**NRC INSPECTION MANUAL** CQV

MANUAL CHAPTER 2507

CONSTRUCTION INSPECTION PROGRAM:

VENDOR INSPECTIONS

TABLE OF CONTENTS

> 2507-01 PURPOSE 1
>
> 2507-02 OBJECTIVES 1
>
> 2507-03 DEFINITIONS 1
>
> 2507-04 RESPONSIBILITIES AND AUTHORITIES 3

04.01 Director, Office of New Reactors 3

> 04.02 Director, Construction, Inspection, and Operational Programs 3

2507-05 DISCUSSION 4

2507-06 INSPECTION POLICIES AND GUIDANCE 4

> 06.01 Vendor Selection 4
>
> 06.02 Inspection Emphasis 5
>
> 06.03 Inspection Plans 5
>
> 06.04 Development of Generic Communications 5
>
> 06.05 Inspection Contractor Support 5
>
> 06.06 General Inspection Process 5

2507-07 TYPES OF INSPECTIONS 7

> 07.01 Routine Inspections 7
>
> 07.02 Reactive Inspections 7
>
> 07.03 Third-Party Audit Oversight 7

2507-08 ENFORCEMENT ACTIONS 7

2507-09 REFERENCES 7

ATTACHMENT 1, Inspection Guidance A1-1

ATTACHMENT 2, Revision History A2-1

CONSTRUCTION INSPECTION PROGRAM:

VENDOR INSPECTIONS

2507-01 PURPOSE

01.01 To establish the inspection program for vendors providing
safety-related materials, equipment, and services in support of new
reactor construction.

01.02 To provide requirements and guidance to NRC inspectors for
conducting inspections at vendor facilities.

2507-02 OBJECTIVES

02.01 To verify effective implementation of vendor quality assurance
programs as a means of assuring the quality of materials, equipment, and
services supplied to the commercial nuclear industry.

02.02 To verify effective implementation of commercial-grade dedication
programs for safety-related materials, equipment, and services.

02.03 To assure that vendors have an effective system for reporting
defects under 10 CFR Part 21.

02.04 To conduct inspections at vendor facilities to help support the
Commission determination that the acceptance criteria in a combined
license have been met in accordance with 10 CFR 52.99 and 10 CFR
52.103(g).

02.05 To obtain sufficient information through inspection activities at
vendor facilities to assure that root causes of reported vendor related
problems are being identified and suitable corrective actions are
developed and implemented.

02.06 To assure that follow-up and resolution of allegations, 10 CFR
Part 21 or 10 CFR Part 50.55(e) reports, and licensee event reports
(LERs) assigned to the Quality and Vendor Branch (CQV) are accomplished
in a timely manner.

02.07 To assure that fraudulently marketed products are traced to their
source and that licensees are informed so that the fraudulent products
can be removed from use or possible use.

02.08 To provide input to the NRC operating experience program of
instances involving substandard, suspected counterfeit, or fraudulently
marketed vendor products and to gather information in order to provide
timely information to licensees and other users.

2507-03 DEFINITIONS

03.01 [Announced Inspection]{.underline}. The licensee/vendor or any
member of the licensee/vendor organization is notified by the lead
inspector or any member of the NRC staff that an inspection is to be
conducted. The announcement may be made by a written communication,
telephone call, or other communication informing any member of the
licensee/vendor organization that an inspection may or will take place
at a specific time or date.

03.02 [Basic Component]{.underline}. A structure, system, component, or
part thereof that affects its safety function necessary to assure:

-   The integrity of the reactor coolant pressure boundary;

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-   The capability to shut down the reactor and maintain it in a safe
    shutdown condition; or

-   The capability to prevent or mitigate the consequences of accidents
    which could result in potential offsite exposures comparable to
    those referred to in 10 CFR 50.34(a)(1), 10 CFR 50.67(b)(2), or 10
    CFR 100.11, as applicable.

Basic components are items designed and manufactured under a QA program
complying with Appendix B to 10 CFR Part 50, or commercial-grade items
which have successfully completed the dedication process.

In all cases, a basic component includes safety-related design,
analysis, inspection, testing, fabrication, replacement of parts, or
consulting services that are associated with the component hardware
whether these services are performed by the component supplier or
others.

03.03 [Counterfeit or Fraudulently Marketed Items]{.underline}. Items
that are deliberately manufactured or altered in such a way as to
misrepresent the actual quality of the item with intent to defraud or
deceive the purchaser.

03.04 [Inspections, Tests, Analyses, and Acceptance Criteria
(ITAAC)]{.underline}. Those inspections, tests, analyses, and acceptance
criteria identified in the combined license that if met are necessary
and sufficient to provide reasonable assurance that the facility has
been constructed and will operate in conformity with the license, the
provisions of the Atomic Energy Act, and the Commission rules and
regulations.

03.05 [ITAAC Family]{.underline}. A grouping of ITAAC that are related
through similar construction processes, resulting products, and general
inspection attributes.

03.06 [Nonconformance]{.underline}. A vendor\'s or certificate holder=s
failure to meet contract requirements related to NRC-regulated
activities (e.g., Appendix B to 10 CFR Part 50), where the NRC has not
placed requirements directly on the vendor or certificate holder.

03.07 [Quality Assurance Manual]{.underline}. A compilation of quality
assurance documents that define the quality assurance policy and
program, describe the method(s) by which the policy will be implemented
through procedures and instructions, and identifies the parties
responsible for implementation.

03.08 [Reactive Vendor Inspection]{.underline}. Inspections performed
for the purpose of obtaining additional information and/or verifying
adequate corrective actions on reported problems or deficiencies
involving vendor supplied products or services. Reactive inspections are
typically performed in response to a specific problem identified by any
group within the NRC (e.g., including headquarters, the regional
offices), or in response to allegations or other identified problems
(e.g., 10 CFR Part 21 or 10 CFR 50.55(e) reports) from outside sources.

03.09 [Routine Vendor Inspection]{.underline}. Inspections performed to
verify effective implementation of a facility=s QA program used to
furnish basic components to the nuclear industry.

03.10 [Supplier]{.underline}. For the purposes of this manual chapter,
any organization that supplies basic components to a vendor, applicant,
or holder of a 10 CFR Part 52 license.

03.11 [Unannounced Inspection]{.underline}. The vendor or any member of
the vendor organization is not notified by the inspector or any member
of the NRC staff until the inspector arrives at the vendor\'s facility
or at the site where the inspection is to be conducted.

03.12 [Unresolved Item]{.underline}. Any inspection finding that
requires more information in order to determine that it is an acceptable
item or whether a violation or nonconformance may exist.

03.13 [Vendor]{.underline}. For the purposes of this manual chapter, any
company or organization that provides products such as material,
equipment, components, or services to be used in an NRC-licensed
facility or activity. In certain cases the vendor may be an NRC licensee
(e.g., a nuclear fuel fabricator) or the product may have NRC
certificates (e.g., a transportation cask).

03.14 [Violation]{.underline}. For the purposes of this manual chapter,
the failure to comply with any portion of a legally binding regulatory
requirement, such as a statute, regulation, order, license condition, or
technical specification.

2507-04 RESPONSIBILITIES AND AUTHORITIES

04.01 [Director, Office of New Reactors (NRO)]{.underline}. Provides
overall direction for the NRC vendor inspection program.

04.02 [Director, Division of Construction, Inspection, and Operational
Programs (DCIP)]{.underline}.

> a\. Directs the implementation of policies, programs, and procedures
> for inspecting vendors, applicants, licensees, and other entities.
>
> b\. Assesses the effectiveness, uniformity, and completeness of
> implementation of the vendor inspection program.
>
> c\. Approves changes to the vendor inspection program.

2507-05 DISCUSSION

The NRO Quality and Vendor branches (CQV) are responsible for
implementing the construction vendor inspection program at facilities
where basic components are designed, manufactured, or stored. Routine
and reactive inspections are conducted to verify that the vendor QA
programs are implemented and comply with the applicable regulatory
requirements of Appendix B to 10 CFR Part 50 and 10 CFR Part 21.

This manual chapter provides NRC guidance for inspection and assessment
of vendor QA programs in support of new reactor licensing and
construction activities. Specifically, this chapter defines the vendor
inspection program for the following activities:

-   Inspections of vendor QA program implementation during design and
    procurement activities in support of an application for a combined
    license (COL). This encompasses ITAAC-related activities associated
    with vendors, such as inspection of offsite fabrication, modular
    construction techniques, and fabrication of long-lead components.

-   Inspections to assess whether the vendor QA programs address
    specific processes such as commercial-grade dedication practices,
    vendor/licensee and vendor/applicant oversight, and reporting of
    defects and noncompliance associated with safety-related components
    or services utilized in a nuclear power plant in accordance with 10
    CFR Part 21.

-   Inspections to verify that root cause analyses of reported defects
    and failures to comply are being identified and that suitable
    corrective actions are developed and implemented.

-   Provide input to the NRC operating experience program in order to
    provide timely information to the nuclear industry of potential
    issues that are safety significant and with generic implications.
    These issues could include substandard, suspected counterfeit, or
    fraudulently marketed vendor products.

2507-06 INSPECTION POLICIES AND GUIDANCE

06.01 [Vendor Selection]{.underline}. The selection of vendors for
inspection is based on several factors, that include:

-   The significance to safety of the equipment or service provided,

-   Verification of inspections, tests, analyses, and acceptance
    criteria (ITAAC) in support of onsite construction activities,

-   Input from the technical staff necessary to support completion of
    design certification (DC) and combined license (COL) reviews,

-   The frequency and significance to safety of problems identified with
    vendor-supplied materials, equipment, or services, including
    third-party auditing organizations,

-   The number of licensees affected by the problem identified, the
    performance history of a vendor, and

-   Other information received by CQV from allegations, Part 21 reports,
    50.55(e) reports, Licensee Event Reports (LERs), and other NRC
    organizations.

The results of past inspections, event evaluations, and inspector and
management reviews should be used to schedule and determine the focus of
planned inspections at each vendor facility.

06.02 [Inspection Emphasis]{.underline}. Inspection emphasis is placed
on manufacturing processes employed by vendors during the design,
fabrication, and testing of basic components. The inspectors will ensure
that the vendor=s quality processes meet applicable industry codes,
standards, and regulatory requirements.

In addition to verifying the implementation of the Appendix B criteria
described above, vendor inspections will include the review of the
vendor=s 10 CFR Part 21 or Part 50.55(e) procedures and, when
applicable, activities performed as part of commercial-grade dedication.

To support ITAAC verification and closure, inspectors will focus on
components related to a certified design ITAAC and will verify the
necessary critical attributes to provide input into the ITAAC closure
process.

06.03 [Inspection Plans]{.underline}. Inspection plans are required for
all inspections. The lead inspector is responsible for preparation of
the inspection plan. Inspection plans will follow the guidance contained
in Section 06.06 of this manual chapter.

06.04 [Development of Generic Communications]{.underline}. The CQV will
prepare input to the Construction Inspection and Allegation Branch in
NRO for the development of generic communications (bulletins,
information notices, generic letters, or regulatory information
summaries) to alert the nuclear industry and others of vendor-related
product/service deficiencies.

06.05 [Inspection Contractor Support]{.underline}. In the past, vendor
inspections have used contractor support as one method for increasing
the technical expert resources available to the NRC for carrying out its
inspection responsibilities. Such contractor augmentations have proven
to be extremely helpful for these headquarters-based inspection efforts.
Like all NRC team inspections, contractor-supported team inspections are
led by an NRC team leader having inspection authority and
responsibility. There is no delegation of NRC inspection authority or
responsibilities to a contractor.

06.06 [General Inspection Process]{.underline}. For each inspection, the
inspector should implement the process described below for
pre-inspection activities, onsite inspection activities, and
post-inspection activities. The inspection procedures listed in
Enclosure 1 provide more specific guidance for onsite inspection
activities.

> a\. [Pre-inspection activities]{.underline}. To facilitate management
> of inspection resource allocations and tracking of inspection
> activities, the lead inspector should develop facility-specific
> inspection plans consistent with the guidance described below.
>
> The responsible team leader will develop an inspection plan. The
> inspection plan will identify the vendor facility, describe the scope
> and major areas of emphasis that will be reviewed, evaluated, or
> assessed. In addition, the inspection plan should identify the
> inspection type, team members, and the inspection schedule. This plan
> is to be reviewed and approved by the responsible Branch chief. For
> inspections involving allegations, inspection plans shall be
> controlled at all times by the inspection team.
>
> Inspections will be typically announced 30 calendar days in advance.
> The lead inspector will contact the vendor representative (preferably
> the QA Manager), announce the upcoming inspection, and discuss the
> inspection schedule. It may be appropriate to inform the vendor as to
> the purpose, estimated duration, and the number of NRC inspectors
> expected to take part in the inspection. The specific areas to be
> covered should also be described if this will facilitate and be
> consistent with the objectives of the inspection. For inspections
> involving allegations, the lead inspector shall not disclose that the
> inspection is in response to an allegation.
>
> The inspectors should review the vendor=s recent inspection and
> enforcement history (if available), any outstanding open items,
> third-party audit report if available, and any events (e.g., \'50.72
> reports, Part 21 notifications) reported by the vendor.
>
> b\. [Onsite inspection activities]{.underline}. Entrance and exit
> meetings with vendor personnel should be scheduled in advance to
> minimize the impact on other vendor activities. The lead inspector
> should hold an entrance meeting with the senior vendor representative
> (preferably the facility=s QA Manager) who has responsibility for the
> areas to be inspected. At the entrance meeting, the lead inspector
> should discuss the inspection scope with vendor management and other
> administrative matters, such as the observation of facility
> operations, interviews with staff, and/or document reviews. Whenever
> possible, the lead inspector should schedule a daily status meeting
> with vendor management to discuss the inspection progress and issued
> identified.
>
> An exit meeting should be conducted with vendor management at the
> conclusion of the inspection. The results of the inspection, including
> preliminary findings, should be presented emphasizing their impact on
> safety. The lead inspector should emphasize that preliminary findings
> are always subject to management review before they are documented in
> an inspection report. Prior to the exit, the lead inspector should
> determine whether his/her supervisor should be briefed on the
> preliminary inspection findings.
>
> c\. [Post-inspection activities]{.underline}. Inspection
> findings/observations will be documented in accordance with IMC-0612,
> \"Power Reactor Inspection Reports.\" Inspection issues that cannot be
> resolved at the time of the inspection will be documented as
> unresolved items in accordance with IMC-0612.

2507-07 TYPES OF INSPECTIONS

The following types of inspections are performed by the Quality and
Vendor Branch. Enclosure 1 lists the inspection procedures that are
applicable to the vendor inspection program as described in this manual
chapter.

07.01 [Routine Inspections]{.underline}. The inspectors will review the
vendor=s QA program and verify effective implementation of QA controls
for activities related to the basic component being provided. The
inspectors will also verify that the QA program provides controls for
reporting of defects and noncompliance. For vendors performing
dedication of commercial-grade items, the inspectors will verify that
the facility has implemented an effective commercial-grade dedication
program. In addition, the inspectors will verify the vendor=s capability
to assure the quality of basic components procured by licensees or
applicants. Typically one inspection is conducted to verify
implementation of the vendor=s QA controls. Follow-up inspection are
performed as necessary.

07.02 [Reactive Inspections]{.underline}. The inspectors will verify
that vendors of basic components have developed and implemented adequate
procedures to evaluate and correct conditions adverse to quality.
Reactive inspections are conducted in response to allegations, previous
inspection findings, reports in accordance with Part 21 and/or 50.55(e),
and other information sources indicating the possibility that NRC
requirements are not being met. Typically one inspection is conducted to
verify implementation of the vendor=s QA controls. Follow-up inspection
are performed as necessary.

07.03 [Third-Party Audit Oversight]{.underline}. The NRC staff will
provide oversight of third-party audit activities (e.g., Nuclear
Procurement Issues Committee (NUPIC)) on a periodic basis. This includes
participation in third-party audit organization meetings related to
vendor performance. The purpose of NRC oversight of third-party audit
organizations is to verify the effective implementation of the audit
process to ensure that the requirements of Criterion VII, AControl of
Purchased Material, Equipment, and Services,@ of Appendix B are
satisfied. These audits are conducted twice a year by the Quality and
Vendor branches.

2507-08 ENFORCEMENT ACTIONS

Potential violations identified through inspection activities will be
processed in accordance with the NRC=s Enforcement Policy, NUREG-1600,
AGeneral Statement of Policy and Procedures for NRC Enforcement
Actions.@

2507‑09 REFERENCES

U.S. Code of Federal Regulations. 10 CFR Part 21, AReporting of Defects
and Noncompliance.@

U.S. Code of Federal Regulations. 10 CFR Part 50.55, AConditions of
Construction Permits.@

U.S. Code of Federal Regulations. 10 CFR Part 50, Appendix B, AQuality
Assurance Criteria for Nuclear Power Plants and Fuel Reprocessing
Plants.@

ASME NQA-1-1994, AQuality Assurance Program Requirements for Nuclear
Facilities.@

END

Attachments:

> 1\. Inspection Procedures
>
> 2\. Revision History

ATTACHMENT 1

INSPECTION PROCEDURES

+------------+----------------------------------+---------------------+
| Inspection | Inspection Procedure Title       | Procedure           |
| Procedure  |                                  | Applicability:      |
| No.        |                                  |                     |
|            |                                  | Routine (R) or As   |
|            |                                  | Needed (N)          |
+------------+----------------------------------+---------------------+
| VENDOR     |                                  |                     |
| INSPECTION |                                  |                     |
| PROCEDURES |                                  |                     |
+------------+----------------------------------+---------------------+
| 43002      | Routine Inspections of Nuclear   | R                   |
|            | Vendors                          |                     |
+------------+----------------------------------+---------------------+
| 43003      | Reactive Inspections of Nuclear  | N                   |
|            | Vendors                          |                     |
+------------+----------------------------------+---------------------+
| QUALITY    |                                  |                     |
| ASSURANCE  |                                  |                     |
| INSPECTION |                                  |                     |
| PROCEDURES |                                  |                     |
+------------+----------------------------------+---------------------+
| 36100      | Inspection of 10 CFR Part 21 and | R                   |
|            | 50.55(e) Programs for Reporting  |                     |
|            | Defects and Nonconformance       |                     |
+------------+----------------------------------+---------------------+
| 43004      | Inspection of Commercial-Grade   | N                   |
|            | Dedication Programs              |                     |
+------------+----------------------------------+---------------------+

ATTACHMENT 2

[Revision History for IMC 2507]{.underline}

+--------+--------+----------------+----------+----------+--------------+
| Comm   | Issue  | Description of | Training | Training | Comment      |
| itment | Date   | Change         | Required |          | Resolution   |
| Tr     |        |                |          | Co       | Accession    |
| acking |        |                |          | mpletion | Number       |
| Number |        |                |          | Date     |              |
+--------+--------+----------------+----------+----------+--------------+
| N/A    | 10     | Initial        | None     | N/A      | N/A          |
|        | /03/07 | issuance to    |          |          |              |
|        |        | establish      |          |          |              |
|        | CN     | guidance for   |          |          |              |
|        | 07-030 | 10 CFR Part 52 |          |          |              |
|        |        | vendor         |          |          |              |
|        |        | inspections    |          |          |              |
|        |        |                |          |          |              |
|        |        | Researched     |          |          |              |
|        |        | commitments    |          |          |              |
|        |        | for 4 years    |          |          |              |
|        |        | and found      |          |          |              |
|        |        | none.          |          |          |              |
+--------+--------+----------------+----------+----------+--------------+
|        |        |                |          |          |              |
+--------+--------+----------------+----------+----------+--------------+
|        |        |                |          |          |              |
+--------+--------+----------------+----------+----------+--------------+
|        |        |                |          |          |              |
+--------+--------+----------------+----------+----------+--------------+
|        |        |                |          |          |              |
+--------+--------+----------------+----------+----------+--------------+
|        |        |                |          |          |              |
+--------+--------+----------------+----------+----------+--------------+
|        |        |                |          |          |              |
+--------+--------+----------------+----------+----------+--------------+
|        |        |                |          |          |              |
+--------+--------+----------------+----------+----------+--------------+