United States Nuclear Regulatory Commission - Protecting People and the Environment

OIG/95A-04 - Factors Contributing to Inconsistency in the Operating Reactor Inspection Program

Contents


Overview

Office of the Inspector General
United States Nuclear Regulatory Commission
Washington, DC 20555
December 27, 1995

Office of The Inspector General
Memorandum To: James M. Taylor
Executive Director for Operations
From: Thomas J. Barchis
Assistant Inspector General for Audits
Subject: Factors Contributing to Inconsistency in the Operating Reactor Inspection Program

Attached is the Office of the Inspector General's audit report entitled "Factors Contributing to Inconsistency in the Operating Reactor Inspection Program." We conducted this review at the request of the former Chairman, NRC, to identify factors that contribute to the industry's perception of inconsistent program implementation.

On November 15, 1995, we provided a draft of this report to the Deputy Executive Director for Nuclear Reactor Regulation, Regional Operations and Research (DEDO). On November 30, 1995, we conducted an exit briefing with the DEDO and his staff and further clarified certain aspects of the inspection program that may contribute to industry's perceptions. The DEDO generally agreed with our conclusions and recommendations. He also outlined a series of actions the agency has underway to minimize program inconsistency. We have reviewed his comments and revised the report as appropriate. The DEDO's comments are contained in Appendix II of this report.

Attachment:
As stated

cc: H. Thompson, EDO
J. Milhoan, EDO
K. Cyr, OGC
J. Hoyle, SECY
D. Rathbun, OCA
J. Blaha, EDO
R. Scroggins, OC
P. Norry, ADM
G. Cranford, IRM
R. Bangart, OSP
W. Russell, NRR
E. Jordan, AEOD
D. Morrison, RES
C. Paperiello, NMSS
J. Funches, ICC
W. Beecher, OPA
T. Martin, RI
S. Ebneter, RII
H. Miller, RIII
L. Callan, RIV
OPA-RI
OPA-RII
OPA-RIII
OPA-RIV
OPA-RIV: Walnut Creek

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Report Synopsis

Inspecting the nation's operating nuclear power plants is central to the U.S. Nuclear Regulatory Commission's (NRC) mission. NRC is responsible for developing regulations to ensure that nuclear power plants are operated safely. The regulations are augmented by an inspection program, conducted primarily by NRC's four regional offices, to confirm utility compliance with agency requirements. NRC's enforcement program contains a range of penalties the agency may impose when utilities do not meet regulatory requirements.

There has been considerable debate within the agency and utility industry in recent years regarding inspection program consistency. We conducted this review at the request of the former Chairman, NRC, to identify factors that may contribute to the industry's perception that NRC has not implemented the inspection program consistently.

First, NRC's on-the-job training (OJT) program is not well structured or closely monitored. In addition, agency training does not provide adequate guidance regarding certain "how to" aspects of conducting inspections. Second, NRC management has not clearly communicated its expectations to inspection staff regarding the relationship between conducting "performance-based" inspections and the need to cite violations. Finally, NRC's decentralized program management responsibility allows regional offices to implement the program and administer enforcement actions differently, which can create program inconsistencies.

We recognize that NRC has and continues to take steps to improve the inspection program. To aid in this process, our report contains three recommendations to minimize the potential for program inconsistency.


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Introduction

Inspecting the nation's operating nuclear power plants is central to the U.S. Nuclear Regulatory Commission's (NRC) mission. The agency is responsible for developing (1) regulations to ensure that nuclear power plants are operated safely, and (2) policies and procedures to guide inspection program implementation.

NRC has conducted five evaluations of the inspection program since 1989 that surfaced management weaknesses, including persistent questions regarding the consistency of the inspection program implementation. In addition, the Nuclear Energy Institute (NEI) retained Towers Perrin, an independent management consulting firm, to assess the interface between NRC and utilities who operate nuclear power plants. Interviews were conducted with senior executives at all 44 nuclear utilities, and a written survey was administered to managers and staff of all licensees. In October 1994, NEI published the Towers Perrin Nuclear Regulatory Review Study, which repeated many issues discussed in NRC's previous internal evaluations, and noted industry's concerns regarding inconsistent inspection program implementation. NRC later conducted a widely attended public meeting at which senior NEI representatives called for more consistency in the inspection program.

We conducted this review at the request of the former Chairman, NRC, to identify factors that may contribute to the industry's perception that NRC has not implemented the inspection program consistently. We interviewed NRC managers at headquarters and Regions II and IV, and licensee representatives at nine operating nuclear power plants within those regions. While we recognize that this is a limited look at the program, we believe the information obtained, coupled with previous evaluations, accurately represents the overall program. Appendix I contains additional information on our objectives, scope, and methodology.


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Background

The objectives of the operating reactor inspection program are to: (1) obtain sufficient information through direct observation and verification of licensee activities to ascertain whether the facility is being operated safely in accordance with NRC's regulations, (2) assure management controls are effective, (3) gather information to support NRC's periodic Systematic Assessment of Licensee Performance evaluations, and (4) assign inspection coverage based on plant performance.

NRC's four regional offices direct the preponderance of NRC's inspection program, and oversee licensee operations to assess whether licensees are complying with regulatory requirements and individual plant technical specifications. Inspection personnel include resident inspectors located at each nuclear power plant, and region-based inspectors who are specialists in certain inspection disciplines. The nature of NRC's inspections varies, from a resident's periodic walkdown inspection, to special team inspections involving several engineering disciplines which requires one to two weeks on-site.

To ensure regulatory compliance, NRC has developed an enforcement program that contains several violation severity levels. For the most serious regulatory infractions, NRC may issue a civil penalty and require the licensee to take corrective action; less serious offenses may result in a lower level violation or a non-cited violation (NCV) that requires the licensee to take corrective action, but does not include a fine.


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Findings

We identified several interrelated factors which contribute to industry's perception that NRC has not implemented the inspection program consistently. To NRC's credit, it has taken a number of actions to improve the operating reactor inspection and enforcement programs. These include conducting regional/headquarters inspection staff counterpart meetings, improving communications with inspection staff, and revising the enforcement program policy. NRC is also taking action to mitigate inspection criteria subjectivity by encouraging greater standardization in plants' technical specifications.

Some of NRC's inspection criteria, such as regulations and technical specifications, are open to interpretation by inspectors and managers who administer the program. This process provides NRC managers and inspectors with considerable discretion in implementing the inspection program. While we recognize that some discretion is needed when administering a complex regulatory system, the subjective nature of NRC's inspection program, coupled with licensing commitments that vary from plant to plant, tends to create the perception that NRC implements the program inconsistently.

Since there will always be some subjectivity associated with assessing licensee compliance with NRC's requirements, we believe the inspection program needs a focused, well developed training process, clear management expectations for inspectors, and the support of an efficient organizational structure. Each of these interdependent elements plays an important role which can affect the perceived fairness and consistency of the inspection program. However, we found problems in the implementation of each of these elements, which can foster inconsistencies. First, NRC's on-the-job training program is loosely structured and not closely monitored. In addition, the content of agency training needs improvement, particularly regarding certain aspects of inspecting, such as the "how to's" of fundamental inspection techniques. Second, NRC has not clearly communicated its expectations to inspection staff regarding the relationship between conducting "performance-based" inspections and the need to cite violations. We also found some inconsistencies in manager's expectations regarding the number of violations inspectors cite. Finally, NRC's decentralized program management responsibility allows regional offices, in coordination with the Office of Enforcement, to implement the program and administer enforcement actions differently, which can create program inconsistencies.


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Inspection Criteria Allows Discretion

We found some NRC regulations permit staff considerable discretion when assessing regulatory compliance. We also found that NRC's enforcement policy provides regional managers with significant discretion in determining when plant operations warrant a violation. In addition, inspection criteria such as technical specifications and licensee commitments vary from plant to plant. As a result, licensees often charge that NRC conducts the inspection program inconsistently.

Assessing licensee compliance with agency regulations and other criteria such as technical specifications, requires NRC managers and inspectors to use considerable judgement in determining licensee compliance with agency regulations. NRC inspection staff and licensee representatives cited Appendix B to 10 CFR 50, "Quality Assurance Criteria for Nuclear Power Plants and Fuel Reprocessing Plants" as an example of a non-specific regulation. For example, Criterion XVI of Appendix B states "...conditions adverse to quality...are promptly identified...." yet it does not define the term "promptly." Also, Criterion V states that instructions and procedures "...shall include appropriate quantitative or qualitative acceptance criteria...." but again, leaves the term "appropriate" open to interpretation. Some NRC inspection staff and licensee representatives also described Appendix B as a "catch-all" that inspectors may use when they believe an issue needs to be raised, but there is nothing else to cite against. Although NRC has issued Regulatory Guides to advise inspectors in using Appendix B, one licensee indicated that the guides do not restrict inspectors in applying this criteria. Based on the body of information we obtained, we believe that the regulatory guides may not provide sufficient guidance in applying Appendix B.

Also, in accordance with NRC policy, the imposition of enforcement actions may be affected by regional office managers' perceptions of licensee performance beyond the specific case. We found examples where a violation was viewed as an isolated case, and NRC regional office managers chose to issue a less severe enforcement action, such as a non-cited violation. However, licensees may be candidates for stronger enforcement action if regional office managers see the incident as an indication of repeated poor performance.

Finally, the criteria inspectors use to assess regulatory compliance varies from plant to plant because each facility has a unique design and plant-specific license commitments and, therefore, distinctive technical specifications that govern plant operations. The technical specifications describe a wide range of requirements plants must abide by, from maintenance procedures to operational parameters. Since technical specifications vary from plant to plant, similar incidents at different plants may not be treated similarly.

We recognize NRC managers and inspectors need latitude in administering this complex regulatory program. However, we also recognize the subjectivity of inspection criteria, coupled with the discretion provided NRC staff in issuing violations, can foster licensee perceptions that the inspection program is inconsistent. NRC has recognized this and efforts are underway that should reduce some inspection criteria subjectivity by encouraging greater standardization in plants' technical specifications. While the subjectivity of NRC's requirements cannot be totally eliminated, to minimize program inconsistency and ensure inspection staff use discretion appropriately, we believe NRC managers need to ensure training programs provide consistent guidance for conducting inspections, clearly communicate agency expectations to inspection staff, and consider centralizing program responsibility from regional offices to headquarters.


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Training Improvements Needed

Although NRC provides both formal classroom training and informal on-the-job training (OJT) to its inspectors, the agency relies primarily on OJT to train inspectors. We found the agency does not adequately monitor inspectors' OJT to ensure they possess a consistent knowledge base. In addition, NRC needs to provide more specific technical training in some inspection fundamentals. We believe these weaknesses can produce inspection inconsistencies.

Inspectors told us they obtain 60 percent to 80 percent of their training while on the job. Prior to becoming certified, NRC requires inspectors to complete and document a series of job-related topics in their qualification journals, and be examined by a qualification board. However, in one region we visited, the determination of whether inspectors have adequately completed the OJT portion of each topic rests with the individual inspector's supervisor. As a result, inspectors usually learn what their immediate supervisors believe is necessary, rather than receiving uniform, consistent training. We also found that regional office managers do not sufficiently monitor each inspectors' OJT to ensure it provides an adequate background of needed experience.

In addition, NRC's training may not be adequate in certain inspection-related topics. Inspectors told us that training in the "how to's" of inspecting -- what to look for during an inspection -- was lacking. For example, the agency's formal training courses explain how safety-related components such as diesel generators operate, but the OJT portion of inspector training does not adequately describe what to look for when inspecting these components. Several inspectors we spoke with believed training in this area was lacking.

Inspection staff also told us NRC does not provide directed training in how to evaluate licensee management performance. However, some inspectors stated that they are often asked to provide input to regional office managers on this topic, but do not feel comfortable when making these assessments due to the lack of training. This was also confirmed by a lessons learned review done at one plant as part of NRC's Integrated Performance Assessment Process. The review found the scope of NRC's inspection effort has widened to include areas such as organizational interactions and licensee corrective action programs. However, the review also expressed concerns regarding inspectors' ability to accurately assess the level and quality of licensee management effectiveness because the agency does not provide training in these issues.

We believe an inspector training program that relies heavily on loosely monitored OJT, coupled with non-specific training in fundamental inspection topics, can create the potential for inconsistencies in program implementation.


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Inspector Expectations Need Clarification

NRC has not set clear inspection staff expectations regarding certain fundamental aspects of the program. In particular, the distinction between conducting "performance-based" inspections and the need to cite violations was unclear. We believe the agency should clearly communicate its expectations to inspection staff to reduce the potential for program inconsistencies.

NRC initially issued a performance-based inspection policy in 1987, and headquarters staff told us this concept is built into the inspection procedures. However, managers and inspectors in one regional office we visited were not clear on the definition of performance-based inspections, or how to implement this approach. While NRC's policy prescribes that inspectors use direct observation and focus on issues with greater safety significance, inspectors and regional office managers lacked a clear concept of how to do this. One headquarters staff member described convincing inspectors to conduct performance-based inspections as a "constant challenge." NRC managers also recognize this as an issue needing resolution, and are working to define performance-based inspections, agree on what this entails, and convey this information to inspection staff.

Inspectors also expressed difficulty in reconciling what they believe to be NRC's requirement to cite any observed regulatory non-compliance, with "performance-based" emphasis on safety and licensee performance. Inspectors stated they are "stuck in the middle" between the emphasis on safety and the requirement to cite each observed violation, regardless of whether there is adverse impact on plant safety. For example, utility contractors relied on a "skill of the craft" technique that was not specifically outlined in the vendor's service procedures when servicing a major component. NRC's inspector issued a violation because he observed the contractors did not strictly follow the vendor's service procedures. However, the inspector and licensee representatives stated there was "minor", if any, safety consequence associated with the contractor's service technique. The inspector also noted that if the licensee incorporated these "skill of the craft" procedures into its technical specifications, NRC would have no basis for issuing a violation.

We also found that while regional office managers do not set inspection violation quotas, some inspectors believe supervisors exert pressure to cite violations, or that the number of violations they identify is linked to their annual performance appraisal; in contrast, other inspectors do not believe they are under pressure to cite violations. These differences in perspectives can create uncertainty regarding the latitude inspectors believe they have in citing violations.

We believe the disparity of inspection staff knowledge regarding these fundamental agency functions indicates the need for NRC to effectively clarify staff expectations regarding when to cite violations. Beyond affecting inspection staff performance, the extent to which licensees receive violations could also influence NRC's licensee assessments. Therefore, to reduce inspection program inconsistency, we believe it is important for NRC to more clearly communicate expectations to inspection staff.


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NRC's Organizational Structure Fosters Program Inconsistency

NRC's organizational structure also contributes to inconsistent program implementation, particularly in the use of violations. The discretion NRC provides its managers to issue violations, coupled with the agency's decentralized organizational structure, has created significant differences in how each region uses the agency's enforcement authority. We believe a more centralized organizational structure could minimize program inconsistencies.

NRR establishes inspection program requirements, but responsibility for conducting inspections is delegated to each regional office. Nearly all inspection staff are under the jurisdiction of NRC's regional administrators, not the Director, NRR, who is responsible for developing the program. NRC headquarters staff told us that regional offices are very independent and, therefore, administer key aspects of the inspection program as they deem necessary. For example, regional offices use different approaches in tracking and following up on enforcement data to help direct their inspection programs. We believe this is due to the autonomy allowed by NRC's decentralized program management responsibility.

NRC managers and licensee staff agreed each regional office has its own "personality" in that some regional offices focus on certain aspects of plant operations. Licensee representatives and inspectors who have worked in various regional offices also told us that each office uses distinctly different approaches to implement the inspection program and apply inspection criteria.

Regional offices differ in the number of violations they issue. One senior headquarters official told us (1) there is a wide variation between regional offices in the number of violations cited per inspection hour, (2) certain regional offices cite comparatively fewer violations than others, and (3) some regional offices use NCV's less frequently. However, he did not have a clear interpretation of the meaning of this information. This information is consistent with NRR's May 1995 inspection report audit which found that one regional office "identifies significantly fewer violations than other regions." One utility that monitors the number of violations NRC issues to plants in each region provided data which we analyzed. The information showed one regional office issued an average of 27 violations per facility in one year, whereas another regional office issued an average of 15 violations per facility that year.

Utility representatives also told us they do not always understand why NRC regional offices issue violations. For example, staff at one utility told us they received four Severity Level IV violations within a short period of time. They contacted regional office staff for further clarification, but were told they should not be concerned because low level violations are not that important. Licensee staff told us they regarded this as an unsatisfactory response to their inquiries, but decided to drop the matter because they were fearful of jeopardizing their relation with the agency.

We believe these regional office disparities inhibit the development of consistent and reliable information to support NRC's enforcement actions and licensee assessments, and can contribute to program inconsistencies. We also believe a more centralized organizational structure, coupled with improved inspector training and clearer staff expectations, could mitigate the perception of inconsistency in the inspection program.

In May 1995, we issued a Special Evaluation Report(1) that suggested, among other things, reducing inspection management layers and consolidating inspection program responsibility in headquarters. This organizational restructuring could alleviate problems associated with inconsistent regional office inspection and enforcement activities.


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Conclusions

The subjectivity of some inspection criteria, coupled with considerable staff discretion, provides an environment for potential program inconsistency. While we recognize some latitude is needed to administer complex and often inherently subjective regulatory programs, we believe the methods used by NRC staff to exercise discretion tends to foster the perception of program inconsistency. To help alleviate this perception and minimize potential inconsistencies, we believe the agency needs to have a more focused and closely monitored training program, agreed upon and clearly communicated staff expectations, and a more centralized organizational structure.

Specifically, we believe that NRC's training system has not adequately prepared inspectors to function efficiently in an environment that provides for significant discretion. The agency's loosely monitored OJT program does not ensure inspectors are comparably trained. Further, inadequate training on the "how to's" of inspecting further fosters inconsistencies in program implementation. Unless regional office managers utilize a consistent standard to determine when inspectors satisfactorily complete the OJT portion of inspection education, inspectors may employ different methods to address similar situations, which can result in inconsistencies. We believe NRC should more closely oversee inspector training, particularly the OJT portion, to ensure that inspectors have an equal and consistent knowledge base.

Unclear staff expectations also contribute to potential program inconsistency, which will probably occur unless inspectors have an accurate understanding of fundamental agency policies, such as performance-based inspections and citing violations. NRC's program managers need to agree on policy details and clearly communicate this information to inspection staff.

Finally, NRC's regulations should be applied consistently, regardless of location. NRC's organizational structure allows regional offices to implement the program as they deem appropriate, further creating an environment for inconsistencies. We believe centralizing inspection program responsibility could reduce inspection inconsistencies. Also, as pointed out in our Special Evaluation Report, restructuring NRC's organization could eliminate unnecessary management layers and reduce program costs.


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Recommendations

We recognize that NRC has and continues to take steps to improve the inspection program. To aid this process, and to minimize the potential for inconsistency in the operating reactor inspection program, we recommend the Deputy Executive Director For Nuclear Reactor Regulation, Regional Operations and Research:

  • Evaluate the system used to train inspectors, particularly the content and mix between formal classroom training and OJT;

  • Establish and clearly communicate to inspectors and supervisors management's expectations in crucial inspection areas such as citing violations, assessing licensee management, and conducting performance-based inspections; and,

  • Consider streamlining the inspection program by shifting inspection program implementation responsibility from regional offices to headquarters.


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Agency Comments

The Deputy Executive Director for Nuclear Reactor Regulation, Regional Operations and Research agrees with the basic thrust of this report and outlined several actions to implement our recommendations. We believe these actions will enhance inspection program management. His comments are contained in Appendix II.


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Objectives, Scope, and Methodology

The objective of this audit was to identify factors that may contribute to the industry's perception that the U.S. Nuclear Regulatory Commission (NRC) has not implemented the operating reactor inspection program consistently.

During the audit we obtained the views of managers and staff from NRC and selected utilities. To obtain the headquarters perspective, we interviewed senior managers and staff of the Office of Nuclear Reactor Regulation's Inspection Program Branch and the agency's Office of Enforcement. We also interviewed senior staff at the agency's Technical Training Center (TTC) located in Chattanooga, Tennessee.

To complement this information, we interviewed resident and region-based inspectors, Section Leaders, Branch Chiefs, Division Directors, Regional Administrators in NRC's Region II and Region IV.

To obtain the utility industry perspective we interviewed representatives of the Nuclear Energy Institute (NEI), and the Institute of Nuclear Power Operations (INPO). We also interviewed managers and staff at the following operating nuclear power plants:


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Region II

H. B. Robinson, operated by the Carolina Power & Light Company;
McGuire, operated by the Duke Power Company;
North Anna, operated by the Virginia Electric & Power Company;
Summer, operated by the South Carolina Electric & Gas Company; and
Vogtle, operated by the Georgia Power Company.


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Region IV

Comanche Peak, operated by Texas Utilities Electric Company;
Diablo Canyon, operated by Pacific Gas & Electric Company;
Fort Calhoun, operated by Omaha Public Power District; and
Palo Verde, operated by the Arizona Public Service Company.

We conducted this audit in accordance with generally accepted government auditing standards during the period January 1995 through September 1995. This audit focused on the methods and procedures inspection staff use to conduct inspections. We did not assess the adequacy of NRC's internal management controls that direct the inspection program.


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Agency Comments on Draft Report

United States Nuclear Regulatory Commission
Washington, DC 20555-0001
December 15, 1995

Memorandum To: Thomas J. Barchi
Assistant Inspector General for Audits
From: James L. Milhoan
Deputy Executive Director for Nuclear Reactor Regulation,regional Operations and Research
Subject: Draft Audit Report - Factors Contributing to Inconsistency in the Operating Reactor Inspection Program

I am responding to your memorandum of November 15, 1995, in which you transmitted the subject draft audit report. Based on our discussions during the exit briefing conducted on November 30, it is my understanding that the scope of the audit was limited to identifying factors which may contribute to industry's perception that the inspection program is being implemented inconsistently.

Given that understanding of audit scope, I agree with your conclusions that while latitude and staff discretion are needed to administer the inspection program, improvements in the inspector training program, communication of management's expectations, and consistent application of NRC's regulations regardless of location will lessen the perception of inconsistency in the inspection program. I recommend, however, that the audit report recognize NRC activities to improve the operating reactor inspection and enforcement programs in many areas, including efforts to improve consistency in its implementation. These efforts include revising the NRC enforcement policy, for among other purposes, to improve consistency and predictability of enforcement actions, program office oversight and review of inspection and enforcement activities (e.g. review of the NRC enforcement program (NUREG 1525), NRR review of inspection reports and OE review of enforcement actions), conduct of regional division director counterpart meetings in Headquarters, and efforts to improve communications with the inspection staff (e.g. inspection program newsletter, National SRI Counterpart Meeting). As a specific example, the staff has worked to develop and pilot inspection guidance associated with industry's implementation of the maintenance rule, and to conduct training for the inspection staff, in advance of the maintenance rule implementation date.

With respect to your specific recommendations, I submit the following:

Contact: R. W. Borchardt, NRR/PIPB
415-1257

Recommendation 1

Evaluate the system used to train inspectors, particularly the content and mix between formal classroom training and on-the-job training (OJT).

Response

Agree. The staff is reviewing and will update NRC Inspection Manual Chapter (IMC) 1245, "Inspector Qualifications." The objectives of this review are to reduce the total number of inspector types through consolidation and to standardize the qualification requirements for inspector types regardless of inspector location (region versus Headquarters). The review will also evaluate the mix and content between formal classroom training and OJT. The staff will revise IMC 1245 to address the above considerations by September 30, 1996.

Recommendation 2

Establish and clearly communicate to inspectors and supervisors management's expectations in crucial inspection areas such as citing violations, assessing licensee management, and conducting performance-based inspections.

Response

Agree. It is essential to clearly communicate NRC management's expectations to the staff. The staff recognizes the importance of an appropriate level of consistency in inspections and enforcement actions across the regions. This is an ongoing effort that involves issues such as the focus of the inspection program, the degree that findings are described in an inspection report, and the enforcement treatment of those findings.

IMC 0610, "Inspection Reports," is being extensively revised to clarify management's expectations regarding the documentation of inspection findings. IMC 0610 will include specific guidance for documenting violations and for when licensee identified violations should be documented in inspection reports and the degree to which they should be described. The revision of IMC 0610 is being coordinated with the Office of Enforcement to reflect the recent changes of the NRC's enforcement policy. Briefings on the changes of the enforcement policy and expectations for implementation of the policy have been performed at all regional offices and at the 1995 National Senior Resident Inspector Counterpart Meeting. A revised Enforcement Manual is being issued which will provide better guidance on the treatment of minor violations and to implement the revised enforcement policy. After the staff completes the revision of IMC 0610, training will be provided during periodic resident inspector counterpart meetings in each of the regional offices. The training will include the guidance for citing violations in inspection reports.

Following review of the Towers Perrin Nuclear Regulatory Review Study, the staff recognized the need to review inspection guidance related to the assessment of licensee management performance. It is not appropriate for inspectors to assess licensee management performance. With an emphasis on performance-based inspection, inspectors focus their attention on licensee activities and processes that are important to safety and reliability. NRC assessment of licensee organizational effectiveness results from NRC management's integration of the complete inspection record. The staff will critically review existing inspection procedures and revise any specific guidance related to assessment of licensee management as appropriate. The changes to the core inspection procedures should be completed by June 30, 1996. The staff will change the regional initiative inspection procedures when other changes to the procedures are required.

NRC management's expectations on performance-based inspections must be clearly communicated to inspectors. These expectations were outlined in a memorandum dated September 17, 1991, from the Executive Director for Operations to the NRC technical staff. IMC 2515 provides guidance on performance based inspection. Current inspector training requirements include a 3-day course on performance-based inspection techniques. However, continued efforts are necessary to reinforce management's expectations on performance-based inspections. Training to be developed for the resident and senior resident inspector (RI/SRI) development programs will include situational exercises that apply performance-based inspection techniques. This training should be ready for presentation in the first quarter of fiscal year 1997. Following completion of this training for the RI/SRI development programs, the staff will evaluate introduction of this course into the qualification requirements for new inspectors and as a refresher training course for currently qualified inspectors.

The completion date for this effort is December 31, 1996.

Recommendation 3

Consider streamlining the inspection program by shifting inspection program implementation responsibility from regional offices to Headquarters.

Response

The audit report does not address potential negative consequences of this recommendation. The EDO and I disagree with shifting inspection program implementation responsibility from regional offices to Headquarters. This could reduce the focus on safety provided by the regional offices. In addition, the current system of checks and balances provided by regional implementation with headquarters oversight may be adversely affected. Notwithstanding these comments, it may be appropriate to centralize certain aspects of the NRC inspection program. The agency's current strategic assessment and rebaselining effort will further review the NRC inspection program.

In addition to the above responses, our review of the draft audit report identified the comments presented in the attachment. The comments refer to the associated pages in the draft report.


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Additional Comments on the Draft Audit Report

Pages i and 1. The second sentence of the first paragraph on these pages should be amended to state that NRC, not NRR, develops regulations. The Office of Nuclear Regulatory Research has primary responsibility for the development of regulations.

Page 2. The last paragraph should be amended to reflect the September 6, 1995, revision to IMC 2515 as follows:

"The objectives of the operating reactor inspection program are to (1) ensure that the licensee's systems and techniques for conducting internal inspections and maintaining control result in safe operations, (2) find and resolve plant-specific safety concerns that have generic significance, (3) identify significant declining trends in performance and perform inspections to verify that the licensee has resolved the issue before performance declines below an acceptable level, and (4) provide one of several bases for conclusions on both individual licensee and industry-wide performance for allocating resources."

Page 3. The second sentence of the second paragraph should be amended to state, "For the more significant violations, NRC may impose a civil penalty or issue an order; less significant violations result in either a notice of violation or a non-cited violation. However, all violations are required to be corrected." This change adds issuance of an order as an enforcement action and clarifies that corrective actions are required for all violations, not just NCV's.

Page 5. The last sentence of the first partial paragraph should be revised to reflect the coordination of escalated enforcement actions for reactor licensees with the Office of Enforcement. The Office of Enforcement approves each case of a violation of significant regulatory concern, and provides oversight of enforcement actions involving less significant violations.

Page 5. The first sentence of the first full paragraph should be amended to state NRC's "policy" and not "regulations." As to the second sentence the NRC, vice NRC regional managers, have significant discretion in enforcement actions.

Pages 6 and 7. The last paragraph on page 6 and the first partial paragraph on page 7 discuss the use of enforcement discretion based on regional management's perceptions of licensee performance. It should be noted that this is in accordance with the NRC enforcement policy. Isolated violations of less than significant regulatory concern meeting the applicable criteria of the enforcement policy may be closed out as non-cited violations. Repeated poor performance should result in more significant enforcement actions.

Page 7. The second sentence of the first full paragraph should be amended to state, "The technical specifications describe requirements plants must abide by, from maintenance procedures to operational parameters." The technical specifications comprise a significant portion, but not the full range, of requirements and licensee commitments that are included in a plant's current licensing basis.

Page 11. The first two sentences of the first full paragraph discuss "NRC's requirement to cite any observed regulatory non-compliance." These sentences should be amended to indicate that this was a perceived "requirement" on the part of the inspectors interviewed in the audit. In fact, NRC's enforcement policy as previously stated in Appendix C to 10 CFR Part 2 stated that the NRC may exercise discretion and refrain from issuing a Notice of Violation under certain circumstances. These circumstances included Severity Level V violations and licensee-identified Severity Level IV and V violations that met certain criteria. (Severity Level V violations are of minor safety or environmental concern.) The revised enforcement policy (NUREG-1600), effective in July 1995, which was designed to better focus the inspection program on areas of more significant concern, provided that minor violations (formerly Severity Level V) are no longer subject to formal citation and usually are not to be described in an inspection report.

Page 12. The first partial sentence should be revised to state that if the licensee incorporated the "skill of the craft" technique into approved plant procedures, then there would be no basis for a violation. As currently written, it is unclear which procedure would be incorporated and approved. Under current enforcement policy this example, assuming it was of a minor nature (without the details it is not clear that not following vendor instructions and just using skills of the craft is only a minor violation), would not be subject to a formal citation and normally not described in an inspection report.


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U.S. NRC Functional Organization Chart

Figure 1: The U.S. NRC Functional Organization Chart


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Major Contributors to this Report

William D. McDowell
Audit Team Leader

Elmo Allen
Auditor

Lindley R. Higgins
Senior Management Analyst


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Glossary: Office of the Inspector General Products

Investigative

1. Investigative Report - White Cover

An Investigative Report documents pertinent facts of a case and describes available evidence relevant to allegations against individuals, including aspects of an allegation not substantiated. Investigative reports do not recommend disciplinary action against individual employees. Investigative reports are sensitive documents and contain information subject to the Privacy Act restrictions. Reports are given to officials and managers who have a need to know in order to properly determine whether administrative action is warranted. The agency is expected to advise the OIG within 90 days of receiving the investigative report as to what disciplinary or other action has been taken in response to investigative report findings.

2. Event Inquiry - Green Cover

The Event Inquiry is an investigative product that documents the examination of events or agency actions that do not focus specifically on individual misconduct. These reports identify institutional weaknesses that led to or allowed a problem to occur. The agency is requested to advise the OIG of managerial initiatives taken in response to issues identified in these reports but tracking its recommendations is not required.

3. Management Implications Report (MIR) - Memorandum

MIRs provide a "ROOT CAUSE" analysis sufficient for managers to facilitate correction of problems and to avoid similar issues in the future. Agency tracking of recommendations is not required.

Audit

4. Audit Report - Blue Cover

An Audit Report is the documentation of the review, recommendations, and findings resulting from an objective assessment of a program, function, or activity. Audits follow a defined procedure that allows for agency review and comment on draft audit reports. The audit results are also reported in the OIG's "Semiannual Report" to the Congress. Tracking of audit report recommendations and agency response is required.

5. Special Evaluation Report - Burgundy Cover

A Special Evaluation Report documents the results of short-term, limited assessments. It provides an initial, quick response to a question or issue, and data to determine whether an in-depth independent audit should be planned. Agency tracking of recommendations is not required.

Regulatory

6. Regulatory Commentary - Brown Cover

Regulatory Commentary is the review of existing and proposed legislation, regulations, and policies so as to assist the agency in preventing and detecting fraud, waste, and abuse in programs and operations. Commentaries cite the IG Act as authority for the review, state the specific law, regulation or policy examined, pertinent background information considered and identifies OIG concerns, observations, and objections. Significant observations regarding action or inaction by the agency are reported in the OIG Semiannual Report to Congress. Each report indicates whether a response is required.


Notes:

1. Now Is The Opportune Time To Re-Examine NRC's Organizational Structure, (OIG/95E-11, May 2, 1995)

Page Last Reviewed/Updated Thursday, March 29, 2012