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~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
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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)
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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)
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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:]
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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.
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-- 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
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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. *
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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
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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. -
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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. .
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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. .
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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
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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
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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.
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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.
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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
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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
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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. ` `*
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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
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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.
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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
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I Peter Stockton
Subcommittee on Over~'
sight & Investigatlo
Committee on Energy
and Commerce
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.~
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
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`.n
.
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Reactor P'ant Project.
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Attachments:
F~j.4 ~
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P. 1. Marquess, pie.
Financia' Mat$ag~5$ent
CRBRP/PO
ataosts
~ As stated
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C, ~ `.~ ~ ~W' ~A.~.O440 (~% ,-,~,4 L,4.4~. j', ~
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PAGENO="0094"
* ITENA
CRBRP TOTAL PLANT COST ESTIMATE
($ 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"
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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"
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-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"
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-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