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POLICY ISSUE
NOTATION VOTE

SECY-04-0215

November 13, 2004

• PURPOSE
• SUMMARY
• BACKGROUND
• DISCUSSION
• RESOURCES
• RECOMMENDATION
• COORDINATION

PURPOSE:

1. To respond to Staff Requirements Memorandum (SRM) SECY-02-0107, "Addendum to SECY-02-0074 - National Materials Program: Pilot Projects," dated August 20, 2002.

2. To inform the Commission of the results of the five pilot projects in response to SRM SECY-02-0107.

3. To respond to SRM M030123B, "Briefing on Status of Nuclear Materials Safety and Safeguards Programs - Materials Safety," dated February 13, 2003.

4. To request Commission consideration and approval of future National Materials Program activities.

SUMMARY:

By SRM dated August 20, 2002, the Commission approved implementation of a blending of the "Current Program" and the "Alliance" options (the Blended option) through the initiation of five pilot projects. Staff provided a status report, SECY-04-0059, "Progress Report for the National Materials Program (NMP) Pilot Projects," to the Commission on April 9, 2004. Each pilot project has completed its final report. This paper provides the Commission with staff's assessment of the five pilot projects, stakeholders' feedback (i.e., feedback from representatives from professional organizations, industry, States, and the public), lessons learned from U. S. Nuclear Regulatory Commission (NRC) and Agreement States interactions on materials security issues, and Agreement State resource issues. The Agreement State resource issues concern whether NRC's strategy of having a cooperative enterprise with Agreement States where they would take a portion of work load is still valid given the State's resource constraints.

The pilot projects and interactions between NRC and Agreement States on materials security issues have demonstrated that a coalition of NRC and Agreement State staff can work cooperatively to develop regulatory products under the Blended option. However, to move the NMP to a structure closer to the Alliance option, a set of implementing procedures under this option would need to be developed, and greater assurance of funding at the State level to support Agreement State involvement in the NMP would need to be identified and put in place.

With respect to State resources, staff continues to believe that the strategy of using State experience, expertise and resources remains valid. However, uncertainty associated with the ability of Agreement States to officially budget and commit resources to support NMP activities remains. With respect to stakeholders' feedback, stakeholders expressed the view that the mission, purpose, and goals of the NMP should be made clearer and that the NMP should develop and implement a risk-informed, performance-based regulatory approach for materials safety and waste disposal activities, similar to that currently used by the NRC. Stakeholders also commented on the need for a formal process to get their input early in the development of regulatory priorities.

Based on the assessment, staff has developed options for future NMP activities and a recommendation. Staff recommends that NRC, the Organization of Agreement States, Inc. (OAS) and the Conference of Radiation Control Program Directors, Inc. (CRCPD) continue to function under the Blended option (Option 1). Under the Blended option, staff believes that the NMP will continue to evolve as new opportunities for collaborative work are identified and implemented without the need for additional resources. Follow-on work and assessment of recommendations in the individual pilot project working group reports can serve as a basis for possible future collaborative work.

BACKGROUND:

SRM SECY-02-0107 approved implementation of a blending of the Current Program and the Alliance options through the initiation of five pilot projects. The Current Program¹ represents the NMP that existed when SECY-02-0107 was finalized. The Alliance option² represents a possible future evolved state of the NMP where NRC and Agreement States would work cooperatively to identify, prioritize, and address the regulatory needs (including schedule and resources) of the materials program. It was also envisioned that NRC would have the authority to regulate discrete Naturally Occurring and Accelerator-Produced Radioactive Material (NARM), which NRC currently does not regulate.

The Blended option, represents an NMP structure which essentially reflects how NRC and Agreement States interact and operate today as an NMP. NRC and Agreement States work cooperatively and look for opportunities to increase use of State experience, expertise, and resources in the development and maintenance of regulatory products such as rules and guidance documents. SECY-04-0059 provides background on previous actions relating to the NMP and pilot projects.

The full NMP Pilot Project Implementation Plan was provided as Attachment 1 of SECY-04-0059. Attachment 1 of this paper provides an update of the Implementation Plan's Milestones and Schedule.

During the pilot project activities, the Office of State and Tribal Programs (STP) and the Office of Nuclear Material Safety and Safeguards (NMSS) Directors, and the OAS and CRCPD Chairs provided collective management oversight.

DISCUSSION:

1. Evaluation of Pilot Project Results

Each pilot project working group report contains recommendations for consideration by NRC and Agreement States, and analyses against the success measures provided in SECY-02-0074. The pilot project final reports are available in the Agencywide Document Access and Management System (ADAMS, ML 043100337). The pilot project activities are summarized in Attachment 2 . A summary of each pilot project working group response to the success measures is contained in Attachment 3 .

The pilot projects and experiences from NRC and Agreement States activities to enhance materials security demonstrated that NRC, Agreement States, and the States' two representative organizations (OAS and CRCPD), can work cooperatively to develop regulatory products. The pilot projects also demonstrated the commitment and ability of OAS, CRCPD, and individual Agreement States to identify and provide staff to the working groups. However, additional assessment will be needed to determine whether specific recommendations and work products of the pilot projects will be used and implemented by NRC and Agreement States. (See last paragraph of each pilot project summary contained in Attachment 2 .) Also, the pilot projects did not provide information on how individual Agreement States budget and account for resources devoted to NRC and Agreement State working group activities.

Agreement State and NRC staff participation in some working groups was affected by competing work priorities in the staff members' home organization or by the need to participate in planned internal staff developmental activities. In some cases, work on the NMP pilot projects was performed as an activity added to the existing licensing, inspection, or regulatory development work of the pilot project participants. Staff recognizes that the success of the pilot projects was partially due to the enthusiasm and dedication of the individual pilot project participants.

The level of effort devoted by STP to overall project management of the pilot projects was greater than initially expected. Project management activities required additional work by individual pilot project Chairs. For example, additional effort was required to prepare an overall implementation plan and schedule, participate in monthly status calls, and provide periodic status reports to STP.

NRC staff and the OAS and CRCPD Chairs believe the two single most significant uncertainties identified from the pilot project experience, and which relate to future implementation of the NMP are: 1) assurance of availability of Agreement State staff resources to support continuation of joint NMP activities; and 2) the ability and willingness of NRC to share decision making with the Agreement States on setting priorities, how work products will be developed, and on the content of work products.

Based on the pilot project results, the following two areas would need to be addressed to move the NMP closer to the Alliance option:

(a) Assurance of budgeted funding to support Agreement States' involvement in NMP activities.

Although Agreement States have been actively involved in a full range of NMP activities, such as participation in working groups and in the Integrated Materials Performance Evaluation Program, individual Agreement States do not currently have the ability to budget resources explicitly for NMP activities. State radiation control program budgets authorize expenditure of State resources dedicated to support State activities. Consequently, the resources needed to support the NMP activities are not explicitly included in State budgets. The CRCPD has funded the development of regulatory products for use by State programs through its budget and staff resources provided by individual State programs and CRCPD staff. An example includes development of the Suggested State Regulations.

During the panel discussion of the NMP at the September 2004 OAS annual meeting, the OAS Chair asked the State program directors about the ability of State radiation control programs to budget resources earmarked to support NMP activities. A number of program directors responded that it would not be possible to explicitly fund NMP activities in State budgets. Some program directors stated that they could potentially provide matching State funds if Federal funds were provided to the States under grants to support NMP activities. Thus, it is unclear whether a coalition, as envisioned under the Alliance option, dependent on State resources which are not formally budgeted or committed to support NMP activities could be sustained for a long period of time, or have assurance that needed regulatory products could be effectively and efficiently developed, when needed.

In SRM M030123B, a question was raised concerning whether the strategy of having a cooperative enterprise with Agreement States where they would take a portion of work load is still valid given the State's resource constraints. The results of the pilot projects indicate that individual Agreement States are able to identify and assign State staff resources to support NMP activities, including States experiencing resource constraints. However, uncertainty associated with the ability of Agreement States to budget and commit resources to support NMP activities remains.

NRC's budget commits resources to support its involvement in NMP activities. These resources are included in budget categories related to support of materials regulatory development activities. Resources, both full time equivalent (FTE) and funding, are also included to support NRC and Agreement State working group activities.

Due to the uncertainty associated with the ability of Agreement States to officially commit resources to support NMP activities, staff does not believe the Commission can adopt the Alliance option without assurance of adequate and sustained Agreement States funding to support their NMP activities.

(b) Development of implementing procedures for NMP.

(i) Development of implementing procedures for defining how needs for new regulatory products would be identified and prioritized jointly by NRC and Agreement States.

The proposed framework (Attachment 4 ) for establishing NMP priorities was developed by Pilot Project 1. Under the proposed framework, a Priorities Committee would be formed with the responsibility to develop and maintain a repository of regulatory needs and to develop recommendations to address high-priority needs. The Committee would also consider input from stakeholders. A Steering Committee would be established to support the Priorities Committee and to provide oversight and facilitate NRC and Agreement State decisions on cooperative regulatory efforts. An Administrative Core would be established to provide administrative and logistical support.

NRC, OAS and CRCPD would first need to agree to use the Pilot Project 1 prioritization methodology or a modified methodology. Specific implementing procedures would then be developed to address: (1) how the Priorities Committee, Steering Committees, and Administrative Core would operate; (2) how to involve stakeholders early in the process of identifying regulatory needs and priorities; and (3) how the Steering Committee would obtain approval from respective agency management on resource commitments for developing work products (i.e., the Commission through NRC's Planning, Budgeting, and Performance Management [PBPM] process, and State management through individual State resource allocation processes).

(ii) Development of implementing procedures for defining roles and responsibilities for managing the development of regulatory products.

The experience with the pilot projects points out a need for greater understanding of the roles and responsibilities of the Steering Committee, (i.e., STP and NMSS Directors, and OAS and CRCPD Chairs) and those of management within the organization assigned the lead responsibility for the pilot project or working group. Although the Steering Committee reviewed and approved pilot project Charters and work product plans, it was unclear whether the lead organization should have responsibility for ensuring the success of its assigned working group or whether the Steering Committee as a whole should have that responsibility.

In addition, during the pilot project activities, changes to the milestones and schedule were proposed and finalized by the pilot project Chairs and the STP project manager. In some cases, these changes were reviewed and approved by the STP Director in coordination with the NMSS Director, and the Chairs of OAS and CRCPD. However, there were no implementing procedures for the Steering Committee to follow in reviewing and approving such changes, and providing guidance and/or making appropriate adjustments to ensure that progress in the quality and timeliness of regulatory products is achieved.

Specific implementing procedures needed include: (1) defining the roles and responsibilities of the Steering Committee and the Administrative Core; and (2) success measures and guidance for the Steering Committee to evaluate progress made by the working groups, to approve schedule changes proposed by the working groups, and to ensure that the product is usable and completed on time.

2. Pilot Project Resource Utilization

As stated in SECY-02-0074, specific resource estimates for each pilot project were determined based on development of individual implementation plans for each pilot project. Based on the Charter for each pilot project working group, a total of 6,943 hours was estimated for completion of the five pilot projects, with NRC staff contributing 3,947 hours.

During the period between December 28, 2002, and September 18, 2004, NRC and Agreement State staff worked approximately 6,369 hours on the five pilot projects, with NRC staff contributing 4,165 hours. Of the 6,369 hours, 177 hours were non-regular (overtime) hours. There were 11 State staff members from seven Agreement States participating in the pilot project activities. NRC had12 staff members who participated: three from STP, five from NMSS, one from Region I, two from Region III, and one from the Office of the Chief Financial Officer. Most of the staff effort supporting Pilot Project 5 was accomplished prior to December 28, 2002, by NRC staff members as part of their normal work in support of the existing Inspection Manual Chapter (IMC) 2800 working group. Therefore, only two staff members (one NRC and one Agreement State) from the Pilot Project 5 are included in the totals above. Pilot project working group members are listed in Attachment 5 . A list of estimated vs. actual resources for each individual pilot project is provided as Attachment 6 .

3. Stakeholders' Feedback

The pilot project working groups and NRC staff sought opportunities to inform stakeholders and receive their feedback on pilot project activities. These activities included publication of Federal Register notices and use of a dedicated NMP page on the NRC web site where NMP related documents such as pilot project Charters, work product plans, and documents for review and comment were made available. NRC and Agreement State staff members made presentations at the annual CRCPD and OAS meetings, the Advisory Committee on Medical Use of Isotopes meetings, and the 2004 Health Physics Society annual meeting.

In addition, staff conducted a stakeholders' meeting on March 31, 2004, to inform stakeholders of the status and progress of the pilot projects and to solicit feedback on the structure and framework of the NMP. Stakeholders included representatives from professional organizations, industry, States, and the public. Stakeholder comments covered a broad spectrum of areas including the organizational structure of the NMP, jurisdiction and policies, program implementation, and future NMP activities.

In general, stakeholders expressed the view that the mission, purpose, and goals of the NMP should be made clearer and that the NMP should develop and implement a risk-informed, performance-based regulatory approach for materials safety and waste disposal activities, similar to that currently used by the NRC. Stakeholders commented on the need for a formal process to get their input early in the development of regulatory priorities. An open communication process should be developed among NRC, Agreement States and stakeholders to discuss regulatory priorities for the upcoming years and factor the results of the discussion into NRC and Agreement State planning processes. A summary list of stakeholders' comments is provided as Attachment 7 . Each pilot project working group considered feedback from the stakeholders' meeting in preparing the final working group report.

4. Lessons Learned from NRC and Agreement States Interactions on Materials Security Issues

On July 2, 2004, STP issued a memorandum to the NRC program offices, OAS, CRCPD, and several working groups and steering committees on materials security issues requesting their input on lessons learned from NRC and Agreements States interactions on materials security that can be applied to the work on the NMP. Overall, staff received positive feedback from NRC and Agreement State staff working on materials security issues. The feedback indicated that development of the additional materials security measures was more resource intensive than initially expected due to issues related to the bases for such measures and that Agreement State staff participation in these activities added significant value in helping shape the content of the additional security measures.

OAS indicated that the Materials Security Working Group (MSWG) has demonstrated the likely success of the Alliance structure by realizing resource savings and efficiency gains for NRC through the partnering relationship between NRC and Agreement States. OAS also indicated that the MSWG experienced challenges in working with NRC management in developing its products and expressed the view that a permanent common defense and security framework is not reflective of a true alliance. Specific lessons learned that can be applied to the NMP are summarized in Attachment 8 .

5. Path Forward for the Future NMP

Based on results of the pilot projects, NRC, OAS, and CRCPD staff identified three options for Commission consideration:

The options are described in further detail below.

Under this option, NRC and the Agreement States would continue to collaboratively address materials issues within the constraints of available resources. Given the additional workload experienced under the pilot projects associated with the functions of the Administrative Core, a formal Administrative Core would not be implemented. Instead, STP would continue to serve as the overall coordinating organization for working groups established by NRC. OAS or CRCPD would serve as the overall coordinating organizations for working groups established by OAS or CRCPD, respectively.

Individual Steering Committees, as provided for under Management Directive 5.3, would be established, as determined to be necessary, to provide management direction and support from NRC, OAS, and CRCPD for specific working groups. Under this option, the relationship between NRC and Agreement States would continue to evolve as Agreement States continue to demonstrate ability to provide State staff resources for the development of NMP products. NRC, OAS and CRCPD would examine recommendations contained in the pilot project working group reports and from stakeholders' feedback as possible areas for future collaborative work within existing budgeted resources.

Pros:

• No additional resources would be required.

• NMP products would reflect both NRC and Agreement State involvement and thus have greater likelihood of acceptance.

• Agreement State experience, expertise, and resources would continue to be applied.

• Opportunity to have more experience with Agreement State ability to provide staff resources.

Cons:

• NRC would continue to face uncertainty in the ability of Agreement States to budget resources to support NMP activities.

Under this option, in addition to activities covered under Option 1, a modified version of the prioritization process developed by the Pilot Project 1 working group would be prepared and used by NRC and Agreement States, including procedures for prioritization of materials program work and for stakeholders' involvement. The process would need to be revised to align with NRC's PBPM process. Implementing procedures as stated under Section 1.(b)(i) of the Discussion section, with the exception of those for the Administrative Core, would be developed.

Under this option, the lead organization assigned responsibility to develop a specific product would need to separately determine their ability to devote resources to develop the product based on their internal resource allocation process (e.g., NRC's PBPM process). If approved, the lead organization would also be responsible for tracking and evaluating the progress of each assignment and product development, providing guidance, and making appropriate adjustments to ensure that progress is made.

Pros:

• Agreement States would assume a greater role in the prioritization of specific regulatory needs and how these needs would be met.

• Most NMP products would reflect NRC and Agreement State input and thus have greater likelihood of acceptance.

• Stakeholders' input would be considered in the prioritization process.

• Agreement State experience, expertise and resources would continue to be applied.

• Opportunity to have more experience with Agreement State ability to provide staff resources.

• NRC and Agreement States would share decision making on implementing plans to address specific regulatory needs for which resources are available.

• Agreement States would have increased responsibility for State development and maintenance of NMP products.

Cons:

• NRC would continue to face uncertainty in the ability of Agreement States to budget resources to support NMP activities.

• Additional resources would be required to establish and administer the Priorities and Steering Committees and to support their operation.

• Additional efforts would be needed to align the Pilot Project 1 working group product with the NRC's PBPM process.

• Decisions on development of specific products would be subject to individual organizational budget processes and reprogramming based on changing needs or priorities.

Under this option, NRC, OAS, and CRCPD would explore possible mechanisms for funding State NMP activities and thereby increase overall State participation in the NMP. If State funding was assured, NRC, OAS, and CRCPD would then develop implementing procedures as stated in Section 1.(b) of the Discussion to enable operation of the NMP under the Alliance option.

Pros:

In addition to the pros under Option 2:

• Could lead to identification of a mechanism to fund State activities supporting the NMP, thereby increasing State involvement and potentially reducing NRC resources.

• Clear implementing procedures to guide the NMP under the Alliance option would be developed to guide NRC and Agreement State activities resulting in a more equal partnership between NRC and Agreement States in conducting NMP activities.

Con:

• Additional resources would be required to examine funding options, to develop implementing procedures, and to support routine operation.

RESOURCES:

Resources necessary to continue to implement current NRC staff activities in the NMP (Option 1, the Blended Option) are included in the current FY 05 and 06 budgets. Agreement State resources would continue to be identified and assigned by OAS and CRCPD. NRC and Agreement State resources would need to be included in future respective fiscal year budgets.

Additional NRC resources would be necessary to implement Option 2. They are estimated to be 1.3 FTE (0.1 for OGC, 0.5 for NMSS, and 0.7 for STP) and $3,000 for STP for travel and per diem over one year to establish procedures for the Priorities and Steering Committees. Additional future resource needs to support routine operation of these Committees are estimated to be 1.3 FTE (0.2 for OGC, 0.6 for NMSS, and 0.5 for STP) and $6,000 for STP in travel and per diem per fiscal year. Agreement State FTE costs would continue to be identified and assigned as currently handled by OAS and CRCPD.

Additional NRC resources necessary to begin implementation of Option 3 are estimated to be 3.8 FTE (0.3 for OGC, 2.0 for NMSS, and 1.5 for STP), and $9,000 for STP for travel and per diem. The resources covering activities over one year to examine options for funding of State NMP activities are estimated to be 1.6 FTE (0.1 for OGC, 1.0 for NMSS, and 0.5 for STP), and $3,000 for STP for travel and per diem and followed by two years to develop implementing procedures to enable operation under the Alliance option. The resources for developing the implementing procedures are estimated to be 2.2 FTE (0.2 for OGC, 1.0 for NMSS, and 1.0 for STP), and $6,000 for STP for travel and per diem. An estimate of the expected annual fiscal year level of resources would depend on the implementing procedures, the roles and responsibilities of NRC and Agreement States, the organization selected to perform the Administrative Core function, and the funding mechanism selected. Agreement State FTE costs to support activities to begin implementation of this option would continue to be identified and assigned as currently handled by OAS and CRCPD.

RECOMMENDATION:

Staff recommends that the Commission approve Option 1.

Staff believes that, under this option, NRC and Agreement States, within the constraints of available resources, can continue to work collaboratively and look for opportunities to increase use of Agreement State experience, expertise, and resources. This would effectively use collective resources and allow the NMP to further evolve without the need for additional expenditure of resources to implement Options 2 or 3. Follow-on work including assessment of recommendations in the individual pilot project working group reports and assessment of stakeholders' feedback could serve as a basis for future collaborative work efforts within existing budgeted resources.

COORDINATION:

The Office of the General Counsel has reviewed this paper and has no legal objection. The Office of the Chief Financial Officer has reviewed this paper for resource implications and has no objections. This paper has also been coordinated with the OAS and CRCPD Chairs, Past-Chairs, and Chair Elects and they concur in the paper and its recommendation.

1. The Current Program is discussed on pages 3.6-3.15 in the Final Report of the NMP Working Group (SECY-01-0112-Attachment 1, ML011590431).

2. The Alliance Option is discussed on pages 3.30-3.44 in the Final Report of the NMP Working Group (SECY-01-0112-Attachment 1, ML011590431).

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