensing actions by the AEC, which 1~iave been assumed to be completed up to two years earlier than present cxpcricncC for light water nuclear power plants. The schodule assumes receipt of * * ap~rovel of special variances for site grading and excava- tion and for substructure installation prior-to receipt of a Construction Permit. This schedule could be affect: drastically by the following: PAGENO="0275" 359 B a. The recent ~`edcral appeals court ruling on the ~IPI suit moar~ that the i~EC r~u~t obtain acccpt.nice o~ total long tern environmental effects of future brcc reactors compared to other alternatives in order to license and construct the L~4FB~ Demonstration Plant. * It is hig~ily unlikely that such a matter ~;ill ~ settled less than a year from now whcr~ a variance to start clearing of the site is scheduled £ or approval. Therefore, site work is likely to be delayed and the variance approval concept is likely to fail. * b. The overaU approach to LMFBR reactor safety mattcr~ is likely to be changed based on Mr. Shaw's d~parturc and possiblefuture AEC reorganizations as discus~ed above. Therefore,.changeS in licensing schedules are likely.. - . . c. it appears lIkely t~iat the Regulatory group of the AEC will be made independent of the development part of AEC soOn. This would rn~an far les~ chance of early and unique ~.icensing approvals. * The site conditions described below~'may delay establi~ zeent Of the. suitabLlity pf th~ site. 5. Currei~t schedulesfor light water nuclear power plants are similar to th~ above dc~cribed.current estimate' for * ~ * / `fl~ensing procedures, has a favorable site,: ha~ a simpler K.,' contractor arrangement, and is being constructed by force account (no competitive bidding of packages) -. 6. The origiz~al FFTF schedule called for completion about' three years earlier than pres~ntly expected. Bechtel ha's * * -been pilloried by AEC for the schedule delays 9i~. ~FTF. * * The attachcd~ Bachtel~rnanpower curves show part of the xeasons why the schedule was delayed. A similar slower-~ than-desired manpower buU.dup is being forced on Burns * and Roe. Further, Westinghouse has already started its efforts to blar.ieBurns and floe for schedule delays. There is no substance to the ~stinghousc schedule. delay coa- * * tention, as documented in a recent Burns and ROe letter.. )_..i~_L ~ .~ sclcctcd orthc.Lt:~FPR Demonstration ~ the~ V 5~1ecLcdIrora . . ~. . -. ~ plant based on itS topogal~Y~~'I~ rom- ditioris. The ~i~ability of the site will not be con- firmed until after an cxtcnSIVC soil boring OgraTa. Th~: is n.po~sibility that the nito ma~y not be acceptable. A~ a TUIfllflflfltl,: site dovclopn~Cfl~t co~t~ will be high. The reasons fc~r the above conclusions ore as *~oilows: PAGENO="0276" 361 B Burns and Roe on July 1, 1973 when the $75,000 was ex- pended and .Cornmohwealth Edison would not provide addi- tional funding. This will delay establishing building locations on the. site and the development of a.Site Safety Report, which will be pnepared for early submission to the AEC (ORL) to confirm the suitability of the site. The Site Safety Report was scheduled unilaterally by AEC (RRD: * to be completed by June 30, 1973. I~ cannot now be com- pleted until early 1974. Based on the site conditions, * described above, discussions,wit.h DRL regarding site suitability are likely to be long and drawn out, leading to effects on the licensing schedule. The early, clean * acceptance of the `site by DRL hoped for by ABC (RRD) is not likely. . 9. PNC has apparently decided to invoke many RDT Standards in the turbine generator specifica~tion rather.t.han the * approach with options recommended by Burns and Roe. This * will mean long delays in turbine generator award and delivery and in our Balance of Plant design ef~ort~ The sane philosophy applied to other Balance, of Plant corn" ponents will also mean long delays in them. G. Project Capital Costs 1. Burns and Roe has had no access to the LMFBR Demonstra- -. A tion Plant capital cost estimate to date. PMC must certi~ * before construction starts thai~ the plant can be built within the present capital cost estimate: Burns and Roe j~ now knowledgeable of the following items which could * cause the estinate to be exceeded: * a. A two-year delay in the schedul~ could add $60,000,0C or more to the cost due to escalation alone. * b. The site will be very costly to prepare as described above. * c. The size of the NSSS and containment have grown con- * * sid~rably because of use of FPTF design features rather tham those prepared by ~ostinghousc. The con- tainment diameter has increased from 155' as proposc~ by Westinghouse to 200' or greater. d. Our' engineering and design cost estimate will have grown by $20-$25,000,000. * c. The maintenance approach may add substantially to th: plant cost. PAGENO="0277" 362 B1 f. The magnitude of plant features necessary to roally carry out the PMC design ~uidaline of "ne planned releases `from radioactive effluent systcrns to the en- * vironment during normal plant operation" and their cost effects have not yet been fully appreciated. g. PMC desires to construct the Balance of Plant in parallel with the Nuclear Island.. This approach will result ~.n some extra costs. 2. PNC has decided to go to competitive bidding of construc- tion packages to minimize costs even at the expense of * schedule delays. Burns and Roe has advised P~iC thai con- * struction packages are not likely to result in fixed price bids which will hold up. We expect many drawing changes due to the developmental nature of the job. * This will be aggravated by the budget cuts and Reactor rnanufacturer assignments described above. PFTF drawings today cont.ain extensive holds and changes. Burns and Roe has told PMC that claims and changes could well make ~om- * petitive fixed price packages more expensive in the long run than force ~iccount work. This is being confirmed by letter to PNC. 3. westinghouse nas stated in a letter to AEC that the use of proven FI~TF design concepts should, in the long run, * improve LMFBR Pro'ject schedules and costs. Burns and Roe * - has gone on record in a letter to Westinghouse that we ~are not in a position to a~±~e or disagree with Westinghouse, not having had an opportunity to study pro- * jected project costs. This step wa ak~tole~ve i~s latitude in dealing with the utility industry later but * --to not aTienatC ABC now. U. Scale-Up of LMPBR Demonstration Plant for Commercial tlse 1. In many of the project technical decisions, there are * trade-off s between what is best to achieve an early, * *successful Demonstration ~lant and what is best to mini- *.mizc later development costs and to be able to scale the plant up to commercial size. The results of the decisionz to date are that there are many aspects of the LNFB~ * Demonstration Plant design which are not pointed toward * scale-up of the plant for commercial use and toward mini- * mizing development costs to the utilities later. We * - believe the decisions have been made for the following reasons: PAGENO="0278" 363 B ~. FFTF concepts a~rc being utilized purtly to justif? cost~i~±h1Ir~3~c t. The FFT? prog:n-. is exper1enc~~n~eVere cos~~~~chedu1e overruns w~: are likely to get worse and become more of a scandal. T~e possible use of LMFBR funds for FFTF could be a n~1~r~ part or the s~an~aI~ b. The schedule is far too optimistic and requires soec~ approaches to be met.. c. The AEC beli~ves that the use of prev5ously approved FFTF concepts and cortipoflents will lead to early, reliable operation of the Demonstration Plant and will minimize technical development work w~ni~h could hang up the Dem~nstratiOn Plant. : ~ When the utility industry comes to de~ielop .a second ~ 1 stration Plant or commercial designs, the above will coe ~7 to light. The utilities will find, their developmenc cosz~ ~ high to deyelop follow on LMFBR's. * 2.. Examples of the above are: * *a. 1~he NSSS design has.bee~ modified to uhe FFTP design * j!c9~eP~* Although Westinghous~ is the. prime con- * f tractor for FFTF, it did not recommend ~FTF concepts * * (after three'years of PD~ sthdies. The AEChas force~ * the use of FPTI' concepts rather than the ~7estingh~us~ design over the objections of many in Westinghouse. }~owever, top Westinghouse mar.rtgcmcnt hss decided to * side with AEC.. PMC recommendations . agai~ist use of * some of the PP~F concepts have been overruled by the AEC (thi.s could be reopened with Shaw gone). As long as AEC and Westinghouse continue to. make the design decisions, they ar~ likely not to.be in thc overall utility ibdustry interest. ~ ki'ow that so~ aspects of the F~TF. design are abortions du~ to am AEC decision to make the FFTF containment tr~o small and I~ccausc of distortions in project cffo~ts hccaus~ of inadequate estimates and funding problems. ~herc are indi~etors that utility roprcscfltativOa arc - startin~ to questioti why they should contribute $25: to ~dd a balance of plant. and steam cjoncrotor to an FFTF * PAGENO="0279" 365 -23~ I. Holmes ~ Narver Situation . * 1. Holmes & Narv~ was of substantial help to us as a sub- contractor in obtaining the Lt'IFI3R award. They continue to be of considerable help in the area of sodium system * design. Their scope of work in~ sodium system stress analysis has been reduced considerably from that we pro- posed arid from that they hoped for. They are greatly upset and disappoirited by this. There appears to be an * effort underway on the part o~ ABC and Westinghouse to minimize the Eolmes & Narver role on the project even * though their reputation on their LMF.C work for ABC seens to be satisfactory. 2. Holmes & Narver recently made a proposal to become the * `West Coast Architect-Bngineer" for the LMFBR Dcmonstra- tion Plant, proposing to do all the architect-engineer * work for Al and GE. They proposed to do the. rcidwaste * system arid H&V design work as wel.l as sodium and incrt - gas systems. We rejected that approach flatly arid workad. out an agreement whereby they would be a~ssigned slightly more than the 90, 000 manhours which was the niiriimum amount for them in our proposal. However, much o~the ~F%ort i-n )-~. ~issi.gncid to them h~is not yet been established * as RM or AE responsibility. In addition, the recent buc~get cuts by the ABC will direct~y affect the amount of Holmes & Narver's work for us in the near future. 3. Based on the above, it is likely that we will have more difficulty with Holmes & Narver in the near future. They may again threaten to be the "~iest Coast A-E" or to leave * the job, or to charge us exhorbitant fees for their expert:. all of which have been mentioned in the past, We will * have to continue to give them as much work as we can within their agreed upon scope, be firm with respect to their moves, and develop our actions based on c~.rcum- stances as they develop. 89-405 O-82---24 PAGENO="0280" 367 S. Advise PMC by formal letter of the pot~ntial nature of site related problo~s known today based on best available data. 6. After authorization of full project work, take a firm for- rnal position with Pi-C that the overall project schedule is late (based on the *~actors enumerated in recant draft letter) and use the extended schedule as the basis fo~ our cost estimate. We are obligated by our assigned respon- sibilities to develop an overall project schedule for PMC as soon as work starts. 7. For contract negotiations, estimate the total overall engineering and design~costs expected to occur ultimately (over $40 million) and base fee on those costs. Take a * hard position in fee negotiation. ` 8. Recommend that Burns and Roe help PY~C review project cap-. ital cost estimates and effects of events to date. Point out technical decisions which have increased costs and' the true state of the capital cost estimate.. 9. Takc~ special steps with appropriate.utilities~tO advise * them of true status of LMFBR and impact on us. Clear the steps we plan wi~th P~C. . Exoectec~ Pn~Hve Results 1. Could provide billings and fee we might riot otherwise obtain. 2. Could put us in the best position to obtain m~xintum fee * from the job. This is important to provide funds for' future growth and development. Also could put us in best position if project is delayed or terminated. 3. Enhances our reputation for technical performance on LNFBR * and for competence, integrity, and.professionalism. 4.' Raises serious project problems early, permitting possible corrective action. }bpefully, could force correction of some serious situations which will continue to' distort and * harm project efforts if riot recognized and fixed, and could * result in schedules and estimates which we can nie~t in an * efficient mannCr. 5.. Raises the problems ~ten other parties are in the poorest position to blame Burns and Roe for bad results. 6. Provides tine to see the results of expected evolutions or~ the project. ` * PAGENO="0281" 368 ~pected Negative Results. 1. Will incur displeasure of P~C, AEC, and Westinghouse regard- ing cost. and schedule positions. Could put PMC and AEC in a bind with JCAE and utilities. Could cause efforts to replace us. 2. If cost and schedule truths abort the project early, could cost us business and incur enmity of supporting utilities. 3. Could lead to protracted contract negotiations and involve much time of company and project management. 4. Retains LMFBR in our workload, with attendant possible neg- ative effect on specific potential clients for new business. Proceed as at Present - Delay Taking Positions on Expected Cost, Schedule, and Technical !rohle~ Basis for and Manner of Proceeding . 1. Proceed to negotiate contracts and man the project to thEt level permitted by funding limits. Continue~applicätion of p~resently assigned aanagement' and retain overall res- `ponsibility for the total final design product. Do the best technical job as quickly' as possible. Take the posi- tion that ~ f ~ -~ to he resuonsible for technical results, we must be satisfied with then. 2. Assess the overall effects ofoutside forces on the LMFBR * Project.suchas the delays in obtaining JCAE agreement and * the delays due to environmental reviews and determine how these situations sh3uld be related to the known delays and cost increases for other reasons. Reflect the overall * strategy in the actions below. 3. At the proper time, attempt again to obtain approval to use scheduled overtime for designers and draftsmen to be able to properly man the project and base negotiation and sche- dule position on the result. 4. Do not address coxistruction package, site, G?E1~c~l~~ problems presently known. Obfuscate overall posltionb until later. * ** * 5. Keep estimated cost and desired fee low. Delay fee nego- tiation as long as possible. Plan on maintaining a dcziroc fee percentage thrcugh negotiation of contract changes. 6. Avoid looking at capital cost estimate. PAGENO="0282" 369 Expected, Positive Results .1. Avoids putting PMC and AEC in a near-term bind on the project. 2. Will result in least short term animosity toward Burns and Roe. 3. Project `progress may be drastically. affected by environ- mental and licensing matters; cost and schedule problems might be hidden in other effects. 4. `Provides time to see the results of expected evolutions on the project. , `~pected Negative Results 1. `May make it xn~re difficult to realize a proper fee on the `job via the changes route. May. also make the job a con- * tinuing legal argument over scope, cost, and fee. Weakens negotiation,. position if job delayed or termimat'ed. 2.. Does.not treat known problems in a fully profes~ional manner. . `3. Postpones emergence of problems until a later time when * Burns an~ P~ .c~n,.and .~n.all U-kelihood will, be blamed for cost and schedule overruns as Bechtel has been. Could cast doubt on our knowledge and competence. Such a situ- ation would have a serious long term effect on our repu- * tation and'growth., . 4. Perpetuates optimistic myths and schedules and distortion of our efforts on the project. Will not correct bad client management practices which have evolved. 5. Retains LM~BR in our workload, with possible attendant neg- ative effect on specific potential clients for new business. Reorganize Into Two Projects - ReauceMaflageme~ Attention and Disdain Overall Rcspofl~ibili~y, Basis for and Manner of Proceeding 1. Recognize that control over the courue o~ the pro~cct is out of Burns and Roe' s hands' and that the final products, drawings, and specifications for the NSSI will reflect Reactor Manufacturer, not our, designs, for which wc'cannot be responsible. Recognize that low rate of funding has diminished project priority. * PAGENO="0283" 370 2. Accordingly, disclaim reeponsibility for overall project prbducts and results. The a true subcontractor to the RM's. Have them is~e all NSS,S drawings and specifications under their name and be responsible for schedules. Continue to be responsible for. BOP products and results only. 3. Divide project in two, with independent Project Managers for W~stinghouse and PNC work. Reassign present top pro- ject management to other work, Be a body shopt for the i~~~i' ~. Expected Positive Results . 1. Makes contractual ana àccoi~nting matters the most clear cut. 2. Frees up some management talent. - 3. Might relieve us of ultimate responsibility for poor iesults expected~ . Expected Negative Results . . 1. Would be likely tq insure bad results and ~n uncoordinated * product. 2. Would not fully relieve us of rcspon~hility. 3. Would not be a prof~ssional approach atad would be so viewed by the utility industry. 4. Retains LMFBR in our workload, with attendant possible neg- ative effect on specific potential clients for n~w business. Term±nate Efforts on Project - Replace ~ith Other New Business Basis for and Manner of Proceediflg, 1. Notify PMC that Burns and Roe does not desire to 1)rOCccd contract because of total, change in nature of job, lifttited budgets, late start on project with unchanged end date, n:~ `reduced scope .of our effort and responsibility foi: ~zocLuc~ * by assignments to RH's. 2. Make claim for unauthorized costs incurred, including dicri-'. tion, loss of business, and loss of overhead inco;ne. Expected Positve Results 1. Extricates coinnan" from a known b~ic1 nituation nitllar to that in which j3eci~tel founc~ itself. 2 Makes personnel available for other jobn ~%`h.1ch sd;ht )~. obtained with a better financial i~LurI~ ~ (t.$ttC(~ Of .u~c PAGENO="0284" 371 3. EliminateS reasor~ for lack of new businc~ss due. to L~Fi3R contract. 1. Docs not support urgent national project needed to help solve energy crisis. Takes Burns arid Roe out of forefrorit of technology in power industry. 2. Will result in long project delays and possibly abort pro- ject if not handled right. 3, Will transfer blame for current project problems to Burns and Roe rather than keeping it where it belongs. 4. Will insure we cannot collect considerable money already spent on the project and will put us in~a poor. position to pro~ecute any claims. . . .:. 5. Will damage our reputation as a top AE and will severely hurt our chances of gettix~g future LM~BR work. 6. WillS make enemies of many utilities and Westinghouse as well as P~4C and AEC.' 7. Will likely cause utilities ~o view us less favorably than now ~or riGW work. 8. May well not result in. new busine~s even if utilities viewed our actions favorably, since truly hard prosp~cts for nuclear power plant work are not readily apparent regardless of impact of LM~~SR. . ~. . PAGENO="0285" if f1\~TiONA1 R~SPONS1 13 11.1TU~S r r C PAGENO="0286" 374 AtLachrcc~t INTENDED 1.SSIGN~ENT OF RESPO~SIDILI'fl~ FOR LtikL~ DENONSTRATION 1L/.RIDESIG~ Westinghouse Electric Ccrporation, Advanced Rcactor~ Divinic~ (*7ARD) is the lead Pemctor Z4anufacturor (R1~) for the p~ojcct arid haS, overall responsibility for technical itianri~jc- rnent, design, and technical services for the NSSS. With respect to Burns and-Roe, WARD is responsible for.tachnical supervision on all matters pertaining to the NSSS. Such technical ~upervisiofl encompasses, in general, the review and approval of: 1. Design work related to the NSSS to assure com-~ pliance with plant design specifications approved by P1~C. * - - 2. Technicaladequacy of NSSS component design, quality assurance plans and procedures, and other matters. 3. Compliance with NSSS schedules and budgets approved by PMC. WARD will also have two other RM's - Atomics International and ~eneral Electric - as subcontractors for specific areas of .N-SSS work. The system design and engineerihg responsibilities for the NSSS are allocated among those three firms as fOllows: Westinghouse 1) The overall integration of the NSSS, and in addition, 2) the reactor system (except fuel hftndling), 3) the primary heat transport system, 4) the containment structure, and 5) reactor ar~d plant control and instrumentation systems. General Electric * - 1) The intermediate heat transport system, - * - 2) steam generator system, 3) decay heat removal system, and - 4) related conro]. systems. - PAGENO="0287" 375 Attachmcr.t 2 Atornics International 1) Sodium purification systems, 2) sodium handling and service systems, 3) radioactive waste disposal systems, 4) containment service systems, 5) 1~ot cell systems, 6) reactor plant maintenance system, and 7) fuel handling system. Burns and Roe provides support to Westthghouse, General Electric, and Atomics International for those systems for which they arC responsible. Burns and Roe has.lead system design and engineering responsibi1it~es for the following items: * 1) Power transmission systems and building electrical power systems 2) Communications and lighting systems 3) Site improvencerits, BOP structures and reactor * s~pport buildings 4) Compressed gas sy~tems * 5.) Beating, ventilation, cooling and air conditioning * for both NSSS and BOP and associated instrumenta- tion and control systems 6) Plant fire protection systems for non-sodium systems 7) BOP maintenance systems 8) BOP annunciator systems 9) BOP Instrumentation and Control 10) Feedwater and Condensate System 11) Main and Au~ciliary Steam System 12) Beat Rejection System 13) River Water Service System 14) Theated Water Sybtem 15) Waste Water T:eatment * * 16) Radiation monitoring, and 17) Related control and instrumentation systonis. PAGENO="0288" 250 -: 2~0 350 ic0~ $26 1~ Appx~oach. 50 yr-2 yr-3 yr--4 yr-S BRE~'CER ~F~3 PIT ?J3 EFFORT PAGENO="0289" 379 My name is Thomas B. Cochran. I am a Senior Staff Scientist with the Natural Resources Defense Council, a national non- profit environmental mbganization with a membership of approxi- mately 40,000. NRDC and I have long been concerned about the U.S. fast breeder reactor program and, in particular, the Clinch River Breeder Reactor. I hold a Ph.D. in physics from Vanderbilt University and am the author of a 1974 critique of the breeder published by Resources for the Future. I served on the ERDA Steering Committee in 1977 which reviewed the liquid metal fast breeder reactor program, including the Clinch River project. I also was a member of DOE's Ad Hoc Committee on Nuclear Non-Prolifreation (NASAP/INFCE) from 1977-1979; and I am presently a member of DOE's Energy Research Advisory Board. The specific question now before the Congress is whether to authorize expenditure in fi;cal year 1982 of some of milljon~ of dollars for the Clinch River Breeder Reactor, as requested by the Department of Energy. In reality, however, the question is whether to push forward during the next several years attempting to develop a commercial plutonium breeder, with total program costs approach $20 billion. It is, in short, not a question simply of providing further funding to a low key, ongoing program, but rather of making a long-term commitment, at extremely high cost, to a very dangerous tech- noJ.ogy which would involve massive flows of nuclear weapons material in the commercial sector. NRDC believes that such a Commitment would be an enormous mistake at this time or in the foreseeable future. PAGENO="0290" 380 2 There are several important facts to keep in mind about the Clinch River Breeder Reactor (CBBR): - First, the primary purpose of any reactor is to generate electricity. The additional purpose of the breeder is to create plutonium, an alterxi~te. fj~~~1_±o.r_uraniUm. Such an alternate fuel is important only insofar as it is economical. Despite the complexity and higher capital cost of the technology which is employed, it simply represents a sophisticated method of heating water with nuclear weapons material. Second, the plutonium breeder will not reduce American dependence on oil, foreign or domestic, by a single drop. At present, only about 10% of our electricity is generated by 0 burning oil, and much of that is for peak demand, often in smaller and older plants. This use of oil will be reduced b~y conversions of existing plants to coal-as reqiiired by the national fuel conversion policy and by the replacement of the olaer plants with new ones using other fuels. Large oil-fired generating plants will not be built in the future in the United States. New baseload nuclear plants may compete with coal, but not oil. - Third, the need for the plutonium breeder is dependent on the n~ for electric gen~~atin caacity and, more importantly, on the growth in demand for the existing light water reactor (LWR) technology. At the time the CRBR was proposed, electric power demand was growing at 7 percent per year. There has been a dramatic reduction in electrical growth since the 1973 Arab oil PAGENO="0291" 381 3 embargo. Last October the Electric Power Research Institute -~ never known for underestimating electric growth rates -- projected electrical requirements in the year 2000 would be 5,9 ± 1.0 trillion kwh,1 just over one-half the stimate made by ERDA 6 years earlier in defense of its breeder program.2 Similarly, ERDA in late 1974 had projected 1200 gigawatts (GWe) in nuclear power by 2000. DOE's last published estimate was 160 to 200 GWe. A more reasonable figure is 120 GWe, a full factor of ten b~QW~he old ERDA figure used in support of the breeder. - Fourth, the claimed economic advantage of the plutonium breeder over the presently used LWR is based on the now lost hope that recycling of the plutonium and uranium fuel through ~~rocessing would ~ mining and i~ci~ing utanium and that this savings would offset the higher capital cost of the breeder plant. The cost advantage of the breeder, if any,. thus rests on the relative cost of the fuels as compared to the capital cost difference of the two reactors.3 ~/ EPRI, 1981-1985 Overview and Strategy, Oct. 1980, pp. 30-31. EPRI÷proj acts an average annual electrical growth rate of 4.4 - 0.8 percent betWeen 1979 and 2000. 2/ ERDA, Proposed FINAL EIS on the LMFBR Program, WASH-l535 (December 1974>, Vol. XV, p. 11.2-9. ERIDA projected total energy requirements of 195 quads in 2000 and 359 quads in 2020, 50 percent and 65 percent, respectively, of the total energy supplied by electricity in 2000 and 2020. 3/ The economic Woes of the plutonium breeder derive in large measure from the fact that the capital cost of a nuclear p~lant today represents about 70% of the generating cost while the uranium fuel at todays prices ($25-30/lb U3O8) represents only about 10% of the total. Thus, when the capital cost of the breeder rela- tive to the LWR becomes large -- present reality -- it becomes virtually impossible to offset this difference with projected savings in the breeder fuel cost. 89-405 O-82---25 PAGENO="0292" 388 5 assumptions regarding each of several key variables: breeder capital costs, uranium prices, electrical demand, nuclear growth, and the social discount rate. The nuclear industry would call this possibility a Class 9 accident so remote a possibility as to be not worthy of further consideration. - Fifth, a rationale for development of the breeder reactor has been the concern over a potential shortage of uranium fuel lli htwater reactors Properly framed, this concern is subsumed in the issue above, that is, when and at what price of uranium will the plutonium breeder become econo- mical. It is perhaps worth noting that with~each new estimate by DOE the uranium resour~ge_bas~has been increasing ,not decreasing. DOE now projects 3.2 million tons of proven resources and probable resources at less than $100/lb and 4.9 million tons when speculative resources are included.6 ~vei~ the lower figure exceeds the lifetime fuel requirements of 500 LWRs of current design, or double this nuinberif advanced LW~des~gns were pursued. 6/ DOE, "An Assessment Report on Uranium in the United States of America," NURE, Gr0-lll(80) (Oct. 1980). These estimates are at the 50% probability level. PAGENO="0293" 384 6 - Sixth, the design of the Clinch River Breeder Reactor, developed nearly a decade ago, is out of date. To reduce cost and technological risk, it was decided at that time to minimize changes from basic design parameters used in the Fast Flux Test Facility, a 1960 vintage breeder technology. The design has been widely acknowledged, even by the architect-engineering firm.for the Clinch River Project, to be inappropriate and 8 obsolete. - Seventh, the European and Japanese plutonium breeder programs are experiencing serious difficulties in moving toward commercial development. The French breeder program, with the 1200 EWe Super Phenix under construction, is recognized as the strongest of the Western breeder programs. The French commitment to two 1500 EWe Super PhenixNark II breeders in early 1980 has slipped to l98~3-1985 in recognition that French breeders are costing more than twice mwhas French LWRs. The plutonium breeder programs in the U.K., the F.R.G., and Japan appear to be "on hold. In judging development in these 7/ FFTF is a 400 MWt liquid metal fast reactor at Hanford, Washington, designed to test advanced breeder fuel designs. 8/ Statement of Dr. Edward Teller, quoted in 123 Cong. Rec. H9692, Sept. 20, 1977; Confjd?ntial memorandum of Burns and Roe, Inc., quoted in the testimony of NRDC before the Subcommittee on Nuclear Regulation of the Senate Committee on Public Works, July 11, 1977. 9/ The U.K., with a 300 EWe breeder demonstration plant, has decided t5postpone a decision on its follow-on breeder until at least 1985. Japan has built a very small reactor, and constru~t±on-~f the 300 EWe Eor~ju demonstration plant continues to be delayed. The overall Japanese breeder program has not only slipped ten years, but the government has lowered the industry share for the next machine from 50 to 20 percent, [footnote continued on next page] PAGENO="0294" 385 7 foreign programs, one must carefully distinguish the rhetoric from realities. - Pinally, the plutonium used a~d produced by the plutonium breeder, including the CRBR, is directly usable in~ar weapons. The fresh breeder mixed-oxide fuel, containing ,3 25 percent plutonium, can be fashioned directly into a nuclear bomb without chemical processing.1° If a more sophisticated (higher yield) nuclear weapon is desired, a country or sub- national group could, at a cost of $l-2 million, chemically separate a ~x1mb's worth (10 )cg) of plutonium from fresh breeder * 11 fuel in three to seven days' time. Unlike alternative reactor fuel cycles, the CRBR type poses the maximum risk of nuclear weapons proliferation by countries, and the maximum risk of theft or diversion by criminal or terrorist groups. The amount of plutonium loaded into commercial-size Ifootnote continued from previous page] further evidence of the deteriorating economic po~tition of breeders. A Committee of the FRG*s Parliament voted last year to complete the 300 Mwe I(alkar demonstration plant but postponed the decision on whether it will operate. Kalkar has experienced substantial cost overruns, and its scheduled operating date has slipped 7 years to 1985-86. The Dutch and Belgian governments have indi- cated a strong unwillingness to increase their respective shares of the project. Their unwillingness and that of the German Gov- ernment and industry have placed the Kalkar reactor in financial jeopardy.(Nucleonics Week, Nov. 20, 1980, pp. 5-6). The FRG, which gets~ 10% of its electric energy from nuclear, has had a de facto nuclear moratorium on reactor licensing since 1975, and tI'e government is experiencing serious public acceptance problems with all aspects of its commercial nuclear program. ld/ DOE, Nuclear Proliferation and civilian Nuclear Power; Report ~? the Nonproliferation Alternative Systems )~ssessment Program (NASAP), DOE/NE-000l/2 (June 1980), Vol. II, p. 2-43. 11/ Ibid., p. 3-43. Time assumes 30 operating personnel with ~4 weeks training during the construction phase. 10-20 weeks would be required to obtain 100 kg of plutonium. PAGENO="0295" 387 9 resources will be exhausted and no new supply found, even at much higher prices. We have seen electric energy growth decline sharply since 1973 in response to increased costs. There is no reason to think that the trend will reverse itself. There is also no reason to believe that theavailability of uranium will follow a different pattern than that for every other fuel that is, that new sources will be found and developed when it is economical to do so. In short, when the market price rises, exploration and development will be stimulated. Therefore, to look at presently provable reserves as the outer limit of the resource, or the "prudent planning base," particularly in view of today's depressed uranium market, is wholly unrealistic. Once these false assumptions are eliminated, we can then deternine the real costs of the breeder reactor. It is now undisputed that the ~ are far higher than or inally_anticipated and far higher than those of a light water reactor. Moreover, there is every reason to expect, based on the e~cperience with the light water reactors, that the costs of breeder reactors will actually be much higher than presently predicted and that its competitive position vis-a-vis the light water reactor will further erode.12 12/ Mr. Stockman pointed Out that between 1967 and 1973 the cost ~ electricity from light water reactors had sen nea4~~OO%. In addition, the cost of the Fast Flux Test Facility wai'3V~?~ ~es~g~e~ter (current doll st. i,sroje~dfèd. Consequently, there is every reason to believe that Clinch River will cost far more than the roughly $3 billion presently estimated. Thus, the present comparisons of capital costs are very optimistic. PAGENO="0296" 388 10 Even at present projections, the breeder reactor cannot compete economically with the light water reactor. At the higher costs which are almost inevitable, price competition will be impossible. Thus there will be no market justification for the employment of this tech1Qp~ unless the time comes, if it ever does, that the economic factors have changed radically. Moreover, consistent with the philosophy of the new Admin- istration, it would be far more appropriate to turn to the private sector, the industries which will use and benefit from the new technology, at least to participate on a realistic basis in its devel cpment. The fact that industry participation is now down to.about 11% of the CRSR cost and zero for the balance of the breeder program reveals the shaky economic ground upon which Clinch River rests. There is simply no reason why the federal ~ government should pay virtually the total costs of a demonstration technology which its proponents claim will be economically viable. It is often &cgued that the breeder reactor is necessary for true energy independence because the technology all but elim- inates reliance on finite uranium resources. This is a simple, appealing argument, but it requires one to ignore the following facts. Our energy security problem derives from liquid fuels -- oil, riot electricity. -~ The U.S. is not a net importer of uranium, and two of our closest allies, Canada and Australia, have huge uranium reserves. Spending $20 billion on the breeder will not place the U.S.~ any closer to energy independence. Indeed it would divert scarce federal R&D funds from much more promising alternatives to imported oil. PAGENO="0297" 389 11 In theory, if the plutonium breeder could be perfected technically -- that is, if a high breeding gain could be achieved in advanced reactor designs and if low plutonium inventories could be achieved in the fuel cycle relative to the reactor -- then the state of nuclear fuel independence still could not be reached until about 2050. In the interim, it would be far cheaper to stockpile uranium. Using the French "target" a plutonium breeder costing 1.75 times as much as an LWR -- the breeder would cost $900 million more than today's readtQrs. For this amount, one could purchase 15,000 tons of U 0 at current prices. This is 2.5 times the 3 8 lifetime fuel requirements of today's LWR and 5 times the require-. ments of an advanced LWR design that could be marketed sooner than the breeder. Even if one made the wrong free market choice -- that is, deployed the breeder rather than improvir~g the LWR and stockpiling uranium -- the breeder would increase the electricity available by only a percex~tage point ur two in the event of a hypothetical uranium shortage in 2020. ~or this level of independence, the nuclear industry would have us build a huge commercial fuel cycle based on nuclear weapons material. Each large commercial nuclear fuel reprocessing plant (processing fuel from some 50 plutonium breeders) would be churning out upwards of 10,000 atomic bombs' worth of plutonium anhually, an amount exceeding the entire plutonium inventory in the U.S. weapons stockpile. In five years the throughput of just or~e of these plants would have exceeded the entire U.S. nuclear weapons material inventory PAGENO="0298" 391 13 of federal dollars and build the CRBfl, thereby demonstrating to the world that we can build in 1990 what the French built in 1973-- avery expensive demonstration piant that can heat water with nuclear weapons material. There are even better choices. In this regard, it is worth comparing the proposed increases in funding of the breeder reactor with the massive cuts proposed in the conservation and solar programs of the Department of Energy. These programs directly reduce American dependence on foreign energy supplies. Conservation through improving energy productivity can meet our energy problems faster and cheaper than any new program for increasing energy supplies. Despite this, the DOE thdustrial conservation program, with its proven cost effective traok record, is being eliminated by the Administration while the breeder budget is being increased. Even solar can produce central station commercial elect enez~ jong before the breeder reactor. Conservation and, in some regions, solar are already competitive economically with central station electric plants. In these circumstances, it makes absolutely no sense to commit massive subsidies to a breeder reactor program with runout costs approaching $20 billion when it is so clearly inferior to other energy opportunities available at this time. In short, the commitment to the Clinch River Breeder Reactor is a huge economic boondoggle, a massive public works project to boost the morale of an almost comatose industry. PAGENO="0299" 392 14 The Clinch ~tiver Breeder has become ~ in the fight by some DOE and nuclear ind~istry leaders to insure the surviv- ability of the nuclear option. Wiser men in the nuclear industry realize that the U.S. would have a stronger breeder program if the CRBR were abandoned in favor of the "bigger, better' breeder. I find it truly remarkable that many jn the nuclear industry are willing to destroy the breeder program to preserve the symbol. In closing, let me note that, even assuming the C~B1~ made sense technically., and that there was any hope that it could lead to a commercially successful technology, it is incompre- hensible that the Administration should propose increased federal funding now. The needy in this country are being told that in the interests of "economic recovery" they must accept billions of dollars of cuts in basic human service programs -- decreased food stamp allowances, increased rent contributions for subsidized housing, and cutbacks in child nutrition programs. Can the CRBR really be viewed as more deserving of federal support than these basic human services? The Administration's breeder philosophy parallels that of former Pakistani Prime Minister Bhutto, who once said that his country would develop atomic weapons "even if we have to eat grass." PAGENO="0300" 07PNC8 SEPTEMBER 30, 1978 Revised November 16, 1978 CONTRACTOR EMPLOYMENT INFORMATION Page 1 of 13 NO. EMPLOYED $ VALUE DISTRICT AND STATE DESCRIPTION COMPANY CITY ON CRBRP .000 REPRESENTATIVE SENATORS Alabama Reactor Vessel Closure Chicago Bridge Birmingham 3 (See TN) 4-Tom Bevtll John J. Sparkman Head & Iron James B. Allen Riser Assembly (welded) Chicago Bridge Birmingham 1 (See TN) 4-Tom Bevill & Iron Containment Vessel Chicago Bridge Birmingham 9 ~ 4-Tom Bevill & Iron TOTAL 13 35,972 California Reactor Manufacturer Westinghouse Sunnyvale 2 (See PA) 12-Paul McCloskey Alan Cranston San Hayakawa Reactor Manufacturer Westinghouse Canoga Park 2 (See PA) 20-B. Goldwater, Jr. Reactor Manufacturer General Electric Sunnyvale 348 227,434 12-Paul McCioskey Engineering Services Jayco Delmar 4 48 43-Clair W. Buraener Reactor Manufacturer Atomics Interna- Canoga Park 388 223,313 20-B. Goldwater, Jr. tional Risk Analysis Science Palo Alto 18 512 41-Bob Wilson Applications, Inc. Control Rod Drive Royal Industries Santa Ana 68 10,358 40-Robert Badham Mechanism (CRDfl) CR011 Controls/Controller Royal Industries Santa Ma 14 1 ,541 40-Robert Badham Panels Test Controllers Royal Industries Santa Ma 7 144 40-Robert Badham Source: Department of Energy. PAGENO="0301" O7PNC8 CONTRACTOR EMPLOYMENT INFORMATION Page 3 of 13 NO. EMPLOYED $ VALUE DISTRICT AND STATE DESCRIPTION COMPANY CITY ON CRBRP .000 REPRESENTATIVE SENATORS California Consulting Specialized No. Hollywood 1 40 20-8. Goldwater, Jr. (continued) Testing Services Pump Tank Feb Ametek-Straza El Cajon 70 2,868 43-Clair W. Burgener Dished Head & Carleton Forge Paramount 25 666 31-Charles Wilson Belly Band Steam Generator 4 Atomics Canoga Park 160 56,679 20-B. Goldwater, Jr. Component Testing International Steam Generator & Atomics El Segundo 50 (See above) 27-Robert Dornah Component Testing International Design Holmes & Marver Anaheim 20 5,000 38-Jerry Patterson Ring Forgings Gulf & Western Whittier 5 352 33-Delwin 14. Clawson Forgings Compton Forge Inc. Compton 10 78 31-Charles Wilson Temp-Personnel GE-WAFS Lompoc 5 228 19-Robert J. La Gomarsino Computer Services Lawrence Livermore Livermore 5 210 9-Fortney H. Stark Computer Services Stanford Linear Stanford 2 63 41-Bob Wilson Accelerator Cntr. SS Seamless Tubing Clark & Wheeler Paramount 4 88 31-Charles Wilson Argon Control Sys. Volumetrics Inglewood 71 28-Yvonne B. Burke Inconel Teledyne- Santa Fe 143 33-Delwin N. Clawson Allvac Springs Control Panels .JPW Industries Orang. County 6 84 39-Charles Wiggens PAGENO="0302" 07 PNC 8 CONTRACTOR EMPLOYMENT INFORMATION Page 4 of13 NO. EMPLOYED S VALUE DISTRICT AND STATE DESCRIPTION COMPANY CITY ON CRBRP .000 REPRESENTATIVE SENATORS ~ (continued) Park - - TOTAL 1,644 581,208 District Consultant 14.P.R. Assoc. WashIngton, 5 385 (1 non-votIng delegate) of Columbia DC - - TOTAL 5 385 Florida Consultant Lincoln Tech. Miami 1 40 13-WIlliam Lehman Lawton Chiles Services TOTAL 40 RIchard Stone Georgia Rod Anode X-Ray Ridge Instruments Tucker 2 604 4-EllIott Levitas Herman E. Talmadge Machines Sam Nunn Site Investigation Law Engineering Atlanta 1.700 7-1. N. McDonald TOTAL Idaho Risk Analysis Science Appl lea- Idaho Falls 2 (See CA) 2-George Hansen Frank Church tions, Inc. James A. McClure Intergrated Plant Energy, Inc. Idaho Falls 3 140 2-George Hansen Operating Procedures Outline TOTAL 5 140 PAGENO="0303" STATE DESCRIPTION Illinois Reactor Vessel Closure Head Contairsuent Vessel Plug Drive & Control Laboratory Support Level Control System Fasteners COMPANY Chicago Bridge & Iron Chicago Bridge & Iron Sundstrand Argonne National Borg-Warner ITT Harper 07 PNC 8 Page5 of 13 $ VALUE. DISTRICT AND .000 REPRESENTATIVE SENATORS (See AL) 14-John Erlenborn Charles Percy A. Stevenson (See AL) 14-John Erlenborn 1 ,184 16-John B. Anderson 1,200 14-John Erlenborn 86 10-Abner Mikva 100 10-Abner Mikva 2,570 C CONTRACTOR EMPLOYMENT INFORMATION CITY Oak Brook Oak Brook Rockford Argonne Des Plalnes Chicago TOTAL NO. EMPLOYED ON CRBRP 13 2 20 25 70 Indiana Reactor Vessel Babcock and Wilcox Mount Vernon 78 25,104 8-David Cornwell Birch Bayh Richard Luger Riser Assembly (Bolted) Babcock and Wilcox Mount Vernon 33 1,680 8-David Cornwall Sweepolets Machining . J. C. Wilson Engineering Corporation Indianapolis . 10 73 11-David Evans EVS Tank Babcock and Wilcox Mount Vernon TOTAL 114 235 1~J~1 40,438 8-David Cornwall Iowa Control Valves Fischer Controls Marshalltown 5 218 3-Charles Grassley Dick Clark TOTAL 5 218 John C. Culver PAGENO="0304" 07 PNC 8 STATE DESCRIPTION COMPANY CONTRACTOR EMPLOYMENT INFORMATION NO. EMPLOYED CITY ON CRBRP I VALUE DISTRICT AND .000 REPRESENTATIVE Page 7 of 13 SENATORS (See PA) 10-Peter Rodino Clifford Case Harrison Williams (See PA) 7-Andrew Naguire (See PA) 10-Peter Rodino New Jersey Check Valves Foster Wheeler Livingston 4 Reactor Manufacturer Westinghouse Oradell Intermediate Heat Exchanger Foster Wheeler Livingston Condensate Pump Ingersoll Rand Phil 1 ipsburq Separator Tank Joseph Oat Corp. Camdefl Containment Tanks Joseph Oat Corp. Camden . ABIH Joseph Oat Corp. Camden Design Holmes & Narver Oradell Valves Hoke Cress Kill Steam Drum Design Study Foster Wheeler Livingston Construction Represen- tative Stone & Webster . Oradell Structural/Thermal Analysts Foster Wheeler Livingstov( . 50 Design Burns and Roe 2 76 6 36 24 5 14 30 15 * 475 1,868 903 2,119 5.000 344 73 (See TN) 13-Helen Meyner 1-James Florio 1-James Florio 1-James Florio 7-Andrew Maguire 9-Harold flollenbeck 5-Millicent Fenwick 7-Andrew Maguire Co 1,160 5-Millicent Fenwick Nevada Upper & Lower Flange Forgings. Viking Metalur- gical Corp. Verdi * TOTAL 15 15 187 187 Oradell 467 j~QJ~9~_ 7-Andrew Maguire * TOTAl. 730 152,543 PAGENO="0305" STATE DESCRIPTION New York Seal Qualification Pump Drives Temp. Personnel Turbine Generator Thermowells CONTRACTOR £MPLOYMENT INFORMATION NO. EMPLOYED ON CRDRP 200 CITY Pawl leg Schenecta~ty Syracuse Schenectady Silver Creek TOTAL COMPANY Prèsray General ElectrIc LM&G Division GE-ESD General Electric Turbine Division Excelco 07 PNC 8 Page8 of13 DISTRICT AND REPRESENTATIVE SENATORS 37-Henry Nowak Jacob Javits Daniel P. Moynihan 28-Samuel Strattoo $ VALUE ,000 11 17,175 68 12 222 36,426 39-Stanley Lundine Ohio EVS Tank Babcock and Wilcox Barberton 25 (See IND) 13-Donald Pease 2-Tom luken Thermal Transient Valves William Powell ~ Cincinnati 70 30 3,965 71 2-Tom luken Check Valves William Powell Cincinnati 20 1,574 13-Donald Pease Steam Drum Babcock and Wilcox Barberton -~ TOTAL 145 7,290 PAGENO="0306" 00 CO C CONTRACTOR EMPLOYMENT INFORMATION 07 PNC 8 Page 9 of 13 STATE DESCRIPTION COMPANY CITY NO. EMPLOYED ON CRBRP $ VALUE .000 DISTRICT AND REPRESENTATIVE SENATORS Oregon Volute Castings ESCO Corp. Portland 35 766 1-Les AuCoin Mark Hatfield Bob Packwood Recirculation Pumps Bingham- Willamette Portland 30 1,225 3-Robert Duncan Overflow Vessel Bingham- Willamette Portland TOTAL 55 T2~ 2,077 47O~ 3-Robert Duncan Pennsylvania Reactor Manufacturer Westinghouse Madison 475* 117,000 21-John Dent Richard Schweiker H. J. Heinz III Cost Studies Westinghouse Pittsburgh 3 120 14-William Moorehead Engineering Studies ~ Franklin Institute Philadelphia 1 10 3-William Lederer Bull Gear Messinger Bearing Philadelphia 6 923 3-Raymond Lederer Check Valves Foster Wheeler Mountain Top 5 5,156 11-Dan Flood Intermediate Heat Exchanger Foster Wheeler . Mountain Top ~ 67 33,173 11-Dan Flood Plant Protection System Weston Company Archibald ` 30 2,625 10-Joseph McDade Desuperheater Schutte & Koerting Cornwells Hts. 5 198 8-Peter H. Kostmayer Feedwater Heater Struthers Wells Corp. Warren 8 2,472 23-Joseph Ammerman PAGENO="0307" O7PNC8 CONTRACTOR EMPLOYMENT INFORMATION Page lOof 13 NO. EMPLOYED $ VALUE DISTRICT AND STATE DESCRIPTION COMPANY CITY ON CRBRP .000 REPRESENTATIVE SENATORS Pennsyl- Upper Inner Stru. Standard Steel Burnham 30 478 9-Bud Shuster vania Forgings for Sodium Pump (continued) Sodium Dump Tank Pittsburgh Neville Island 40 3,127 18-Doug Waigren Des Moines Channei Analysis Westinghouse Churchill 2 24 14-William Moorehead Prototype Primary Westinghouse Large 8 279 20-Joseph Gaydos Control Assembly Tank Mounting Flange Standard Steel Burnham 15 191 9-Bud Shuster Upper Inner Structure Allis-Chalmers York 50 1,105 19-William Doodling Fabrication for Sodium Pump Consulting Services A. A. Bishop Pittsburgh 1 71 14-William Moorehead Insulation Design W-AESD Large 17 5,587 20-Joseph Gaydos and Space Services Permeability Test PGH. Testing Lab. Pittsburgh 1 1 18-Doug Welgren Chillers York Division York 4 2,019 19-William Goodliug Borg-Warner Engineering Support Lincoln Technical Pittsburgh 1 78 18-Doug Walgren Services PAGENO="0308" CONTRACTOR EMPLOYMENT INFORMnTION Tennessee Project Management 07 `NC 8 Page llof 13 STATE DESCRIPTION COMPANY CITY ON CRBRP .000 REPRESENTATIVE SENATORS Pennsyl- vania (continued) Project Office CRBRP/P0 Representatives Madison 1 (See TN) 21-John Dent Condenser Ecolair Lehigh Valley 10 j~?~ 15-Fred Rooney . TOTAL 780 175,867 Oak Ridge 145 Project Management Corp.; DOE; TVA; Conmionwealth Edison 28,100 3-Marilyn Bouquard Howard James R. H. Baker Sasser Clerical Support Kelly Services Knoxville 9 90 2-John J. Duncan Studies . University of Tennessee Knoxville 15 821 2-John J. Duncan Reactor Manufa~turer Westinghouse Oak Ridge 110 31,000 3-Marilyn Bouquard Construction Stone and Webster Oak Ridge 35 517,000 3-Marilyn BOuquard Laboratory Support OOE/ORPIL Oak Ridge 7 4,600 3-Marilyn BOuquard Design Burns and Roe Oak Ridge' 8 (See NJ) 3-Marilyn Lloyd Clerical Support ProTemp Knoxville 4 PAGENO="0309" DESCRIPTION Suction Piece, Bearing & Impeller Castings Laboratory Support STATE Washington Wisconsin COMPANY Atlas Foundry DOE/HEDL 07 PUC 8 Pagel3of 13 DISTRICT AND REPRESENTATIVE SENATORS 6-Norman Dicks Warren Magnuson Henry Jackson 4-Mike McCormack CONTRACTOR EMPLOYMENT INFORMATION NO. EMPLOYED CITY ON CRBRP Tacoma 40 Richland 22 TOTAL 62 Medford 35 Cudahy 3 Cudahy 5 43 $ VALUE ~OO 592 11,453 12,045 1,340 412 308 2,060 Protected Air-Cooled Condenser Conseco Riser Assembly Material Ladish Upper Internals Material Ladish TOTAL 6-William Stelger William Proxmire Gaylord Nelson 4-Clement Zablocki C,' EMPLOYMENT GRAND TOTAL - 4,953 NOTE: The reduction in the number employed from 5,245 In August, 1978, to 4,953 in September, 1978, is due primarily to the fact that work on the Turbine Generator has been suspended. PAGENO="0310" 406 `bA~VlOA.ST0CKMAN 40D%o-'r. M00..00,. 1021 1.,.,,,~,,,,, ~4o,~.oO0~D0 e,.~.o.. W*,,,0202,. D.C. 20011 ,o0r~NCOMCEC0~~MI~ Q~OII~Vt~ ot tft ~AflitCb ~tate~ * ~ou«=t of ~eprt~tntatibt«= ~A20DG20lON ~aa~flngton, p.C. 0515 .~" ~, September 17 1977 * .. CONSERVATIVE ECONOMICS AND FREE MARKET PHILOSOPHY SAY "NO' TO THE CLINCH RIVER BREEDER PROJECT * As a member of the Energy and Power Subcommittee, I worked to defeat the Administration's National Energy Plan on the grounds that it was anti-free market in nearly every respect. Along with most of our Republican colleagues, I advocated decontrol of oil and natural gas prices because I believe the market will furnish additional supplies in response to higher prices. I opposed bureaucratically administered conservation programs because I believe the free market is the best means of achieving conservation. As prfces rise, businesses, households, and other energy users substitute lower cost factors-- insulation, improved engineering efficiency, and other capital improve- ments--for energy, thereby lowering demand and costs. I also Opposed the Administration's red-tape-ridden coal conversion program. The market system will lead to increased coal use by utilities and industry as the Btu cost of gas and oil rises without the costly `help" of a ~ashingtOfl bureaucracy. Until a few months ago, I assumed that the Clinch River Breeder project was a good idea. It promised vast amounts of energy free from foreign control. But after a careful, in'depth review of the economics of the project, I have come to the conclusion that it is totally nçompatikie with our ft~p arket approach to ~ ~ The case for the Clinch River project and early breeder coniserciali- * zation has been constructed almost without reference to the principles that we applied in the earlier energy debate. It ignores the dynamic resource adjustment process that will take place in the energy market during the next three decades. As a result, it overstates future demand. for electric power and understates the expanded supply of uranium that will be generated by higher prices. This lack of market reference in PAGENO="0311" 407 September 17, 1977 Page 2 the case for the breeder obscures the clear cost advantage of sticking with conventional nuclear power over the next thirty years. The breeder cannot compete with existing nuclear, technologies within the time frame contemplated by its advocates without continuing massive subsidies. The precedent set by cOn,tir~uing th~ Clinch River project will be one of increasingly deeper government involvement in the development, marketing, and commercialization of alternate energy sources and massive federal subsidies to underwrite future national energy costs. Today it is the nuclear bre~der lobby looking for a large, uneconomic subsidy. Tomorrow it will be the solar power gang, then the windmill freaks, and so on in a never ending stream of outstretched palms. As I said in my previous Dear Colleague, I believe that government. support for basic scientific research, laboratory experimentation, and pilot scale demonstrations is a laudable and appropriate policy. But government should not become invdlved in the provision of subsidies for the ~ of new energy technologies that cannot pass the market test of competitiveness with alternatives on a price basis. The breeder reactor will not pass this test until well into the next century, if ever. If your view is similar to my initial reaction, you assumed that the vote on Clinch River was a struggle between the pro-production forces and the anti-growth Doomsday squad that has done so much damage to our energy situation already. It is not. Ironically, it is a.test of whether, as Republicans, we will consistently adhere to the free-market views on energy policy that we so forcefully advocated during the debate on the energy bill earlier this session. I hope that you will carefully consider the á~ttached'memorandum and vote in favor of the Brown amendment to cut back the funding for Clinch River. With all best wishes, I am Yours very truly, ~`VE STOCKMAN Member of Congress. Enclosure DAS/nr PAGENO="0312" 409 -2- becomes cheaper~ because it does not require fresh uranium ore. Eventually, these fuel cycle savings more than off-set the higher capital costs of the more complex breeder reattor desi~gn and technology. Under these conditions the breeder variant Would displace the light water reactor as the lowest cost source of nuclear electric power. In a normal product market, the interaction of supply and demand would determine this threshold point, and thereby determine whether 1990, 2020, or any point in between, Is the appropriate date for the introduction of the commercial breeder. However, the market for advanced nuclear electric technologies (and indeed advanced energy technologies of all, types) is heavily influenced by extensive Federal involvement in research, development, and demonstration. In the present case, this involvement is appropriate due to the unusual national security implications of civilian nuclear power and due to the clear national economic benefits which result from public financing, of research and development activities that would, have prohibitively long pay~.back periods in the private sector, especially in the risk-averting utility industry, But development of energy technology options should not be confused with their marketing and commercial introditjq~. An essential principle of the market approach to energy policy is that when the stage of commercialization or near commercialization is reached, the market choice mechanism must take over and development subsidies must largely end. Therefore, the only justification for any continued funding of the Clinch River project is the hard ecopomic. judgment that under fore- seeable conditions, the market would select the breeder during the,1990's as the lowest-cost form of nuclear electric power production. Advocates of the Clinch River project have recently shifted their justification in an attempt to avoid this crucial test, and are soft- pedalling the former argument that Clinch River is the first stage In an integrated commercialization program. But even a cursory review of the nature and scope of the timetable proposed by the Science Committee demonstrates that the Clinch River Project cannot be severed from the overall timetable for early commerciali~atioji. The new argument is that the'Clinch River project offers a kind of energy "insurance policy,' or a scaled-up R & 0 option on which a commercialization choice can be made In the late 19$O's--after the project is in operation. But this argument ignores economic and political realities. The Clinch River project will cost at least $2.7 billion.. In conjunction with the other elements of the breeder development program, It will generate a vast Industrial support and supply infrastructure among private companies engaged in all phases of reactor design, component manufacture, and plutonium fuel cycle support. The development of this infrastructure is in fact one of the central goals of the project. - The notion that after the government and private firms have invested billions of dollars in developing a commercial breeder industry infra- structure, it wifl somehow be easier to make a decision on commercialization PAGENO="0313" 410 ..3.. Is absurd. All of the expenditures on the project and its infrastructure will have become sunk investments. It would make no sense to wrfte off all of this investment and pUt the breeder reactor on the shelf for two or three decades until economic conditions become more favorable, should that be the conclusion of the Clinch River test. What will happen is that the breeder will develop still greater institutional momentum. As difficult as the decision to defer breeder cormner~ialization is today in the face of clear and convincing evidence, it will become still more difficult at the so-~ca1led `commercialization decision date' in the 1980's. Whatabout the "insurance policy" argument? It may seem attractive to support the Clinch River project despite its very unfavorable economics against the risk of unpredicted deterioration in the world uranium market. But uranium is not the only fuel source facing the prospect of depletion of low-cost reserves. Supply uncertainties a~e at least as strong for conventional sources of natural gas and crudeoil. If we adopt the "insurance policy" rationale, the Federal. government should make a commit- ment to very heavy subsidies for commercial scale synthetic crude, oil shale, geopressurized gas, and coal gasification plants as well--just to ~ provide an "insurance policy" for other vital energy sources. This kind of logic obviously leads very rapidly to a non-market based energy supply system, something that I fervently hope is not our goal. In light of these considerations, it is clear that the time to make the choice between accelerated or deferred commercialization of the breeder is now, The following sections demonstrate quite clearly that market conditions will not be conduclve `to breeder introduction until well into the next century. *. . II. There Is No Such Thing As Free Ene,~gy. The preceding makes clear that the breeder is an advanced technological variant of current reactor and fuel cycle design, not the energy equivalent of a perpetual motion machine. Contrary to the popular image, it does not "breed" more energy than it consumes; rather, the breeder facilitates a more complete extraction or recovery ~f the energy potential of uranium ore than is possible with current technology. This enhanced recovery, however, comes at a substantial premium in reactor capital investment and fuel reprocessing facilities. For this reason, the widely advertised fact that the enrichment tailings left over from the conventional nuclear process contain the energy equivalent of a trillion barrels of oil is of little significance divorced from the context of economic costs. For one thing, this huge, dramatic nunber represents electric-generation input equivalents, not end-use energy available to the economy. Given the inherent thermal conversion, inefficiency of electric power generation, the end-use value is something in the order of only 300 billion barrels of oil equivalent. PAGENO="0314" 411 -4- More importantly, incomplete energy recovery from fuel resources Is by no means unique to .the uranium 235 fueled light water reactor; the ext~action and conversion process for nearly every fuel in use in the economy today exhibits the same pattern. - On the average, almost two-thirds.of the crude oil ma given reservoir is left in the ground because the costs of a higher rate of recovery are prohibitive. In fact, since the beginning of the petroleum age in the United States, nearly 300 billion barrels of oil have been left in the ground due to the economic limits of recovery.. Similarly, until recently most U.S. coal seams have been deep- mined, yet the typical `room and pillar' method of extraction has left considerably more than half of the available coal behind. The amount of energy in this unrecovered coal is the equivalent of another 300 billion barrels of oil. A proposal to launch a massive Federal subsidy program to re-open abandoned mines and wells, or to encourage much higher rates of recovery from currently producing properties, would not be given serious consideration at the present time. Yet the much bally-hooed stored uranium tailings are no different in principle. The desirability of enhanced BTU recovery from any fuel is essentially a matter for the market to decide; physical potential is a thoroughly inadecluate justification for a large subsidy program. III, Future Ele~tric Power Demand and Market Adjustment. The linchpin in the case for subsidized breeder comercialization has been enormous projected increases in electric power demand during the next three decades. As recently as 1974, for example, the ERDA mid- case estimate showed a need for 2,200 gigawatts of generating capacity by the year 2000--a figure which represents generating capacity more than four times greater than available today. Under this demand scenario, a min3mum of 1,000 gigawatts of nuclear capacity would have been absolutely essential (this compares with 40 gigawatts of nuclear capacity on-line at present). Nevertheless, even at, this high level of nuclear supply, coal-steam capacity would have had to increase four-fold to make up the difference. Obviously, under these electric demand conditions, known and even speculative supplies of low-cost uranium would have been inadequate, making early breeder conTnercialization imperative. In truth, however, these demand projections represent an inexcuseable ignorance of market dynamics. Rather than being sophisticated economic projections, these nuriters were merely mechanical extrapolations of the electric power consumption growth rate that had prevailed for the previous decade or so, about seven percent per year. PAGENO="0315" 413 -6- The process of factor substitution will greatly constrain the rate of industrial and coimi~erclal power growth as well. To take one specific instance, It is almost certain that the two and one-half decade longdecline of industrial co-generation, during which co-generated power declined from almost 20 percent of industrial use to 10 percent, will be sharply reversed, thereby constraining demand for purchased central station power. As a result, an average electrical consumption growth rate in the three percent ange~ seems highly probable in the decades ahead. Even this would mean an increase in the central station electricity share of GNP to nearly 5 percent by the year 2,000, assuming a 60 percent increase in real prices. Since the long-term growth rate forreal GNP is roughly in the 3 percent range, this would imply a 1:1 growth ratio between electrical consumption and GNP, a sharp contrast with the 2~1 ratio implicit in* the pro-breeder scenarios. There Is already stron~ evidence accumulating that this sharply reduced growth rate in central electric power is likely. During the last two years of strong economic recovery and high real G!IP growth, electrical consumption has lncrea5ec~ only at a 1:1 ratio with GNP. . This contrasts markedly with the pattern during previous decades in which even strong cyclical recovery years exhibited electrical consumption growth rates far in excess of GNP. IV. ~ Electric Demand Under a Realistic Market Scenario. The foregoing considerations make clear that rather than in e~ccess of 2,000 gigawatts of electric capacity by the turn of the century, the more probable estimate iS in the r~oge of 1,000 gigawatts (based on a three percent average growth rate instead of seven). On the basis of current trends, it is likely that even 350 gigawatts of nuclear electric capacity Is an optimistic estimate of the nuclear share of this total capacity requi rement. Two strong considerations support this estimate. First, there is little reason to believe that there would be serious restraints on achieving roughly 650 gigawatts of non-nuclear capacity. Presently, for example, hydro-electric accounts foP 65 gigawatts. The Interior Department projects that this will reach nearly 100 gigawatts by 1985. In addition, it is almost certain that ~ minimum of 5 percent of capacity will have to be fired with liquid or gaseous fuels (perhaps synthetics) because it Is simply economically prohibitive to use large coal or nuclear fired plants for peak-shaving purposes. This leaves a requirement for baseload coal capacity in the range of 500 gigawattS. Presently, there are 250 gigawatts of coal capacity in PAGENO="0316" 414 -7- place. According to current surveys, another 100 gigawatts of coal capacity is either under construction or planned through 1985. Thus, over the remaining fifteen years of the century only another 150 gigawatts of capacity would be required, an average of 10 coal-fired plants per year. These coal fired capacity estimates imply annual coal production of slightly over 1.2 billion tons per year, even after allowing for substantial increases in direct lndustrial use. Slhce the Carter Admini- stration has targeted this production level for 1985--iS years earlier-- there is little reason to think that there would be serious supply constraints. The second reason to believe that nuclear capacity would not exceed 350 gigawatts under a realistic demand scenario is simply the lagging rate of light water nuclear plant additions in the past three years. The 350 gigawatt figure for the year 2,000 implies that 14 new 1,000 megawatt units will become operational during each of the next 22 years. Yet in 1975, there were only ~ new orders for nuclear plants; In 1976 there were only three; and this year there have been none. Moreover, during the same period there have been 18 units cancelled representing nearly 20,000 megawatts of nuclear capacity. Compared to the 5,500 megawatts of new orders, this means that just since 1975 there hasbeen a net decline of nearly 14,000 megawatts of nuclear capacity ordered for the 1980's. Certainly it is to be hoped that Congress will ~ct soon to stream- line the present disasterously complicated and prolonged licensing process, and that the intense social and political opposition to nuclear power generation will be overcome. Nevertheless, the experience of the past few years makes clear that the required annual addition rate of 14 nuclear plants will be difficult to achieve, and that 350 gigawatts of nuclear capacity by the year 2000. is indeed a conservative reference target for analyzing uranium supply and prices. V. UraniUm Supply and Prices: Bureaucratic vs. Market Perspective The second critical question regarding early breeder commerciali- zation concerns future prices and supplies of uranium ore. Specifically, is there likely to be a sufficient supply of low-cost uranium ore to support the lifetime requirements of 350 gigawatts of nuclear capacity, thus permitting a deferral of breeder commercialization program until after the turn of the century? The answer to this question depends first of all upon future enrichment practices. Uranium oxide contains roughly .7 percent U-235, but the extent of enrichment extraction of this fissionable material can range from 57 percent (.3 tails assay), to between 87 and 100 percent PAGENO="0317" 415 -8- (.1- 0 tails assay). For this reason, projections of uranium oxide requirements are very sensitive to assumptions about enrichment methods and the tails assay. Specifically, the lifetime requirements of the 350 gigawatts of nuclear capacity projected previously would be 2.5 million tons, assum- ing .3 tails; 2.2 million tcrns, assuming .2 taIls; and 1.8 million tons, assuming .1 tails. The, high tails assay thus produces uranium ore require- ments nearly 40 percent greater than under the low assay. Traditionally, U.S. enrich~ment facilities have operated at a .2 tails assay. But in 1973 this was temporarily increased to .3 in response to what appeared to be a growing shortage of enrichment capacity, rela- tive to projected rapid growth in the nuclear power market. The effect of this change was to increase the apparent uranium oxide requirements for current and planned, light water reactors by 26 percent.. However, it is likely that the future trend will be tcMard increasing rather than declining extraction of fissionable material from our uraniu~pl supplies. The anticipated shortage of enrichment services capacity has become extremely unlikely because of the serious slowdown in reactor deployments and because of the active enrichment capacity expansion pro- gram now underway. Another factor determining the level of extraction efficiency is the cost of enrichment services relative to the cost of uranium. As the price of raw uranium rises relative to the price of enrichment, the percentage of 11-235 that can be economic~ally extracted from raw ores increases. Thus even assuming that there are no.breakthroughs in.enrich- ment technology, the proportion of useable fuel that can be extracted from raw uranium will rise over the next decades. The biggest potential increase in extraction efficiency will come, from new technologies, however. These new processes promise to radically reduce the amount of U-235 left in the tailings. The mos-t promising new technology from a theorectical standpoint is laser isotope separa- tion. This process may be capAble of extracting nearly 100 percent of the 11-235 from uranium ore, thus vastly expanding the amount of fuel that could be produced from our uranium supplies. The tailings piles that breeder advocates point to as a huge potential source of energy could be used to produce fuel for light-water reactors if laser isotope separation becomes commercially viable. Another promising variant in enrichment technology isthe gas centrifuge. Current U.S. enrichment plants use iemanse quantities of electricity. When all three plants are operating at full capacit~, they use nearly as much electricity as the entire state of Minnesota. But because these plants had access to the very cheap electric power produced by the TVA, the cost of enrichment remained within, rea- sonable limits. Now that even TVA power has become significantly more PAGENO="0318" 417 expedientrather than an economics based estimate, because it implies nearly a Zero elasticity of supply beyond presently identified re- serves. As will be shown more fully below, this assumption has even less credibility than that employed by propbnents of continued regula- tion of natural gas. The other item in the red herring category Is the frequently recited fact that current spot market pr~ces are in the $40 per pound range. But the spot market fqr uranium ore is extremely thin as most uranium is purchased under long-term contracts. As a result, the spot market price is highly volatile and can be highly affected by short-run demand conditions. In fact, the present high spot market price is a temporary aberration reflecting the surge in short-term demand induced by recent changes in ERDA enrichment practices, ERDA contracting pro- cedures, and the massive abrogation of supply contracts i~y Westinghouse in late 1975. A more reflective indicator of long-tet-m price trends i~ the price for 1980's delivery contained incontracts written during the past year.., These are almost entirely under $20 dollars per pound in real terms. To return to the critical question of long-run supply it Is clear as a matter of resource economics that the "prudent planning base" esti- mate of roughly 2 million tons used by breeder advocates is in fact, not only imprudent but actually nonsensical. By definition, proved and probable (extensions) reserves essentially repre~nt~ast exploration activities. Therefore, to assume that this figure embodies the produci- ble uranium supply for the indefinite future implies that either there will be absolutely no additional exploration for new uranium deposits in the coming decades or that the marginal cost of new reserves will escalate upward on nearly a vertical path. The relatively brief history of the uranium mining industry offers no support whatever for either of these assumptions. Two trends tell the story. First, after the government~supported launching of the uranium mining industry in the early fifties, there was a persistent and steady decline in real prices--from $28 per pound in 1954 to less than $9 per pound in 1973. Yet despite this sharp drop in prices, exploration activity and production moved sharply upward. From 1950 to 1960 annual production increased nearly twenty-fold, and low-cost ($15 per pound and uhder) proved reserve levels rose from a. ne9ligible 3,000 tons to nearly' 200,000 tons in 1960. By 1975 this category of the lowest cost reserves had again. more than doubled to 430,000 tons. Resource base estimates (as thstinguished from proved and probable reserves) were expanded in a similar manner. * Thus, in order to accept the prudent planning base estim&tes as the limit of future producible uranium supplies, it is necessary to assume that an industry that has been characterized by declining mar- ginal costs,, rapidly expanding reserve additions and drIlling produc- 89-405 O-82---28 PAGENO="0319" 418 -11- tivity rates that increased by nearly 6 percent annually for two decades will precipitously reverse course and careen down a path. of sky-rocketing marginal costs and vanishing exploratory drilling productivity. The fact, however, is that even during the last three. years of demand-induced market instability, drilling productivity in the low-cost reserve categories (under $30 per pound) has actually increased substantially, indicating continuity with past trends. ERDA currently places the potential resource base, which in- cludes both current reserve and, future discoveries, at 3.7 million tons-- a level nearly twice that necessary to sustain the 350 gigawatt scenario developed above. But these are of necessity extremely conservative figures because they embody geologic data gathered by an industry whose exploratory activities have been constrained by historic $10 per pound prices to the very lowest-cost uranium formations. It is clear, however, that the breeder will not be competitive at a uranium price below $75 to $100 per pound. Under these conditions thereis little doubt that as long-term prices rise above the extremely low historic levels additional geologic data will be gathered permitting, a subst~ntia1 expansion of the potential resource base, and therefore, future uranium reserves and production. The final environmental impact staement on the breeder, for example, estimated that with the addition of new geologic data derived from increased search for higher-cost deposits, the potential resource base at prices of $50 per pound is nearly 9 million tons--over four times the level necessary to sustain the 350 gigawatt scenar9o. \ VI. The Magitude of the cost Penalty for Bre~4~,rs~_~Jpçertain But Growip~ The third reason why the breeder will not be commercially viable if introduced on the accelerated schedule proposed by the Science Corrinittee is that the current projected cost differences between breeders and con- ventional reactors, both for the capital cost of the plant and for the fuel cycle facilities, are almost certain to widen in the years ahead. When the Clinch River plant was originally proposed in the late 1960's, the projected cost of the plant was only $500 million, or about $1400 per kilowatt of generating capacity. By the time the pro- ject received its original authorization in 1973, the cost had gone to $690 million, or $2000 per kilowatt. Today, ERDA estimates a completion cost of $2.3 billion, or more than $7000 per kilowatt. Some experts have speculated that the cost may well go to $3 billion by the time construction is completed, since construction has not yet begun and experience with the Fast Flux Test Facility has been that mOst of the increases occur during construction. At $7000 per kilowatt, Clinch River will cost more than ten times PAGENO="0320" 419 -12- as much as current light water plants. per unit of capacity. Of course, the cost of Clinch River includes many first-time exepnses, and other costs associated with the prototype status of the plant that make a direct comparison unjust. But this factor of, ten represents the improvement that will have to be made in the economics of building breeders in order to make them competitive with light-water reactors. The increases in the cost of building Clinch River ha\'e been reflected in the Increases in the estimated cost of later commercial breeders, however. In a 1974 study supporting the rapid commercialization timetable, ERDA calculated that breeders would cost $100 per kilowatt more than conventional reactors at their 1995 commercial introduction date, and that this difference would be eliminated in thirteen years. The most recent ERDA projections show a cost difference of $145 per kilowatt initially, declining to $50 after thirteen years. This reduction in the cost of breeders is absolutely essential to the commercial success of the development effort on the present timetable, yet the history of the light-water reactor and the great unknowns in breeder and repro- cessing technology make the likelihood of achieving cost reductions - of the requisite magnitude almost nil. As commercial technologies mature, process costs almost in- variably decline. One notable exception to this rule has been the light~water cooled nuclear power reactor. By the end of 1967 after nearly ten years of commercial noeration, the cost per kilowatt of LWRs had reached about $180 (19.75 dollars). By 1973, the average cost had increased to $475 per kilowatt of capacity. Thus, even after setting aside the 34 percent increase in general price levels during this six year period, the real cost of light-water capacity rose nearly 200 per- cent. The ru'ason for the high rate of cost increases for nuclear plants was primarily regulatory and contractor design changes to m"et safety and environriontal problems, though of course some of it is attributable* to the differentially high inflation rate of the construction industry in general. We simply did not know all therewas to know about these facilities, however, and consequently the regulatory mechanisms for inter- nalizing costs in the plants resulted in the.continual addition of new, unpredicted cost factors. This process seems to be nearing an end for the light-water cobled reactor. The latest CRDA projections for the cost of build- ing reactors for delivery in the early 1980's is $667 per kilowatt in 1976 dollars. This represents a rate of real increase of only about 2 to 3 percent annually, well below th~ levels of the previous decade. The implications of this stabilizing tuLend in the cost of conventional reactors for the competitive position ~ the breeder are enormous, The breeder has yet to go through aoy of the licensing and development pro- cesses that produced the great escalations in .t~fe cost of building light- water reactors. Yet the inherently greater technological complexity of PAGENO="0321" 421 ~~~i97g OIG /74,/. ~J) GLL/eb ~` ~ - 3/7/79 010 ~/ ~L1I~ ~tii1~ WLD I~1FOLMATION MX 3/ /7( TO: Deputy Secretary 010 PROM: Inspector General StTD.7~CTs Donald R. Dill, Atomice International Division, 3/ /79 Rockwóll, Ed Marinoek, Joseph Oat Company, and Al Plisga, Manufacturer's Representative, San Francisco Operations OUice Dribery and Fraud Against the Government (26'2.497) ?o provi4e the.,Deputy Secretary with information regarding; the disposition of sub5ect inveitigation. Discus*Lon Atonics International (Al), prime contractor under San Francisco Operations Office, reported that Mr. Dill ob.~ tamed a loan of $1,000, interest free, and received other gzatuities from Mr. Plisga, in exchange for advance bid information, although there was no resulting contract. This matter was referred by the Federal Bureau of Investi~ gation to the Assistant XY.S. Attorney in Lao Angeles, California, who declined prosecution due to insufficient evidence. Mr. Dill was terminated for violation of com~ pany rules. -/ Mo investigation is being made by my office. . X. Mansfield Prepared by 010: GLLofton/eb: 3/7/79 OFFICIAL PILRE PAGENO="0322" 422 o MEMO ROUTE SUP ~ Forts ERDA-93 (1-75) ERD4MO~LsF So. s. obooso so), Foscon~tttss5 Fos,.t)on. ~ Foss ~ TO (Num. ottO unit) Cues L. Lofton " ~ * torn DA" Fits )Mstss*tio~. soot.os ALLEGED ATTEMPTED BRTBER~(EWARD W~RINOCK) (ROCKWELL INTERNATIONAL) (26-2-197) TO (Nomsostit woO) ~e~oo oititoi.s DATS* -~ ~ > (0 (N.tn.snd ON(S) ,`~ ~- INTIALS - ~ DAMA503 ~dL&liam~andu~~ ("i t~°h~(VF ~i(tfiecIMs.hjeop),~tf~-,jwj11 frwar.themackaooe of material rMerred (SODA (No ~ Wil ott 0. Edmonds - tottIerein~ ~~MO~KO ~ from Mr. William P. Snyder~, ~~çouns ~ ~R~'J~9, cR /POCouna~.9rou~ L~~is presenti. out of town and it j~ not knowtt oxa~t1y *-- PAGENO="0323" 423 Department of Energy Oak Ridge Operations P.O. Box E Oak Ridge,Tennessee 37830 November 6, 1978 MEMORANDUM TO FILE / FROM: WILSON 0. ED. SUBJECT: SAN - ALLEGED ATTEMPTED BHIBERY (EDWARD MARINOCK) (ROCKWELL INTERNATIONAL) (26-2-197) The above case was referred to Mr. John B. St. Pierre, Special Agent, FBI, Oak Ridge, Tennessee, on April 12, 1978, who referred it to Mr. Robert E. Simpson, Assistant U. S. Attorney, Knoxville, Tennessee, for a prosecutive decision. Mr. St. Pierre was thereafter contacted on May 2 and June 29, 1978, as nothing had been heard from him relative to Mr. Simpson's decision. In both instances, he advised that Mr. Simpson had not made a decision in the matter. On November 3, 1978, Mr. St. Pierre advised that Mr. Simpson had declined prosecution on the basis that a bribery had not been committed within the jurisdiction of the Knoxville Division of the U. S. District Court. Re said, however, that Mr. Simpson did~not make a decision on the question of whether fraud had been committed against the Government in connection with the contracts awarded to Joseph Oat Company, Camden, New Jersey. Mr. St. Pierre advised that hereferred the entire package of material the writer had furnished to him to the FBI in Los Angeles, California, on September 26, 1978, suggesting that the FBI discuss the case with' the U. S. Attorney there for a prosecutive decision. He added that he would not be advised of the outcome of this discussion. PAGENO="0324" J~ sq,. 4 ~ ~cce4.-.~2 4...~,...L', r... c,e~,4e (3~ ~ ~, c»=r, ~4 1,0 yç, ~ ~. ~ f-v ~i; ~ ~ * &r~L~t~. c-v~~ ~e ~ f?~-~- ~ ~ 8~r `7~. ~ ~ `~rc~ a~~' ~ ~ s~ ~ ~ - 54ta~e~ ~ ~Cic~A4tP-f 4 /~ 1~/ L4~4' (~ ~ £4.tul ~ - Department of Energy `~A Clinch River 8reederReac~cr Plant Prqjcct Othce Oak Ridge,Iënnessee 37830 Cues L. Lofton, CO-Director Office of Inspector General U. S. Department of Energy Germantown, tID. 20545 Ci les: Here is a copy of the complete report on the Al procurement matter. you sometime early ne eek abo Will amP. Snyder, Counsel CRBRP Project Enclosures: I. Ltr. dtd. 3/28/78 2. Security Rpt. dtd. 2/27/78 ENERGY RESEARCH AND DEVELOPMENT ADMINISTRATION Office of Internal Review March 30, 1978 PAGENO="0325" 426 Atoinlae Int.MMloflil OWMcn 3900 Do Sut(, Avonu. Rockwell Canogo Pwk. calltornl.~ 01304 (213) 341-1000 lntern~itiønel ~`tarch 28, 1978 Mr. L. W. Caffe.y, Director CRBRP Project P.O. Box U Oak Ridge, Tennessee 37830 Reference: Letter dated February 17, 1978. Mr. Richard 1. Da~ey, Director, Safeguards and Security bivislon, Department of Energy, San Francisco Operation Office from Mr. R. U. Bertø, Manager, Indu$trial Security, Atomics international Subject: Security Report R-.12.~O Gentlemen: To provide further background information concerning the reference letter, the contents of our Security Report R42-O dated rebruary 27, 1978 were discussed today between Doyle raker, myself and Mr. John Wagoner end Mr. Joseph Heeke. At their request I am forwarding to you the entire report. Please contact me if I can be of any further assistance, Very truly your~, ROC}~WELL INTERNATIONAL CORPORATION Atomics International DiVisiOn ~e. ~. ~ R. 0. Barto Manager industrial Security PAGENO="0326" 427 A~II~ RodceWyneD)v1810n ROckWell lntemstional $eCW*ITV I%~tØOCT OATh Pebr~aty 27, 1978 ~` -. * ~Td,M1ACTERI -- )y*~ DQNAt~, B.; SU Ow1~t~Ac1~ A13MINXSTRATO~t ~UB~GZE~* IEt~ULAfl~!T D/'76L, Atomics Xnternational ULvJ-ei.oU ~ ,eAIOD F~.'l3KUAfi~ 9 - PEBRU1~R~ 22, 1978 ~ueM~5y On February 9, 1978, Industrial Elocurity was m~vleed of p~~øib1e iriu3~aritie~ on Lbs part of eubjoct. t)onald R. DILL rolative to bia acceptauct of a ihi ,00ç) int.West fros loan from Al. 1~1izEa, Manufeottirere and further Mapresentative. ThveetitpttiOfl substantiated the allegaUOA, ~` developed information pertainint~ to aoceptE,t%Ce of OI.heg' types of in eonnt~tion gratuitics and the unauth~r~zed rGlmase of bid pt'ice detarvtirts& DIlL had been with a çevarwusnt r.ded contrant. It ~!au offereo. a $5,000 bribe L'rom Ed Marinocic, ~1ooeph Onf. Company~ Osisden, the new Jercey, for bid price informAtion. Pill Aentod acceptance of bribe * Inn contract was t~warded by Picnics Internatiuzv~l on the activity of jo 1uoeticnt. PItT was dtecha'gad February 3.6, ~78 fur vIOlatiOn . Conpan~ Rosa. CLCtiED * GQPII~ ~O. J. B. Coyne .i\.~ ~ B. Q. .I00en ~o~i1~r~ PAGENO="0327" 429 yS.3e Nv.: p#pott On: DILL, 1)ONt~U), IL. ~7 February 1.978 Cub..Ccintrw:~ A&ninistrat.or 3 D/7E]., Atornica Th~etnat~ona1 Divist*a On February 10, 1978 P1i)~ja tras interviewed, I'Lizga readily edniitted that he 1uan~d 1)111 ~1,OOO in May or L977~ ?li~a 0itid that Dill bed tolA ?liz~a he viti. in rieverc finaAetai straights, arid :r~eGed a Iban i~O tide hire Over, Plisga said be ~Ook the reoney tit -Dill `e hoes in Sled VaU4ly, w1iere~ note was prepared to covcr tho lOar., wbj4li DiU. and bus wife both cigned. It cvntalnwd the provision that it. ~ae to he 1.ntereat free and w&s to be repaid within 90 dayø. Pli~a said that nane of thi.s loan bad ever berm rspaicl by 1)111. In fact- Dill. had recently asked for another loan and Piiz~a. va~ torc~d tO tilrli hire dOila, Misga said that. with respect to f'n.vorrr to Dill, in ~y or 1977, be s~Onsored Dill in it 1301? Thurnament at t,h~ L.om coyote Golf C0u4'ue,. and had talcen Dill ti~ luruth approximately three time~. ~lso, at ~hristmaa 1977k Plinga bad giver: nil, a bottle Of wine. P1 izga was as)wd ii, he received any special Cr,,nnidcrat.jora or was gtve~ any informittion regarding cornpetil.ive bids u~ the 1.ubing. Pl~'/.ga replied that, h~ had never received any specific inforn~tion from D11.~ regarding the bLil on the tubing, hui~ did ,~eceive "Mall 1 Park Figurezi'. According 1.0 P1 isga, Dill said that $I,3ot,000 would be a gO~44,gj~p to bid and PiJ~wga transmitted this irtrormation to Martin ~ l'resident, fienv{c,R Aano~iatoa, Pl.Lzgt explained that although he was represent trig .Tons~h Cht ha had no direct communicatiOr: with this Company, in that all. dealings ~Cre through 1~enwick ~ On Tebniary 16, 1977 DIII was tntcrvieirec~. Dill admitted he LIed burrowed $1,,000 frnm Plizga stating he received this interest free loan in JiEly or 1977. Dill ua.Ld that at the tine hi?, wages from AX had been assigned and be was vn*b3n to borrow any money from l.ending agencies because of this wage assignment. Dill said that b~ did not directly ask Plisga ror the 1oa~, merely inquired ir P1i~ga knew or anyone who could lurid DIII uome money, e,cplaining that it wuri impooaibi,e fup Di;, t to get a lean from banks Or Savings and Loans Institutions, DiU was then aruked if this loan from k'lizga in any way influenced him relative to 1.hn a:eleetiOn of Joecph Ont to got the nont u'aet for the storage tubes when `this ~`arbictilar project is funded. Diti. ~aid that the loan in p0 wii,y influenced his judgirrent in making a s;eleetion for the fabrication Of this storagr; t.ubing; however, Dill, did admit th~l. her gase certain bid tht'ormation to Plizga during the time these cOntracts were being bid. . PAGENO="0328" 431 ~iie Na.: Report On: DILL, DONALD~ fl. Y~bruary 1978 Ziub~.Contract Alt:5,oL,r~t~or D/7G.L, JU~OrnLuo 14 rnatiuna]. Diviaion Dill said that aitbou~b thu 3.O.tri made by Plizga made him føcl indebted to ?llaga, the 1 O.t~ In nea way influerteect him in his dealings with Pliz~. Dill did admit that the loan iq iz~a had put Dill in a bs4 light, specifically in vie~r ox' tha fact that Plizga i'ao V~z7 active in getting the storage tuba nOi~tr*ot from JOese~h Oat. Dill van asked if he ~td not fired it very peculiar that a company r~ou1tt reduce their bid On&.mtll&ohte3O3lars fln thin size or a ~rOJvoL, Dill admitted that th1,~ did neOn to be an unroasuriable reduction, hut felt that the JouepIi hi. Company knew what they were doj.ng, and they justified the reduction t~c~ Dill. Dill pointed out that the re~tscn that Joee~h Oat Company scent in a revimed bid or $i,o2t,~Oo was becauce the original hid had been ~ubmitte4 by Ronald Kaplan, who is the noh of the President of' the Company, t~rbin Kaplan. Dill stated that ROrutlA Kaplan bad n~ibmittect the bid durinR the absence of' bin rather. Dii]. atated that the further * reduotton in the bitt fOi' Joseph Oat crnee a~ a result t~f the Joseph O~ Company getting bettor and theape~' sources of raw material. Dill said that he had been tCkera to lunch approximately e~i w times by ?tizga. Healao e&acalveñ a Presto Burger from th~ World Airways, Mien., Sed last Christmas rcccived food r.turf from Marinock. Dill state4 th~t he could not. recall ady other favurs given him by eomptflj~a with ~tOm Dill had dealt in the normal, cOurse of business. In a reinterview Workman aeknmrl.engaml that mid 1977, BiLL did rcpvrt. the settexspted bribe by Marirthck; howovcr, Dill advised Woricman that Vn~inock made the offer while th~ t,w~ men were in a bar. DIII. advised Workman that in Dill `is opinion l'tu'inock wan not sincere about the bribe and the offer W&!m sfmiule while Marinock wan intoxicated. Workman said he took no further action nn this matter. Xnfo~mation rc1e~tive to the bribery attempt baa been referred to the ~parb'u~~t of Energy, SAN Security Divinion, for evauiatioz~ a~ 4j~pusitjon. T*]1 tP*~ discharged on sebruary l6,~ 1.970, fOr violation of' Company Rubs. No further inve~itigation I~ contemplated by us~rla]. Security and. thin matter is considered closed. "CL~ED!' . * ` / PAGENO="0329" REP EVST SIOR~GR ~UBRS PRBHBLT T1JBES & ST~AGE SliER EtOGS #02D03 ~RO- JET AIR- RITE ALUS C&~LMES ANE7E~ STRAZA 1tSS0C~ PIPING BMCO(3C W(LCG)C IOBING BIG. BUBELER TWCLEAR 01NERN. AtUNICS J($8714 OAT I~)!AL lIE). TRBN~ TUBE YU2FGST~ ~BLDING !PVNAILED P~P0SAL, FAiE ~ DATE 5-24-77 5-24.77 7-15-77 . . ~CIWDED PROeGS-. AtDUEDATE 7.11-77 i-it-n REVISED PROPOSAL, DUED.EI5 7-18-71 - 1-18-77 ~i~o~'OSAt RE-. CBIVED I DISCUSSUXIS ~~3CIED 6-07-77 t~,'a ~. 8-23-?? 2-24.77 8-03-77 IVI 7-19-77 8-23-77 8-24.77 6-&7-?7 N/a 6~21-77 N/B * 7-19-fl 8-23-77 8-24-77 7-22-77 N/B - 7-19-7? 8-23-77 8-24-77 7-19-77 8-23-77 5-24.77 7-19-7? 8-23-77 8-24-77 J',D ?.-19-77 8-23-77 8-24-77. RETJBSTED 7CR BEST & FINAl. 3-23-77 8-25-7? . * 8-25-.?? 5-25-77 5-25--?? 8-25-77 5-25-?? BESI 1. ?INAL. - WE 9-01-77 9-C3-?? . 9-01.77 . 9-01-.?? 9-03-7? 9.03-77 9-01-.?? tszst& FINAL. RECEIVED 9-01-77 8.41-7? 8-31-77 8-31-77 8-31-?? 8-01-77 8-304? ORIGINAl. NOPOSAL. I?,VISSD PROPOSAL BBS~ MD FINAL J. Oat 1,821,965 1.19-77 1024,280 8-19-77 ..705,000 U~EC. Azate3c/Straza 732,451 7.19-77 710,000 8-31-77 General Atoiab 1,079,922 7-19-77 c 1,059,886 8-31-77 Air~te Diviet~n i,708,-208 liNK. 1,305,803 9-01-77 Boeing Bog. 1,362,224 1-19-77 1,360,313 8-31-77 Royal Iodiistttea 1,385,138 7-19-7? 1,385,138 9.01-7? Youngsto~ 1,626,3)4 7-19-77 .- 1,436,111 8-38-?? PAGENO="0330" 433 ~r1ORANDUM REPORT ON Ml ~~JSfl O1~ C~ ~r'u'~r~~ r~ JJ~Cfl~ `ME DR r CLINCH RIVER aREEDFM F.E~\CTO!~ I~I'OJECT, 1' OAK RIDGE, TENNESSEE ~": * IC File No. P1-71 February 13, 1981 SUMMARY This report primarily concerns the misuse of Ai~tomated Data Processing (ADD) Rosources at the Clinch River Breeder Reactor Project (CRBRP) at Oak Ridge, Tennessee. The Office of Inspector General (IG) first learned about the reported misuse of these resources through t1-~e. Office of chief Counsel, CRI3RP, wh3 jndicated that the Federal Bureau of Investigation (FBI) was conducting an investigation into the possible misuse of the computer system at CRBRP. Working in conjunction with the FBI, our office determined that the computer system had been misused by the Chief of AD? operations, an employee of Westinghouse corporation. Westinghouse is under contract with DOE to provide ADD res rçes and other support for the CRBRP. Discovered on the system were a 400 family, 21 page community directory, advertising ma erial\ and contract agreements fgr a private corporation, a mid- erm examination, an eight-~page lease for a private dwelling, personal resumes, a football pool, and a variety of comput r games Further, the state of the physical security and fire safety systems at the computer facility was found to be inadequate. We found that smoke detectors were hanging by paper clips, and no fire suppression system was in effect on site. During the course of the review we recommezv~ed that CRI3RP management develop end implement specific policies and proce- dures to prevent cor~puter misuse, and to upgrade the physical security and fire safety systems of the facility. We have learned thet compliance with our recommendation has already begun. The Director of the CPJ3BP project issued a policy memorandum on Octoi~ur 8, 1980, formally detailing a policy on misuse of the ADD *~yatems. It stated that any private use of the computer was u~uuthorized and that the continued use of the computer for private reasons will result in disciplinary action. Further, Westinghouse-CRBBP h~s taken interim fire prevention steps while putting out for bid a comprehensive rhy ~* i ~i y ~ 89-405 O-82---29 PAGENO="0331" 435 * DRAFT V1P~ ~Ofl~(~f)i. ~~LO(~ On t.ha )~C Of tic c..puter in an un- autnc,rj~od ~ric1 ~Lr~ffiCient manner by the sy:;~urn users. A review of all of the files of the 100 users wan considered impractical because of the desire not to tie-'up the CRBBP ADP resources for an extended period of time; further, past 3t.atistical reviews have proven to be 95% accurate. Thus a random selection and review of 15 user's files wa~ performed. This, plus a review of the fSle areas of the 5 active programmers, was considered an appropriate method for obtaining a valid system-user profile. Further, a file by file review of the account of Mr. Frazier ward conducted, in an effort to determine the extent of his misuse of the computer system. An examination of the physical security of the computer room was also made a part of this review. FINDINGS A detailed analysic of Mr. Frazier's file area and its contents located on account number [1,6], revealed the following data had.been stored on the system over the past year: 1) A letter advertising Frazier's out.aide corporation, CAS. 2) A marketing agreement between CAS and a firm known as Knoxville Computer Center (KCC). 3) A~personal resume on George Frazier. 4) The by-laws of CAS. 5) A 400 family, 21 page directory of the Belmont West Association, with the names of the residents, their children's names, home phone numbers, employment loca- tions and phone numbers. 6) A Belmont West Association Newsletter ~p_plement dated 6/13/79. 7) A variety of letters to individuals in the Belmont West AssOcirtiOn requesting payment of annual dues, from Georç1~: W. Frazier, President, 13e]moat West Associe~tiCfl 0) Other mircel..1.aneouS lett~rs relating to the Belmont West AssocictiOn. Our investigator deterinir~ed from Westinqhoune that Mr. Frazier, who had a mmrketing agreement between his f~rm, CAS, and Kro'cvilie Compllt?r center (KCC), had recommended that KCC he PAGENO="0332" 436 DR'~ c:nir~cLod to provide backup and disaster rocovsry for Westinghouse's CRBRP computer. (It is noted that KCC has the only other DEC PDP 11/60 computer in the Knoxville area). On January 23, 1979, Mr. Frazier sent a letter to the Controller for Westinghouse at CRBRP, in which he outlined his desire to do some outside work. The letter stated that he would work with KCC, "who currently has no business relationship with CrU3FtP, nor is any contemplated to my knowledge." He also stated that, "In this endeavor, I shall not utilize any company tine or go~iarn- ment and/or Westinghouse-owned equipment.' A review of Frazier's file areas revealed that he did indeed use Westinghouse's, and thus DOE's, equipment. `The second area of our re~'iew concerned the file sections of the 15 randomly-selected accounts. These accounts were used. almost exclusively for word processing. The only items found which could he considered a possible misuse of the computer were some personal letters and a few resumes. There was some file duplication, and several letters and memoranda were stored well past their issue dates. The word processing files in general, however, showed little misuse of government resources. The final accounts reviewed were those of the individual system programmers. The following items were located: 1) Amid-term examination for "Computer Programming for Engineering," DP1O2. 2) An 8 page lease agreement and application for a privately-owned dwelling. 3) The office football pool. 4) Computer games; e.g., Depth charge, Rocket, etc. The actual storage space occupied by these unauthorized files, based on the blocks of stcrage used, represents approximately 2% of the total storage space available, There was no account-S ing log maintained in the system showing the amount of use of these unauthorized files. Hence, no valid estimate of Central Processing Unit (cPu) re3ources could be made. it thould be noted, however, that all of the ADP specialists misused the computer to some extent, even thouch such misuse was not statistically significant. PAGENO="0333" 437 DRAFT `lhr ` ~J)e(. t. of tiliM review core i~tcd o~ examining the `physiciL security of the computer room, to include fire safety. The computer is located in a room which is readily accessible to all employees. Further, it is locatci on the ground floor at the back of the building. The room has a large plate-glass window providing ready accesr; to the computer. There' is no alarm system protect- ing either the room or the building. A guard is stationed in the building, but his station is at a desk in the front of the building, quite remote from the computer room. The fire safety system ir~ the computer room was discovered to be generally inadequate. Paper supplies and forms, all flammahie material, are stored on open shelves directly adjacoi2t to thecomputer. There is no sprinkler or chemical fire suppreSsiOn system. The only evidence of fire detection equipment were two home-type smoke detectors, which act as an early wnrning system. These were found hanging fro~ paper clips between the pieces o1! computer hardware. The doors to the computer room are made of lightweight wood, and clearly could not serve as viable fire doors. During the course of the review, we recommended to both WestincihOuSe and DOE Management at CRBRP that all individuals with unnuthorizea files be ordered to purge those files. In addition, we urged that a policy statement. on the proper use of the computer be prepared and issued by management. We were pleased tO learn that the Director of the C1~BR responded to these recommendations, and issued a policy memorandum i/ several weeks later to all Administrative Directors and Chiefs. Xe this memorandum he pointed out some of the items which were found that he considered unauthorized. He then advised that any private use of the AD? resources of the project would be considered unauthorized and any one misusing the computer repeatodlY would be disciplined. We also pointed out to management the problems with physical security and fire safety, and were advised that these deficiencies would he correct.ed. Further, on January 12, 1980 the Controller for ~e~ti.nghouse-CR3RP told us that they have taken' a two phase approach to the problem of physical security and fire safety. IThase one consists of the implementation of fire procedures i~or ev,icuation of the facility in the event of a fire and the proner procedures for shutting down the computer. Furthex, a risk aie~lysis survey was conducted to determine ~s closely as possib ~e the loss that would be incurred should a fire result. PAGENO="0334" 438 6 )?t~~;e two (u~s1aLs O:~ ~ atLdy 01: oL~ior computer room fire and physical securit.y measures in the Oak flidge Area, an analysis of these measures and a draft of requirements for their facility which will be submitted to security corporations for bids. Also, Westinghouse is periodically dumping to tape two weeks of work for bac]zup in the event of a fire or disacter. These security procedures and others, we have been advised, will be submitted to the CRBRP project manager for his review. RECOMMENDATIONS We have recommended the following action, some of which has already been implemented, be taken by DOE and Westinghouse CRnru'~ 1. An inquiry be made by the Westinghouse Project Manager at CRBRP of Digital Electronic Computer Corporation as to whether they can include a more comprehensive audit software feature to provide a history of CPU usage by file in the soon to be acquired PD? 11/44. 2. Periodic, statistically valid reviews of randomly selected computer files he conducted by the CRBRP Controller for 17estinghouse. 3. Ah immediate upgrading of physical security and fire safety systems be undertaken by the Director of ADP operations at Westinghouse. PAGENO="0335" 439 LEONARD P. RIVERS; El' AL On P0 number 9230120MP., for three items, released September 20, 1979, Rivers awarded the order to AX based on the lowest competitive bid of $679.21, The bid quote reflects Al could deliver the goods by September 20, 1979, and RI-ESG receiving records reflect the items were received September 25 and 26, 1979. On February 15, 1980. Rivers submitted a change request showing the length of items #1 and #2 were~ increased and added an additional cutting charge increasing the P0 price to $l,32~.84, a difference of $650.53. Again, the delivery records do not reflect the above change. The above POs represent increased billings of $19,475.63. A review of additional POs awarded by Rivers revealed that in addition to utilizing Al, he was also awarding bids to Avalon Industries, A.ltman Industries, and MRG Industries, generally showing competitive bids among the same companies. It was also noted that another RIESG subcontract administrator, Marvin Robert Spreckelson, was also utilizing the above companies. RI-'ESG vender recørds and the company minority vender representative failed to reveal any information identif5able with these companies. In addition, the users of materials pi~rchased from the above companies felt the prices paid for materials to be excessive. In the case of P0 number 0380048MP, awarded by Spreckelson to MRG Industries, a comparison was made with an established supplier of the same materials and it was found that where MRG charged $185.00 for apiece of one inch tubing and $305.00 for a piece of two inch tubing, Tube Sales, the established supplier, charged $22.00 and $36.00, respectively, for the same items, a difference of $432.00. In the case of the above P0, Sprecke3.son reported that Tube Sales bid $514.16 with competitive bids of $490.00 from MRG and $516.60 from A!. A review of POs issued to the above çompanies revealed the following: 5 PAGENO="0336" 441 THREE VERY LARGE government projects- the Tennessee-Tombigbee Waterway, the Clinch River breeder reactor and SRC I (the solvent refine4 coal project)-come before Congress this week. All richly deserve to be defeated. What else do these projects-a canal connecting the Tennessee to the Gulf of Mexico, a breeder reactor demonstration plant, and a plantto make solid and liquid fuels from coal-have in common? All three are to be paid for entirely or largely from federal government funds. All have incurred im- mense cost overruns beyond expenses due to delay and inflation. All are way behind schedule. All are extremely expensive-between $3 billion and $4.5 billion. And none of the three makes economic sense. It took 25 years from the time the Tenn-Tom was first authorized for Congress to become sufficiently persuaded of its merit t~ appropriate money for it. Congress was right the first 25 times. The canal's cost has ballooned from about $300 million adecade ago to $3 billion, but less than 20 percent of its pro. jected benefits for the last five years actually ma- terialized. Nearly everything else about the project is uncertain, including where the canal could sensi- bly end, which direetiOn barge traffic on it will travel, who would use it and for what, and whether the benefits would ever exceed the costs of con- struction. Since Clinch River was first proposed, the ration- ale for plutonium breeders has evaporated. Only a large and growing number of traditional nuclear electric plants, using up the available uranium fuel,~ would offset the breeder's greater cost and make itl economically competitive. But in the last few years1 projected nuclear demand has plummeted, esti- mates of uranium availability have risen sharply, and the price of uranium has dropped. Meanwhile, the cost of the Clinch River plant alone has risen fivefold-to $3 billion-and construction has not even begun. Utilities lobby strongly on Clinch River's behalf, but do not put their money behind it: the private share of the cost is now down to 9 percent. European breeder programs, including the most ambitious in France, are on hold or being re- evaluated. The SRC I project is the youngest of the three, but it may already have set the record for cost over- runs: up 99.8 percent in 18 months. As in the case of Clinch River, the government would bear most of the costs-up to 97 percent, depending on how suc- cessful the project is. The revenues now being proj- ected by the principal contractor assume that the solid and low-grade liquid products will sell at the equivalent of oil priced at $76 a barrel, which is very unlikely. The project suffers from a number of basic design flaws, None of these projects will yield benefits com- mensurate to the government's investment. Some may yield none at all. Termination would be the best choice even if there were plenty of money.avail- able. But at a time when badly needed government programs are being cut to the bone, their presence in the budget is an affront. ~e ~Wa91$ngton ~po~t AN INDEPENDENT NEWSPAPER Three That Deserve to Lose PAGENO="0337" 442 DINGELL'S RENT-A-COP SLEUTHING BREEDER The embattled Clinch River Breeder Reactor (CRBR) has a new opponent. Ernest Pitzgerald, the Air Force's deputy for productivity management and the gadfly who once lost his job for disclosing cost overruns and structural deficiencies in the C-5A transport plane, is temporarily on leave to help Rep. John Dingell (D-Mich.) prepare the case against continued funding of Clinch River. The Reagan Administration has asked for $254 million In fiscal year 1982. Fitzgerald's initial conclusion is that the federal government's contracting style has been "absolutely bizarre." The project itself is an "amorphous mess," he told The Energy Daily. Fitzgerald and Peter Stockton, an investigative aide on Dingell's Oversight and investigations subcommittee, plan to submit a preliminary draft of their findings on Clinch River to Dingell next week and to complete a longer report before.Corsgress votes on the future of the reactor. The future of Clinch River-on which nearly a billion dollars has already bees spent-will probably be decided before the end of June. The oversight subcom- mittee has postponed plans to hold hearings on the fast breeder project which had been scheduled for next week. Although he is only on leave from the Air Force for a short time (the third time Dingell has requested his help in as many years), "the MO. at the Department of Energy," he said, "is not too hard to fathom, especially since many DOE contract people come from the Pentagon." Although the General Ac- counting Office has published a number of reports on CRBR, Fitzgerald claims no one has ever taken a serious look at the project's purported toss overruns. Dingell wrote a letter to Energy Secretary James Ed. wards on May 22 saying he "expect[ed] full coopera. tins" from DOE in subcommittee requests for documents and interviews. DOE's general counsel in- formed Edwards that, with the esception of a few White House documents in the files at DOE's Germantown, Md., office building, where most of the nuclear pro- (Continued on next page) SURFACE MINING REVAMP ROLLS FOR WARD Interior Secretary James Watt is forging ahead with his reorganization of the Office of Surface Mining, despite-tome say because of-escalating criticism of the reorganization from some in Con- gress. Lass Friday, acting OSM director Andrew Bailey ordered the most controversial piece of the reorganization-the elimination of the Denver regional. office and the creation of a technical center in Casper, Wyo. Last Friday, Bailey sent all regional OSM employees a memorandum serving notice of a "transfer, of function" and a general notice of a reduction in force (RIP). The Denver and Kansas City offices are to be closed by Auguit 31, and employees on Monday were given a form on which to indicate whether they will move to Casper, resign or retire. The form must be returned to the OSM personnel officer by June 30. The Bailey memorandum hints that OSM is having trouble finding office space in Casper: "until appropriate space is secured in the areas to which these functions are being transferred, the duty stations of the transferred employees will not change," the memo says. At House hearings in Denver earlier this month, there were predictions that OSM would not be able to find suitable office space in Casper. The Watt reorganization plan, announced May 20, quickly came in forattack from environmental groups, OSM employees and state strip mine en- forcement officials All claimed that moving from Denver to Casper would make dealing with OSM more difficult, uince Denver it really the capital of the wets and Casper a remote cowtown by com- parison. The flap led Rep. Patricia Schroeder (0-Cob.), head of a civil tervice subcommittee, to hold hear- ings in Denver. And for a while it appeared that Watt might be waffling on the reorganization plan: Interior officials went out of their way to portray the plan at tentative. At the Denver hearings, the mout telling criticism of the reorganization came from state of- (Continued on next page) Wednesday, June 17, 1981 (JFFICE "` Volume 9, Number 116 PAGENO="0338" 2 DIngeli's Rant-A -Cop Sleuthing Clinch Rivør (Continued from preceding page) gram is headquartered, Dingell was entitled to whatever documents he asked for. After sifting through the boxloads of documents received since then, Fitzgerald and Stockton clams they have uncovered evidence that the cost of the project has increased by a "factor of four" since its inception. And they have an internal memorandum by Burns and Roe, one of the project contractors that, they claim, raises serious questions about the safety, siting, management, cost and scheduling of the controversial project. `(A 1973 Burns and Roe memorandum pinpointed certain seitmic problems. As a result of additiotsal core drilling conducted thereafter, the reactor site was moved several hundred yards to the north and west.) .~ The two investigators claim they have also discovered that Westinghouse, which manages the reactor portion of the plant, once asked for a $90 million increase in its management fee because of project delays and the unex- pected workload. Eventually, a contract appeal board ruled that Westinghouse was due only about $3.4 million. Westinghouse says that since it became involv- ed in the Clinch River project, it has received between S25-30 million in fees from DOE. William Rolf, general manager of Project Manage- ment Corp., the nonprofit porporation which manages design, construction and testing of CRBR, says he "looks forward to an objective investigation since there is nothing to hide." While one can argue that the cost of the project has gone up more than four times since the original cost estimate of $669 million was made in 1971, Rolf says, there has been less than a doubling in cost since the first real design cost estimate was made in September 1974. That figure was Si .736 billion, assum- ing the plant was completed and reached initial criticali- ty by July 1982. The most recent estimate is that CRBR will now cost a little over $3 billion if Energy Secretary Edwards' 1990 target for completing the plant is met. Some other estimates put the cost at more than S3.5 billion. The private sector is pledged to pay $257 million of that, with the rest coming from the federal govern- ment. -Roger Gale Transco's Loss, Texas Eastern's Gain Jack Earnest, president and chief operating officer of Transcontinental Gas Pipeline Corp., will move to Texas Eastern Corp. on July 1 as senior vice presi- dent and general counsel and a member of the management committee. Earnest has held his cur- rent position with Transco since joining the company in 1979. - Taking Earnest's seat will be Kenneth Lay, who joined Transco last month as president and chief operating officer of Transco Companies Inc. and will retain that position in addition to his new job. 0 The Energy Daily Wednesday, June 17, ~gg1 Surface Mining Revamp Rolls Forward (Continuedfrosn preceding page) ficials. Brace Hayden, Montana's chief strip mine regulator, said: "What I, as a program ad- ministrator, am looking for from OSM is a period of stability and consistency." The Denver office has "a very capable and experienced staff who could collectively understand all of the various facets of Montana's coal mine reclamation and abandoned mine programs," he said. Walter Ackerman, Wyoming's chief regulator, said that "although the reorganization is clothed in glowing prorniies of working more closely and effectively with states, I would prefer that OSM remain in its present location." He added-and Hayden confirmed-that OSM had not consulted their states about the reorganization. Combining two regional offices-Kansas City and Denver-into the Casper OSM office would force some 90 people into only 54 positions pro- posed for Casper. But many will choose not so move with their jobs. Indeed, many critics of the move fear that the best personnel in OSM's Denver office will quit the government, leaving only the marginal to move so Wyoming. After Schroeder's hearing, she wrote Watt a detailed letter asking for further consideration before going ahead. Then last week the House Ap- propriations interior appropriations subcommit- tee, under Rep. Sidney Yates (D-lll.), voted to block the reorganization-by cutting off funds in the 1982 appropriation for the Casper technical center. Yates also nearly doubled the number of mine inspectors Watt asked for in his budget sub- mission. Yates' and Schroeder's delaying tactics have made Watt even moredetermined to go forward with the OSM reorganization, say Interior Depart- ment sources. Speaking at the National Coal Association's annual meeting in St. Louis Mon- day, Watt stood firmly behind his plan. "When the reorganization plan I have ordered is com- pleted, we will have 628 permanent full-time employees, not 1,000, and 22 offices, not 42. There will be a savings of more than $2 million a year on administrative costs alOne," Watt may be moving fast now in hopes that he can get the full reorganization accomplished in the current fiscal year, which ends September 30. Then the Yates subcommittee's action would have less meaning. But most who follow federal person- nel issues say there is no way the issue can be fully resolved before the start of the new fiscal year. 443 THE ENERGYDAILYIS A PUBLICATION OF KING PUBLISHING GROUP U.wellynKlng. Publisher Richard Myars, EsecutlveEdltor John McCeughey, Senior Editor PUBLISHED MONDAY THROUGH FRIDAY. COPYRIGHT 1981 (ISSN 0364-5274) SUBSCRIPTION PRICE: $700 PER YEAR; $750 PER YEAR OUTSIDE NORTH AMERICA (ALL AIR MAIL). EDITORIAL STAFF-WASHINGTON: Burt Solomon ledilorl, Kennedy Maize, Roger Gale, JoAnn Dyer. PARIS: Ann Maclachian. LONDON: Oavid Fishlocis. CALGARY: David Hatter. NEW YORK: Peggy Everett. DESIGN/GRAPHICS: Kathy Cummings, Donna Horchier. BUSINESS STAFF-WASHINGTON: `Jane Connolly Ibusiness manager), Grant Stockdale lessistant publisher(, Pamela Lautman. Betty Thomas. REPRODUCTION OF THIS NEWSPAPER BY ANY MEANS IS STRICTLY PROHIBITED. PAGENO="0339" 444 The Review Of The July 15, 1981 * Volume 17, Number 28 POLITICS I I vwio to no one in my support for high technology and the accelerated development of nuclear power. How- ever. Conservatives need to be con- scious that every nuclear development program should be considered on its own merits. The current debate over the Clinch River Nucle'~r Power Plant in Tennessee is not a simple matter of the anti-nukers trying to shut down an important power plant. To the con- trary, the Clinch River Plant is a hope- less case of pork-barrel politics and had judgment, and at the very least a shocking example of technology trans- fer to the Communist masters of the Soviet Union. Clinch River Travesty It was in 1970 that Congress first considered construction of a breeder reactor which would produce etiergy from uranium while producing~ plu- tonium as a by-product. The cost of the project was set at $669 million, with the government then scheduled to supply some $100 million in seed money. The rest of the funding was to come from private firms. Congress intended this project as a practical program to supply energy. But in the last 11 years various com- panies steadily dropped out of the Clinch River program as the realiza- tion dawned that the design of the re- ~ct'r was both outdated and flawed. Instead of cancelling the project or bringing it up to current levels of knowledge, the government assumed the share of departing companies. As I write, the ground has yet to be broken for this project, though more than $1 billion has been spent on prep- arations. The estimated cost for com- pletion of the plant has leapt to $3 bil- lion, with the utilities industry paying for only $250 million of the figure. And, as unbelievable as it may seem. the plant is not expected to be opera- tional until at least 1990 or beyond, al- though actual construction is supposed, to begin this year. What is more, the `nearby towns and industries scheduled to use the plant have long since turned to other sources of energy. Thus cur- rent planning intends for the plant to become strictly a research and devel- opment facility. This horror story gets worse. In 1976 the Soviet Union approached the United States about an exchange of' information and technology relating to the Clinch River Project. According to a letter in my possession, American scientists have since met with Soviet agents described as scientists and ex- changed "documents outlining the technkal requirements and costs" for a reactor like the Clinch River Plant, Despite the fact that this type of re- actor is outmoded by modern Ameri- can standards, it is outrageous that we should be supplying such information to our nation's enemies~ In late June the Wdl Street Journal gave detailed coverage to an F.B.I. investigation now underway which ap- The Revsew Of The ~EWS, July 15, 1981 43 - PAGENO="0340" 445 lears to have uncovered massive evi- dence of waste, fraud,t payoffs, and kickbacks in the Clinch River Project. In one case, government contracts were awarded to a company on an "open- ended" basis, with nO restrictions as to ultimate cost? This is disturbing be- cause much lower "fixed price" con- tracts were available from another company. The House Commerce Com- mittee is now set to begin looking into the matter. Lest anyone think I am straying from the Conservative reservation on this issue, consider that in May nuclear scientist Edward Teller told a Member of Congress: "Clinch River is techno- logically obsolescent, and its small scale and large cost make it thoroughly with badly~ needed econ- omy in government." Dr. Teller went on to make it clear, and I fully concur, that he supports "expedited licensing and planning" for nuclear power plants. However, the debate over the Clinch River Project is not, or at least should not be, a debate over nuclear power per Se. Rather it is a debate over the ~~j~gement of this nation's. nt&clear development ro ram. e Wi ó ourselves a great disser- vice if we allow the vote in Congress on the Clinch River Project to be "the" test for continued development of nu- clear power~ The evidence is over- whelming that this program is not only far from the best, it may be the worst possible nuclear power program as a litmus test of commitment to nuclear power development. Why then is the Clinch River plant still alive? A,s the Wall Street Journal put it, "The main virtue of the [Clinch River) breeder seems to be that it is located in the Senate Major- ity Leader [Howard) Baker's home state." For years, Conservatives have pointed to numerous examples of needless federal spending designed to boost local economies. This seems to fail in that category. Indeed, Conservatives including O.M..B. Director David Stockman and New York Republican Jack Kemp (C.L-80) have joined Minnesota Re- publican Vin Weber (C.I.-90). who has been~ waging a lonely battle on this matter for some time. Unfortunately. Senator Baker succeeded in getting this $3 billion project included, in the Senate's recent Budget reconciliation process. On the House side. when "Grarprn-Latta 11" gained narrow pas- sage in a development Conservatives generally welcomed, that House recon- ciliation package also contained fund- ing for Clinch River. Responsible Conservatives who care about the future of nuclear power still have a clianc.e to stop tha Clinch River boondoggle. The opportunity will come later this year when both Houses act on the Fiscal 1982 authorizations for the Department of Energy. Conserva- tives who favor nuclear power should get behind Representative Vin Webers effort to stop this program riddled with corrultion and waste. Then. the country should move forward with a commitment to develop up-to-date re- actors for a program of energy in- dependence. - PAUL WEYRICH I I 44 Tb. Review Of Tb. NEWS, July 15, 1981 PAGENO="0341" 447 PAGENO="0342" a a PAGENO="0343" 449 89-405 O-82--30 PAGENO="0344" PAGENO="0345" ~2;cRgfa' U~ ~;gw~r' d r!fl1~ aflw~v~io ~ V hUH flhng PAGENO="0346" when the. government officials who free bun in return for advanoe.jn-' are supposed to keep track of the formation on contracts and $54100 projects contractors shirk their re in cash for bid price information sponsibilities The FBI found that two purehas- According to a epokeawoman for ing officials invented bogus cbnlpa the Clinch River project,. about 80 nies, from which they claimed tp percent of the tost increase was due have solicited bids for items needed to circumstances beyond official con. at Clinch River. trol. In other words, the bureaucrats The Congressional Budget Office were responsible for "only" $500 mit. hat estimated that terminating lion of the estimated $2.5 billion Clinch River "could save the govqi~- overrun That's bad enough ment $1.4 billion over the five-y~ar But it's actually worse than that. period of 1982.1986." But, the Investigators for Rep; John Dingell Reagan administration, reportedly. (D-Micb.) told my associates Tony over .the objections of budget `dire~. Capaccio and Howard~ Rosenberg tsr David A. Stockman, has decided that at least three.fourths of Clinch to go ahead. River's prime contracts are open TROUBLE AT SEA-Two of ended; that is, with no firmly set the Navy's moat glamorous wespdbs costs or completion dates. programs are awash in troubles. One The investigators warned that is the Trident missile submarine~ttie even the staggering $3.2 billion es- other is the csrrier.based F58 fight. timate may be optimistic., It fails to' er-attack'plane. take Into atcou~t the possibility that Among the Trident's probjems the entire Clinch River facility,might have been cost overruns, insCrance have .tQ he.'relocated for safety rea- mi~çups and even substandard steel,. sons. While the moet.obvious defects are A 1978 Nuclear Regulatory Corn- thought to have been correrted,bcth mission report listed nearly 100 safe. the Navy, and the prime con$ractor, ty problems.. A Clinch River official General Dynamics' Electric Beat ,Qi. said rnány'of the problerne had been vision, are nervous about the sea t~i~ addressed even before the NRC re- ala. port, but the commission had not As for the F18, high Navy sour~s yet checked to see if the needed cur- `report that fatigue testing of thejat's `rëctions wore actually made, fuselage indicates that seriou z~e- Fraud has also plagued the pro. fecte may'occur after only 700 hours ject. One . internal Department of of flight. The plane has already Energy'memo told how an empboye proved to be a financial disaster, Its of Atomica International, a subcon- cost overruns now estimated in the tractor, received a $1,000 interest-, hundreds of millions. . . 453 Clinch River: Could Rate 10 On Fiasco Scale Government boondoggles are al- ways good for evanescentheadlines. But if they are really to stick in the public craw, two considerations are usually necessary: the fiasco must occur under high auspices, and the story must have a certain oomph ca- pable of kindling public interest. By all the oomph indicators, the Clinch River fast breader reactor at Oak Ridge, Tenn., may not register high. It is an unheralded project, with an `awkward name, well off'the beaten path. But it is a multimillion. dollar fiasco born `of fraud and mis. management. The plant, darling of, the nuclear power industry, is supposed to pro. duce more nuclear' fuel than it t~ses, which sounds likes bargaip. But it has been no bargain for, the tax- payers who are unwittingly paying for it, Originally, it was .to be in opera. tion by December,~ 1979, at a cost of $669 million. But it haa'already cost $1 billiOn, and the latest estimate is that it won't be `operational until February, 1990. By that time, the bill will be at least $3.2 billion. How could this happen? It's easy, PAGENO="0347" Energy (From Page 3) Atomics International did not deliver the 11 generators. Instead, after delays anti design changes, - the company negotiated a new ~ contract to provide only two - generators at's cost of $143 million ~ tothe project. ~ "The basic problem is that in- stead of the project meeting the specifications, the specifications are meeting the project," said Air ~ Force cost-cutter A. Ernest Fitz- ~ gerald, who was detailed to the ~ Dingell subcommittee to help with ~ the investigation. The well-known Ui CIA wisistleblower added that ~ "the rubber baseline developed at ` the Pentagon has been further re- 6 fined atDoE." PMC spokpsman Saiwen says that Atomics International is not responsible for `the rising costs * incurred in producing "the * world's most advanced steam generator." And he said that Atomies International was chosen over the less expensive Foster Wheeler Corp, because "they had already produced a design for the steam generator at their own ex- pense, built it, tested itand it per- formed flawlessly." Saiwen acknowledged that three Atomics International employees have been investigated by the FBI for "instances of alleged fraud." He said that the "three employees were accusedof lOwer tier contracting irregularities amounting to about $20,000... and these costs have been absorb- ed by Atomics International." In one case,an Atoinies Interna. tional subcontract official admit- gation that his sales manager had ted that he had accepted a $1000 offered a $5000 bribe "an absolute interest-free loan from,a sales- and flagrantlie." man representing an East Coast Two other Atomics Internatjon- manufacturer who wanted to sell al subcontract administrators storage tubes to the Clinch River apparently invented bogus ___________________________ project. The subcontract official companies and claimed to have also said he turned down a $5000 solicited bids from those phony tract official denied all bribe from the manufacturer's- firms for items needed at Clinch - wrongdoing. Another case of sales manager. River. Investigators say the two apparent fraud involved an em- After the Atosnics International employees then supplied the items ployee of Westinghouse Corpora. employee provided bid price infor- themselves at wildly inflated, lion, chief contractor at Clinch mation lathe salensan, investiga. prices. River. The Energy Department's tors say, the manufacturer drop- inspector general found that this ped his bid from $1.8 million tb official was using a $200,000 Clinch $705,000 and waa tentatively River computer to run his own pri- chosen for the contract. The vate computer firm. company's vice president told this Westinghouse fired the employee. newspaper that the firm had He was unavailable for comment. never received a contract'to pro- At the request of the Dingell vide Clinch River with storage subcommittee, the DoE inspector tubes, and he denied that his general has opened an investiga- company was in any way respon- tion into other possible contractor sible forthe giooa loan by the sales abuses at Clinch River. representative. He called the ahle- For example, the FBI found that one subcontract administra- tar apparently sold tubing worth $22 and $36 to the government for $185 and $305. He allegedly bought the tubing from an established supplier after he falsely claimed that that supplier should not be `given the Clinch River tubing con- tract because its bid was $514. In a telephone interview, the subcon. PAGENO="0348" 456 ~ FEDERAL TIME ,-i~YGUS~jo~ cRiTics cHARcE~ New Reactor Less Safe Than Three Mik ~s~and If you liked Three Mile Island, John U. Dingell, D-Mich., chair- you'll love the Clinch River breed- nian of the House oversight and er reactor. investigations subcommittee That Is the message some oppo- released a summary of the NRf3 nents of the controveisial $3.2 bil- safety criticisms at a July20 hear- lion breeder project find in a 31- ing. page Nuclear Regulatory Corn- At that session, Dingell called mission summary listing more the Clinch River nuclear plant "a than 100 unresolved safety baa.. cost and technical fiasco." He ac- ards at Clinch River. cused the administration of trying Citingthe NRC report, these to "circumvent health and safety environmental scientists and con- requirements for the breeder gressional investigators say that project" by seeking exemptions - compared to the "light water from both environmental and reactor" used at Three Mile Is- NRC licensing standards. land -the Clinch River breeder is-. Dingell charged that the admin~ far more likely to melt down, blow istration was recklessly Ignoring up and spew radioactivity Into the "Three Mile Island and the fact surrounding area within 24 hours that two breeder reactors in this of a nuclear accident. - country have suffered core melt- But despite these safety flaws, a downs" in its push to build the 500 percent cost overrun, and alle- breeder. Revamping the project gations that the project has been to meet NRC licensing standards misconceived and mishandled, on could drive the costs - already up July 24 the House voted by -a slim from $669 million to $3.2 billion - margin to continue to fund the nearthe$5 billion mark, hesaid. breeder reactor. - Dingell added that an NRC The NRC safety report on order to move the project away * Clinch River was compiled in 1978 from Clinch River - an area be- after efforts to secure NRC licens- lieved to contain seismic faults - ing for the plant v~ere halted by could shove the already delayed President Carter's opposition to completion date back to 1994. the project. In air attempt to stop "This is an 11 to 15 year delay - the Reagan administration from making the technology 30 years pouring $254 million into the old," he said: . problem-riddled program, Rep. (See REAf~TOR,Back Paje) Reactor (From Page4) Dingell and other breeder oppo- nents claim that public health and safety would be jeopardized by the Clinch River plant unless the 100 safety flaws identified in the 1978 NRC report are corrected. The NRC safety team identified these potentional hazards: * Breeder operators would have to manually activate safety sys- tems within 10 minutes of an acci- dent to avert disaster. This -"reliance solely on manual initia- tion (of some. -emergency proceduresj" leaves the breeder dangerously susceptible to hui~an, error, NRC noted. - -. Unlike light water reactors which use water as a coolant, breeder reactors use liquid sodi- um which catches fire on contact with air, explodes on contact with water, and, in the event of acci- dent, could eat away the concrete in the reactor building. * Although NRC requires that a *reactor be able to contain-a melt- down for at least 24 hours without leaking to permit evacuation of the nearby population, the Clinch River breeder may not have this capability. . - o In a breeder r~actor, a melt- down can result in a nuclear explosion which could blow the lid off the containment. * Employees In the breeder reactor control room are not ade- quately protected againstradia- tion doses or the consequences of - a meltdown. - - . * The breeder's instruments do not give breeder operators alt the information they need during emergencies. NRC said these in- - struments should provide more data on failed fuel, loose parts, sodium leaks and radiation levels within the containment. Support- ers of the Clinch River breeder dismiss these NRC findings as unimportant. In a recent Republi- can-~Study Committee "back- grounder" on the project, Tim Peckinpaugh, an RSC researcher, maintained that claims that the breeder is an environmental threat had been "soundly" reject- ed as "specious?' And he added that "the breeder will use nuclear fuel 30 to 50 times mere efficiently* *than the present generation of - commercial nuclear power plants, the thermal reactors referred to as light water reactors." * -HERSHOW. PAGENO="0349" 457 OTHER COUNTRIES are mov- ing ahead of the U.S. in developing commercial-scale breeder reactors while our own nuclear program tags along amid charges of serious cost overruns, mismanagement and possible fraud. The kindest thing we might do to the controversial government- backed Clinch River Breeder- Reactor (CRBR) project is to scrap it and borrow some of the technolo- gy used in France's bighjy- successful PheniS program. Another alternative would be se- rious talks with our allies about a nology-sharing program. sistingrepeated efforts to kill the project, developers have been urged on by the promise that the breeder will be able to produce more nuclear fuel than it can con- sume. Started back in the 1940s, advo- cates held out for the Clinch River project even in the face of fact that the U.S. is falling behind. The big- gest argument for its continuation is on grounds of security-that we should not depend on technology from another country. French Licenses. Getting the French to license their technology to us and adapt it to a demonstratiOn plant of our own is "not impossible," but does present a number of..problems, according to a spokesman for U.S. nuclear energy advocates. "There are some differences in French and ou~ own regulations," said Paul Turner of the Atomic In- dustrial Forum, which represents manufacturers, utlities anil related interests. But, he added, these differences can be overcome by using Only their design and tailoring it to fit the requirements and needs in this country. There have been discussions in the past with the French and En- glish on a breeder information- sharing program and he saw no reason why these talks can't be reopened. Turner said, however, his orga- nization favors continuation of the Clinch River project `It's the only game in town," he explained. France took the lead in the breeder area several years ago with its Phenix demonstration plant and is scheduled to put its much larger commercial Super- Phenix into operation by Decem- bcr, 1983 The Soviet Union is not far be- jectbe unc ken. - Rep. March Marks, R-Pa., chal- lenged contentions that DOE had failed to cooperate in the probe,. and Tennessee Democrat Albert Gore said some of the allegations were "just flatly inaccurate." In its preliminary findings, the staff reported: * Cost overruns of 450 percent since 1973, with the possibility the figure may go much higher. * Growth of the taxpayer's liabil- ity from approximately $100 mil- lion to $3 billion, more than 30 times the original estimate. * Delay in a promised breeder reactor demonstration plant porn 1979 to 1990; if licensing bythe - Nuclear Regulatory Commission requires an alternate site, the date could be advanced to 1994, and re- quire an additional $17 billion. * That DOE is considering an amendment to the Enegsy Reorga- nization Act in orderto circumvent safety questions raised by the NRC, including 100 unresolved issues. * Two critical components, the steam generator and sodium pumps, have experienced signifi- cant design and fabrication prob- lems as a result of test failures. * Poor choice of an exotic aeros- pace alloy for the reactor, which can't be welded, over a common stainless steel component * Examples of alleged bribery and fraud by Atomic International officials and a Westinghouse offi- cialwho was running his own busi- ness on a CRBR computer. Fitzgerald told the subcommit- tee .that DOE failed to produce a crucial documentto his investiga- tors, who wanted to know why com- petitive bidding for 11 reactor steam generators was scrapped in 1975 Project Director Lochlin CatTey later produced the documents, saying he was embarrassed to have them turned over to him only a day before Monday's bearing. In its investigation, the subcom- mittee stsfftiuestioned why the de- partment entered a non- competitive contract with Al for two steam generators while throw- ing out a competitor's bid for $20.3 million forall 11 None of the generators have been delivered, the subcommittee was told; meanwhile project sources saytbe cost ofthetwo com- ponents have soared to $143 mil. lion. TECHNOLOGY WA T~I Clinch River Project Is Mired In High Costs, Charges of Fraud hind France - with one demon- stration plant, another close to commercial scale, and a plant somewhat larger than the French in the design stage. The earliest we can get a com- mercial plant into operation if we follow our current policy is 1990 and possibly .1994, Rep. John D. Dingell, D-Mleh., told the Oversight and Investigations Subcommittee of the House Energy and Com- merce Committee Monday. Several unsuccessful attempts have been made to kill the Clinch River program, whose price tag escalated from an estimated $669 million In 1973 to $2.2 billion today. Despite this, the Reagan adminis- tration appears intent on reviving the project Carter tried to ditch it when he was in office and ass congressman, David Stockman, the currentdirec- tor of the Office of Management and Budget, called for ending what he called "subsidization" of the program. Shoi4Lived Cut One of Stockman's first acts as 0MB director was to slash govern. ment funds for the breeder, but accor~lng to Dingell, that cut "lasted less then two hours." Senate Majority Leader Howard Baker is given credit for restoring funds origittally cut out of a $35 bil- lion energy research bill approved by the House Science and Technol- ogy Committee Baker's home state is Tenbessee, whbre the Clinch River project is located. The fight to prevent appropria- tion of $250 million in the Reagan budget for the Oak Ridge, Ten~,, project now moves to the House floor. Dingell has called on the Gener- al Accounting Office to investigate possible fraud in the handling of the project and threatened further hearings of his subcommittee to look into the "lack of candor" by the Department of Energy in dis- cussingits role in Clinch River. Dingell borrowed A.E. Fitz- gerald, an Air Force government contract expert from the Pentagon, to help the subcommittee in a staff investigation, which revealed a number of irregularities. ~ believe there are millions of dol- lars of hidden costs in the Clinch River breeder reactor," he testi- fied. Fitzgerald recommended that prime contracts be canceled and that a technical review of the pro- PAGENO="0350" 459 AUGUST 17, 1981 FEDERAL TIMES SHEiLA HERSHOVI waste,' say the breeder propagandists, "is small in volume, easily controlled and tightly regulated." GAO, on the other hand, believes the pamphlet' should have mentioned "the fact that Some radioac- -live wastes must be isolated from man and other species for centuries and niillt~nnia - time scales Smoke beyond the lifetimes of existing and previous civiliza- tions." Screen And GAO was unimpressed b~' the propagandists' claim that "clearly the breeder is safer and better - for our environment than any other source of elec- tricity." Sure. Windmills have been known to mug * Don Quixote. Along with copies of the propaganda pamphlets, the DoE minions dumped some interesting contrac- IN THAT heartwarming old flick "Miracle on 34th tor expense sheets onto the witness table. There was Street," the old coot who thinks he's Santa Claus Stone & Webster Engineering Corporation's request proves his case when mailmen paiade into his sanity for DoE approval of nearly $141,000 worth of 1977 * hearing to deliver sacks of letters addressed to "membership expenses in trade, business, and Santa. professional organizations." Among other items, the The message is: If the government says you're contractor thought the Clinch River project should Santa Claus, you're Santa Claus. pay the dues for "luncheon clubs, such as the Fort Perhaps Influenced by this Hollywood oldie, the Hill Club. . . ~thatJ provide an atmosphere condo. cive to the conduct of business in confidence and Department of Energy tried a similar ploy at a July without interruption and distraction." - I 20 House oversight and investigations subcommittee - * hearing on the Clinch River breeder reactor. In the Stone & Webster also billed the project $1200 so midst of testimony by Shelby Brewer, assistant that 20 contractor employees could join the Atomic Energy secretary for nuclear energy, DOE officials Industrial Forum, a lobbying group for the nuclear dumped cartons of what appeared to be Clinch River industry. And listed on Stone & Webster's 20-page audits on the witness table. ` roster of memberships are such diverse organiza- "The ClinchRiver project is one of the most thor- tions as `The University of Maine Pulp and Paper Foundation ($500), U.S-Korea Economic Council, oughly and frequently reviewed and audited projects Inc. ($1000), American Nuclear Energy ($19000) and in history," Brewer intoned as the fat binders came thudding and booming out of the boxes. ~`, Massachusetts Taxpayers Foundation, Inc. ($500). But when subcommittee aidesfinaliy had a chance Deleted, alas, as unallowable-overhead costs were to read the documents after the hearing, they found $3216 in "social and country club dues," as well as an they had been'snookered. "The first two binders we apparent attempt to double-bilrthe Clinch River looked into - they were phony," a staffer fumed, project for $6405 in Chamber of Commerce member. "They had nothing to do with Clinch River. One had ships. - to do with a tidal project and the other was about a Riveting as these documents are they do little to solar project in the Southwest with a `hidden $25,000 bolster the argument that the bre~der reactor margin' to cover up cost overruns." project has been closely scrutinized and serttpulou~ly But those files that did contain Clinch Rive~r audits managed~ Nevertheless, Rep. Albert Gore Jr., t)-, Tenn., whose district houses many Clinch River revealed a few surprises. There was, for example, a workers, spoke glowingly of the government's 1977 draft General Accounting Office report scolding "extensive investigations. amlits and reviews" as he the ~3r~eder Reactor Corporation, a group represent- urged colleagues to pour $228 million into the project mg the utilities participating in the Clinch River in fiscal year 1982. venture, for issuing four pamphlets that "are so oversimplified and distorted, that they clearly consti- Following DoE's exbmple, Gore released a torrent tote propaganda and, as- such, are questionable for of paper at the July 20 hearing. In an attempt to dissemination to the public." * * discredit a subcommittee staff report denouncing the Clinch River project as a $3.2 billion "cost and tech- "Is plutonium dangerous?" asks one pamphlet. nical fiasco" the Tennessee congressman handed The answer, according to the breeder propagandists, out ten ~tac'ks of DoE documents and "discussion" Is that plutonium is "simply not a realistic threat * when compared with other-hazardous materials," dealing with the main charges against the breeder. such as "fire, water, coal, wind, sun, oxygen." GAO `This "thorough rebuttal" - which Gore said he called this statement "ludicrous." - and his staff prepared - was too voluminous for What about radioactive waste? "Radioactive most of his colleagues to read. Those who did found ______________________________________________ documents that contradicted each other and docu~ - -. - -- * ments that contradicted Gore. * -* PAGENO="0351" 460 At the hearing, Gore sniped repeatedly at A. Ern- est Fitzgerald the celebrated Air Force whistleblower who had been detailed to the subcom- mittee to help the staff probeClinch River contracts and overruns. He portrayed Fitzgerald as "really a folk hero in this country" who was great at finding Air Force waste but "flatly inaccurate" when he took aim at boondoggles enriching Gore's district. Gore said Fitzgerald had mistakenlyaccused the breeder project of settling a $157 million claim by Westinghouse for $23 million when the actual settle- ment was $8 million. Fitzgerald replied that both the $23 million figure and the $8 million figure had been provided to him by the Clinch River project and both had been included in his testimony, along with his recommendation that the conflict between them be resolved. Both figures also appear in the "thorough rebut- tal" issued by Gore. The $23 million figure is said to refer to "the fees paid Westinghouse through fiscal year 1979." The $8 million figure is described as the settlement for claims "for work performed prior to stopped." None of this is true. Most of this is disprov- September 30, 1978." On Gore's own copy of the "thorough rebuttal," there is a hand-written note en by documents in Gore'sown `thorough rebuttal." next to the $8 million figure. The note says, "\Vest- Thanks, in part, to Gore, the House voted to contin- inghouse got `goosy' and made added claims." A tiC the Clinch River project. So, of course, will the Gore aide said he didn't know anything about the Senate, persuaded by Senate Majority Leader How~ handwritten note or Westinghouse's alleged go6~si.. arcl Baker ofTennessee.. .. . ness. .. . Less than a week after Gore helped keep Clinch After blaming Fitzgerald for mixing figures he River roIling along, he slipped outof his role as * didn't mix, Gore praised Loeblin W.. Caffey, director Populist Prince of ?~rk and re-emergedas the enemy * of the Clinch River project for discovering examples * of DoEwaste. Al a July 28 hearIng, he angrily of fraud and waste which Caffey.did not discover. accused Energy officials cf aliowiOgoircoropaflies And four days after the hearing, during the floor to rip off billions in consumer overcharges. - debate on 1982 fundin(for the breeder, Gore told his. . . colleagues that all instances of waste, fraud and abuse at Clinch River "were extremely minor in "Maybe we're making too much ofthis," Gore said nature, immediately .caught and identified bythe sarcastically. "It'sonly$3billion." .-. . management of the project, immediately referred to The Clinch Riverproject is $3.2 billion. But it's in~ the inspector general and the FBI and immediately Tennessee. - - . PAGENO="0352" 461 7 ~4e ~ ~ .July T~8V~ Probes of i~ lear plant irre~uhirities revealed From staff and w1~e;D?~~ Investigators haven ~e elved P~ojtCt spohesmen said they ~ `~"~: ~ welcome the aivestagatlon *04 1 FBI ~ opd ~ ~ ~ ~ the In- Kevin SaIw~ a Clinch RWe1- ,flegol b off dais of conspon CS vestigatars at first. ~ spokesmen, said the FBI anvestr~a rking on the Cluutch R~'~~I' "The staff were told not to talk tions were initiated by Clinch River Breeder Reactor project. . 4.~ us, but nbw, they've-bean in- ~` officials and ks ~ctors, y~bb, Peter Stockton, an invest,90tOr structed to only answer our ques- were the victIu5 of any wmngdo~ for the House Energy ond* com~ *.tlOTia and* volunteer bO Informs- . . Ing, and not theperpetratars.. merce Subcommittee, said the * tion" Stockton said.' `~ ~ ~i an extremely well-run committso dlSCOVCT~d the probes ~ retatfrig to the Ato~ and disciplined projecl, and In any * while conducting its OWlS lnveS; mica'. international purthas~ kind of investlgation,we'regoing to gatiout ~to the buying Pro ~ *~lds'tbe found by the project of- ~ come out ciean~,eSalwen said. the proieCt ~ ~ flce~or the Energy.Departrnent.~Ihe `. ~ ~ lagell, D-MIcIL ii 1 used onentatOr the electrlCPtoflt. Investigators have received soTneat~ opponent of the liquid-metal, fast-I 0 e FBI probe involved the the documents, Init toasty are miss- *.br~er reactor that is designed.te hief of computer oper- .Iri& Stockton said.,, ::. ~ . * produce more energy then at con~.: ationS for Westinghouse Electric .. HUTInp bet ere thó' subcom. sunies, is headirigtheinvestigation~ * Corp who olIeg~dIY was u n9 ill be h Id ` .abó t two . The . Invattigatlon -`centers. company computers ~for _ `weeks, he said. ~ `-..-~. amunc~ ~the. breeder. project's: - _---` - .. ~ `~` *.. awarding of a $26 million contraot * private business. He has been. . to Atomics International In 1975 for fired by the companY, Stockton ~ steam generators, passing overa said.. . ,~..,. ~. $20 bid from Fceter Wheeler Carp., * Another lovolved two me~wh0 .j The projectoflienlater renegotiated site edty set up phony companies "the contractthat required Atomics to bid against Atomlus Interriation' to deliver, only two steam garter- at a unit of Roc welt International ,atom at a costotslanrnuhion. `."~ * Corp. Both men have left the corn- " Fred W. Beuiuthal,' an aid~ tb pasty, Stockton said. ~ c~my " . Senate Majority. Leader ilowar4 companies submitted lugh bids for.1 ` R-Tenn, said the problems' extra equipment used on Atom us the investigation so far International's steam generators. bave Involved the business side of which are the center of the suibc0~~~" the breeder pr*ctsome tipie ag&,'- snittee's probe. . . . , -~ ` -The technical partof the proJec~t Stockton said at the subeomm - be sald,is Sound, and any wrongdo~ tee's request the inspector general lrig among benInèonact~ for the Department of Energy as ~th the bedeg'sbouldn'toversba' sent two auditors and an inveltaga- dow the ksp0t~oce of building the tor to the project headquarters, 1st / plant' ..~ ,,,~ ~ ~ Oak Ridge to Inspect purchasing . ~ ~ba ~ P~~'~"'~: `u.- ., ., .. *, . ~` .: * ~n ongoing pelt of the nation's nu~ clCar power strategybecause It can convert leftovers from the uranium ~ ~ ~ tratian are seeking $254 million for * theprojectntyear,:~.-s3.?Sn~"l k ~ ~ ØØ~99~9 5.1.4 2~)(]I~I )kJO Jè18è13 .LWE) 9~l~I o~a'w~o