United States Nuclear Regulatory Commission - Protecting People and the Environment

Licensee Commercial-Grade Procurement and Dedication Programs (Generic Letter 91-05)


April 9, 1991 

TO:       ALL HOLDERS OF OPERATING LICENSES AND CONSTRUCTION PERMITS FOR 
          NUCLEAR POWER REACTORS

SUBJECT:  LICENSEE COMMERCIAL-GRADE PROCUREMENT AND DEDICATION PROGRAMS 
          (GENERIC LETTER 91-05)


This generic letter notifies the industry of the staff's pause in conducting 
certain procurement inspection and enforcement activities and identifies a 
number of failures in licensees' commercial-grade dedication programs 
identified during recent team inspections performed by the U.S. Nuclear 
Regulatory Commission (NRC).  The pause, which began in March of 1990, will 
end in late summer of 1991.  The purpose of the pause is to allow licensees 
sufficient time to fully understand and implement guidance developed by 
industry to improve procurement and commercial-grade dedication programs.  
This generic letter expresses staff positions regarding certain aspects of 
licensee commercial-grade procurement and dedication programs which would 
provide acceptable methods to meet regulatory requirements.

During the period from 1986 to 1989, the NRC conducted 13 team inspections 
of the licensees' procurement and commercial-grade dedication programs.  
During these inspections, the NRC staff identified a common, programmatic 
deficiency in the licensees' control of the procurement and dedication 
process of commercial-grade items for safety-related applications.  In a 
number of cases, the staff found that licensees had failed to adequately 
maintain programs as required by 10 CFR Part 50, Appendix B, to assure the 
suitability of commercially procured and dedicated equipment for its 
intended safety-related applications.  In addition, the staff identified 
equipment of indeterminate quality installed in the licensees' facilities.  

Because of a decrease in the number of qualified nuclear-grade vendors, the 
NRC staff is aware that there has been a change in the industry's 
procurement practices.  Ten years ago, licensees procured major assemblies 
from approved vendors who maintained quality assurance programs pursuant to 
Appendix B of Part 50 of Title 10 of the Code of Federal Regulations 
(10 CFR).  Currently, due to the reduction in the number of qualified 
nuclear-grade vendors, licensees are increasing the numbers of 
commercial-grade replacement parts that they procure and dedicate for use in 
safety-related applications.  This is a substantial change from the 
environment in which 10 CFR Part 50, Appendix B was promulgated.  This has 
necessitated an increased emphasis by licensees and the NRC staff to 
maintain procurement and dedication programs that adhere to the requirements 
of 10 CFR Part 50, Appendix B, and thus assure the quality of items 
purchased and installed in safety-related applications.  Therefore, 
dedication processes for commercial-grade parts have increased in importance 
and NRC inspections have determined that a number of licensees have not 
satisfactorily performed this procurement and dedication process.



9104030126 
.

GENERIC LETTER 92-05                 -2-

The industry has been made fully aware of the NRC's concerns in this program 
area.  In the past, escalated enforcement cases have provided notice to the 
affected licensees and to the industry of NRC's findings, concerns, and 
expectations in the implementation of procurement and dedication programs.  

Further, the NRC staff continues to participate in numerous industry 
meetings and conferences at which the NRC's positions in this area have been 
presented. The Nuclear Utility Management and Resources Council (NUMARC) 
Board of Directors recently approved a comprehensive procurement initiative 
as described in NUMARC 90-13, "Nuclear Procurement Program Improvements," 
which commits licensees to assess their procurement programs and take 
specific action to enhance or upgrade the program if they are determined to 
be inadequate.  The initiative on the dedication of commercial-grade items, 
which is part of NUMARC 90-13, was to be implemented by January 1, 1990.  
The staff is monitoring implementation of licensee program improvements by 
conducting assessments of their procurement and commercial-grade dedication 
programs and maintaining close interaction with the nuclear industry through 
participation in conferences, panels, and meetings. 

The staff will continue to perform reactive inspections relating to plant 
specific operational events or to defective equipment and, as required, will 
continue to initiate resultant enforcement actions.  In addition, the staff 
will continue to perform inspections of vendors.  The staff expects to 
resume procurement and dedication inspection activities in the late summer 
of 1991.  These resumed inspections will be conducted using 10 CFR Part 50, 
Appendix B (not the NUMARC initiatives) as the applicable regulatory 
requirement.  Licensee programs must assure the suitability of commercially 
procured and dedicated equipment for its intended safety-related 
application.  

The staff position is that the staff will not initiate enforcement action in 
cases of past programmatic violations that have been adequately corrected.  
In addition, the staff does not expect licensees to review all past 
procurements.  However, if during current procurement activities, licensees 
identify shortcomings in the form, fit, or function of specific vendor 
products, or if failure experience or current information on supplier 
adequacy indicates that a component may not be suitable for service, 
corrective actions are required for all such installed and stored items in 
accordance with Criterion XVI of 10 CFR Part 50, Appendix B.  Also in 
accordance with Criterion XVI, licensees must determine programmatic causes 
when actual deficiencies in several products from different vendors are 
identified during current procurement activities and these deficiencies lead 
to the replacement of installed items as part of the corrective action.  In 
such cases, a further sampling of previously procured commercial-grade items 
may be warranted. 

In NRC Generic Letter (GL) 89-02, "Actions to Improve the Detection of 
Counterfeit and Fraudulently Marketed Products," the staff described its 
perspective on good practices in procurement and dedication and provided the 
NRC's conditional 
.

GENERIC LETTER 91-05                 -3-

endorsement of an industry standard (EPRI NP-5652) on methods of 
commercial-grade procurement and dedication.  A number of recent inspection 
findings, as discussed in Enclosure 1, indicate that licensees have failed 
to include certain key activities, as appropriate, in the implementation of 
the dedication process.  The NRC staff's positions on the successful 
implementation of licensees' programs for commercial-grade dedication with 
respect to critical characteristics and like-for-like replacements are as 
follows.  (These are also included in Enclosure 1.)  

The term "critical characteristics" is not contained in Appendix B and has 
no special regulatory significance beyond its use and definition in various 
industry guides and standards.  The NRC first used the term critical 
characteristics in GL 89-02 as constituting those characteristics which need 
to be identified and verified during product acceptance as part of the 
procurement process.  The NRC has not taken the position that all design 
requirements must be considered to be critical characteristics as defined 
and used in EPRI NP-5652.  Rather, as stated in Appendix B, Criterion III, 
licensees must assure the suitability of all parts, materials, and services 
for their intended safety-related applications (i.e., there needs to be 
assurance that the item will perform its intended safety function when 
required).  The licensee is responsible for identifying the important 
design, material, and performance characteristics for each part, material, 
and service intended for safety-related applications, establishing 
acceptance criteria, and providing reasonable assurance of the conformance 
of items to these criteria. 

A like-for-like replacement is defined as the replacement of an item with an 
item that is identical.  For example, the replacement item would be 
identical if it was purchased at the same time from the same vendor as the 
item it is replacing, or if the user can verify that there have been no 
changes in the design, materials, or manufacturing process since procurement 
of the item being replaced.  If differences from the original item are 
identified in the replacement item, then the item is not identical, but 
similar to the item being replaced, and an evaluation is necessary to 
determine if any changes in design, material, or the manufacturing process 
could impact the functional characteristics and ultimately the component's 
ability to perform its required safety function.  If the licensee can 
demonstrate that the replacement item is identical, then the licensee need 
not identify the safety function or review and verify the design 
requirements and critical characteristics.  Engineering involvement is 
necessary in the above activities.  Reliance on part number verification and 
certification documentation is insufficient to ensure the quality of 
commercially procured products.  

The other matters discussed in Enclosure 1 do not constitute NRC staff 
positions, but provide information on inspection findings and clarify the 
characterization of effective procurement and dedication programs previously 
described in GL 89-02.

BACKFIT DISCUSSION: 

Based on past inspection findings and the resulting enforcement actions, the 
NRC staff has determined that licensee commercial-grade procurement and 
.

GENERIC LETTER 91-05                 -4-

dedication programs needed to be improved to comply with the existing NRC 
requirements as described in 10 CFR Part 50, Appendix B, Criterion III 
(Design Control), IV (Procurement Document Control), VII (Control of 
Purchased Material, Equipment and Services), and XVIII (Audits).  
Specifically, licensees have failed to adequately maintain programs to 
assure the suitability of commercially procured and dedicated equipment for 
its intended safety-related application.  Since the generic letter presents 
staff positions regarding implementation of existing regulatory 
requirements, as contained in Appendix B to 10 CFR Part 50, the staff has 
concluded, that this is a compliance backfit and has prepared the generic 
letter in accordance with 10 CFR 50.109 (a)(4)(i).  In light of the 
inadequacies identified in the procurement and dedication programs of a 
large number of licensees, the issuance of this generic letter is necessary 
to express the staff's position on the key element that licensees must 
include as part of the dedication process, specifically that commercial-
grade procurement and dedication programs must assure the suitability of 
equipment for its intended safety-related application.  This generic letter 
is also intended to clarify the elements of effective procurement and 
commercial-grade dedication programs that were previously provided to 
licensees in GL 89-02.  Since licensees' procurement and dedication programs 
may contain programmatic deficiencies, the staff has included in the generic 
letter the necessary licensee corrective action to address shortcomings 
identified in specific vendor products or components that directly lead to 
the component not being suitable for safety-related service.

Although no response to this letter is required, if you have any questions 
regarding this matter, please contact the persons listed below. 

                                   Sincerely, 


                                   James G. Partlow
                                   Associate Director for Projects
                                   Office of Nuclear Reactor Regulation

Enclosures:  
1.  Characteristics of Effective Commercial-Grade 
    Procurement and Dedication Programs
2.  List of Recently Issued Generic Letters

Technical Contacts:  Richard P. McIntyre, NRR 
                     (301) 492-3215

                     Uldis Potapovs, NRR 
                     (301) 492-0959
.

                                                                Enclosure 1



                CHARACTERISTICS OF EFFECTIVE COMMERCIAL-GRADE
                     PROCUREMENT AND DEDICATION PROGRAMS


Background

Appendix B to 10 CFR Part 50 contains the NRC's regulations for procurement 
quality assurance (QA) and quality control (QC) for products to be used in 
safety-related applications.  In addition, the NRC has provided further 
guidance in Regulatory Guides 1.28, 1.33, and 1.123.  These requirements and 
guides, if properly implemented, provide a measure of assurance for the 
suitability of equipment, including commercial-grade items for use in 
safety-related systems.  Criterion III of Appendix B requires licensees to 
select and review for suitability of application materials, parts, 
equipment, and processes that are essential to the safety-related functions 
of the structures, systems, and components.  Criterion IV requires that 
procurement documents specify the applicable requirements necessary to 
ensure functional performance.  Criterion VII requires licensees to assure 
that the following are sufficient to identify whether specification 
requirements for the purchased material and equipment have been met:  source 
evaluation and selection, objective evidence of quality, inspection of the 
source, and examination of products upon delivery.  The process used to 
satisfy these requirements when upgrading commercial-grade items for 
safety-related applications is commonly called "dedication."  The process of 
ensuring compliance with 10 CFR Part 50, Appendix B, must include all those 
activities necessary to establish and confirm the quality and suitability of 
commercially procured and dedicated equipment for its intended 
safety-related application.  Some of the dedication activities may occur 
early in the procurement cycle, before the item is accepted from the 
manufacturer.  Generic Letter (GL) 89-02, "Actions to Improve the Detection 
of Counterfeit and Fraudulently Marketed Products," discussed 
commercial-grade dedication in terms of engineering involvement in the 
procurement process, product acceptance, and the dedication process as 
identified in the EPRI NP-5652 guidelines.  This enclosure further discusses 
the characteristics of effective procurement and dedication programs 
previously discussed in GL 89-02 and provides examples of specific failures 
by licensees to effectively implement these characteristics for dedicating 
and ensuring the suitability of commercial-grade products for safety-related 
applications.  Appropriate implementation of these characteristics would 
have avoided many of the failures to meet 10 CFR Part 50, Appendix B 
requirements in licensee procurement and commercial-grade dedication 
programs which were identified during past NRC inspections.   

Inspection Observations and Findings 

From 1986 to 1989, headquarters and regional personnel conducted 13 team 
inspections of licensees' procurement and dedication programs.  These 
inspections have identified a common, broad programmatic deficiency in 
licensees' control over the process of procurement and dedication of 
commercial-grade 
.

                                      -2-

items.  In a number of cases, licensees have not maintained programs to 
ensure the suitability of equipment for use in safety-related applications 
as required by 10 CFR Part 50, Appendix B, Criterion III.  These 13 
inspections resulted in findings with significant safety implications.  The 
staff identified eight findings that were considered to be Severity Level 
III violations and three findings that were Severity Level IV violations.  
At one plant, the staff did not assign a severity level to individual 
violations.  Instead, the staff considered the entire group to be a Severity 
Level III problem and used enforcement discretion, as provided under the 
enforcement policy, based on the licensee's corrective actions (see 
10 CFR Part 2, Appendix C, Section V.G.2).  Only one of the plants that were 
inspected did not receive violations in this program area. 

In GL 89-02, the NRC has conditionally endorsed the dedication methods de-
scribed in EPRI NP-5652 guidelines.  The staff believes that licensees who 
implement these dedication methods, in accordance with the NRC's 
endorsement, can establish a basis for satisfying the existing requirements 
of Appendix B to 10 CFR Part 50 as these requirements apply to the 
dedication process for commercial-grade items.  An effective 
commercial-grade dedication program must include provisions to demonstrate 
that a dedicated item is suitable for safety-related applications.  For a 
licensee to adequately establish suitability, certain key activities must be 
performed, as appropriate, as part of the dedication process.  This generic 
letter is intended to clarify the dedication approaches described in GL 
89-02.

During each of the 13 inspections, the staff identified a common element in 
each of the inspection findings.  This element was the failure of the 
licensee to assure that a commercially procured and dedicated item was 
suitable for the intended safety-related application.   A dedicated 
commercial-grade item must  be equivalent in its ability to perform its 
intended safety function to the same item procured under a 10 CFR Part 50, 
Appendix B QA program.  The following is a list of the 13 licensees 
inspected and the inspection report numbers.  A summary of the general 
inspection findings and NRC observations on these findings follows the list 
of licensee inspections.



     LICENSEE and PLANT                                INSPECTION REPORT NO.

1.   Tennessee Valley Authority (Sequoyah)                50-327/86-61
                                                          50-328/86-61 

2.   Southern California Edison (San Onofre)              50-206/87-02 
                                                          50-361/87-03
                                                          50-362/87-04 

3.   Alabama Power (Farley)                               50-348/87-11 
                                                          50-364/87-11 

4.   Louisiana Power and Light (Waterford)                50-382/87-19 
.

                                      -3-

     LICENSEE and PLANT                                INSPECTION REPORT NO.

 5.  Sacramento Municipal Utility District (Rancho Seco)    50-312/88-02 

 6.  Maine Yankee Atomic Power (Maine Yankee)               50-309/88-200 

 7.  Northern States Power (Prairie Island)                 50-282/88-201 
                                                            50-306/88-201 

 8.  Portland General Electric (Trojan)                     50-344/88-39 
                                                            50-344/88-46

 9.  Connecticut Yankee Atomic Power (Haddam Neck)          50-213/89-200 

10.  Washington Public Power Supply System (WNP-2)          50-397/89-21 
                                                            50-397/89-28

 11. Florida Power (Crystal River)                          50-302/89-200 

 12. Gulf States Utilities (River Bend)                     50-458/89-200 

 13. Commonwealth Edison (Zion)                             50-295/89-200 
                                                            50-304/89-200 

 1.  Inspection Findings 

     a.   Failure to identify the methods and acceptance criteria for 
          verifying the critical characteristics, such as during receipt 
          inspection, dedication process, or post-installation testing.

     b.   Failure to establish verifiable, documented traceability of 
          complex commercial-grade items to their original equipment 
          manufacturers in those cases where the dedication program cannot 
          verify the critical characteristics.  

     c.   Failure to recognize that some commercial-grade items cannot be 
          fully dedicated once received on site.  Certain items are manufac-
          tured using special processes, such as welding and heat treating.  
          Dedication testing of these items as finished products would 
          destroy them.  For these items, licensees may need to conduct 
          vendor surveillances or to witness certain activities during the 
          manufacturing process. 

     Discussion 

     The NRC staff has met on several occasions with NUMARC and licensee 
     representatives to discuss "critical characteristics" as used in the 
     context of commercial-grade procurement and dedication.  The term 
     "critical characteristics" is not contained in Appendix B and has no 
     special regulatory significance beyond its use and definition in 
     various industry 
.

                                      -4-

     guides and standards.  The NRC first used the term critical 
     characteristics in GL 89-02 as constituting those characteristics which 
     need to be identified and verified during product acceptance as part of 
     the procurement process.  The NRC has not taken the position that all 
     design requirements must be considered to be critical characteristics 
     as defined and used in EPRI NP-5652.  Rather, as stated in Appendix B, 
     Criterion III, licensees must assure the suitability of all parts, 
     materials, and services for their intended safety-related applications 
     (i.e., there needs to be assurance that the item will perform its 
     intended safety function when required).  The licensee is responsible 
     for identifying the important design, material, and performance 
     characteristics for each part, material, and service intended for 
     safety-related applications, establishing acceptance criteria, and 
     providing reasonable assurance of the conformance of items to these 
     criteria.  There is no minimum or maximum number of critical 
     characteristics that need to be verified.  Further, the critical 
     characteristics for an item may vary from application to application 
     depending on the design and performance requirements unique to each 
     application.

     A licensee may take different approaches for the verification of the 
     critical characteristics, depending on the complexity of the item.  In 
     many cases, the licensee can verify the critical characteristics of 
     each item during receipt inspection testing.  However, for a complex 
     item with internal parts which receive special processing during 
     manufacturing, the licensee may need to conduct a source verification 
     of the manufacturer during production to verify the critical 
     characteristics identified as necessary for the item to perform its 
     safety function.  When these methods cannot verify the critical 
     characteristics related to special processes and tests, certification 
     by the original equipment manufacturer may be an acceptable alternative 
     provided documented, verified traceability to the original equipment 
     manufacturer has been established and the purchaser has verified by 
     audit or survey that the original equipment manufacturer has 
     implemented adequate quality controls for the activity being certified.

     For items with critical characteristics that can be verified for the 
     most severe or limiting plant application, the licensee might prefer to 
     identify and verify the item's critical characteristics to qualify that 
     item for all possible plant applications.  For complex items that would 
     be purchased for specific plant applications, it may be appropriate to 
     address the acceptance criteria for each item individually.  
     Engineering involvement is important in either method because the 
     technical evaluation will identify the critical characteristics, 
     acceptance criteria, and the methods to be used for verification.

2.   Inspection Findings 

     a.   Failure to demonstrate that a like-for-like replacement item is 
          identical in form, fit, and function to the item it is replacing.  
          Part number verification is not sufficient because of the 
          probability of undocumented changes in the design, material, or 
          fabrication of commercial-grade items using the same part number.

.

                                      -5-

     b.   Failure to evaluate changes in the design, material, or 
          manufacturing process for the effect of these changes on safety 
          function performance (particularly under design basis event 
          conditions) of replacement items that are similar as opposed to 
          identical to the items being replaced.  

     c.   Failure to ensure that items will function under all design 
          requirements.  On some occasions, licensees only ensured that the 
          commercial-grade item would function under normal operation 
          conditions.

     d.   Failure to verify the validity of certificates of conformance 
          received from vendors not on the licensee's list of approved 
          vendors/ suppliers.  An unverified certificate of conformance from 
          a commercial-grade vendor is not sufficient.

     Discussion 

     A like-for-like replacement is defined as the replacement of an item 
     with an item that is identical.  For example, the replacement item 
     would be identical if it was purchased at the same time from the same 
     vendor as the item it is replacing, or if the user can verify that 
     there have been no changes in the design, materials, or manufacturing 
     process since procurement of the item being replaced.  If differences 
     from the original item are identified in the replacement item, then the 
     item is not identical, but similar to the item being replaced, and 
     evaluation is necessary to determine if any changes in design, 
     material, or the manufacturing process could impact the functional 
     characteristics and ultimately the component's ability to perform its 
     required safety function.  If the licensee can demonstrate that the 
     replacement item is identical, then the licensee need not identify the 
     safety function or review and verify the design requirements and 
     critical characteristics.  

     Engineering involvement is necessary in the above activities.  The 
     extent of this involvement is dependent on the nature, complexity, and 
     use of the items to be dedicated.  Participation of engineering 
     personnel is appropriate in the procurement process, and product 
     acceptance, to develop purchase specifications, determine specific 
     testing requirements applicable to the products, and evaluate the test 
     results.  When engineering personnel specify design requirements for 
     inclusion on the purchase documents for replacement components, they 
     need not reconstruct and reverify design adequacy for procurement 
     purposes, but need only ensure that the existing design requirements 
     (which may reference the original design basis) are properly translated 
     into the purchase order.

     Reliance on part number verification and certification documentation is 
     insufficient to ensure the quality of commercially procured products.  
     Effective product acceptance programs have as elements, receipt and 
     source inspection, appropriate testing criteria, effective vendor 
     audits and surveillances (including witness/hold points as 
     appropriate), special tests and inspections, and post-installation 
     tests.  Procedures and adequate qualifications and training for 
     implementing personnel are also necessary factors in successful 
     implementation.

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