Audit of NRC’s

Construction Reactor 

Oversight Process

OIG-15-A-14 

June 16, 2015

All publicly available OIG reports (including this report) 

are accessible through NRC’s Web site at

http://www.nrc.gov/reading-rm/doc-collections/insp-gen
UNITED STATES

NUCLEAR REGULATORY COMMISSION

WASHINGTON, D.C. 20555-0001

OFFICE OF THE

INSPECTOR GENERAL

June 16, 2015

MEMORANDUM TO: Mark A. Satorius

Executive Director for Operations

FROM: Stephen D. Dingbaum /RA/

Assistant Inspector General for Audits

SUBJECT: AUDIT OF NRC’S CONSTRUCTION REACTOR 

OVERSIGHT PROCESS (OIG-15-A-14)

Attached is the Office of the Inspector General’s (OIG) audit report titled Audit of NRC’s 

Construction Reactor Oversight Process.

The report presents the results of the subject audit. Following the May 14, 2015, exit 

conference, agency staff provided formal comments for inclusion in this report. Agency 

comments are located at Appendix B to the report.

Please provide information on actions taken or planned on each of the recommendations 

within 30 days of the date of this memorandum. Actions taken or planned are subject to OIG 

followup as stated in Management Directive 6.1.

We appreciate the cooperation extended to us by members of your staff during the audit. If 

you have any questions or comments about our report, please contact me at (301) 415-5915 

or R.K. Wild, Team Leader, at (301) 415-5948.

Attachment: As stated
Office of the Inspector General

U.S. Nuclear Regulatory Commission

Defense Nuclear Facilities Safety Board

Results in Brief

Audit of NRC’s Construction Reactor Oversight Process 

What We Found

NRC needs to improve efficiency when adjusting to construction inspection 

schedules and revising inspection guidance. In Fiscal Year 2014,

approximately 60 percent of regional construction inspection staff time 

was spent on administrative program support activities, such as adjusting 

to licensee construction schedules and revising SmartPlans rather than 

conducting inspections. 

NRC relies on construction inspection staff for monitoring and adjusting to 

construction schedule changes because schedules provided by licensees 

do not contain real-time information as originally envisaged. Further, the 

process for approving SmartPlan revisions is dominated by multiple levels 

of review by individuals who do not necessarily need to participate in the 

review. 

Agency efforts to identify process inefficiencies are not comprehensive

and have left the agency unable to identify process and functional 

redundancies, overlap, and gaps. As the pace of new reactor construction 

increases, unaddressed administrative inefficiencies could affect future 

cROP effectiveness.

What We Recommend

This report makes recommendations to improve the efficiency of 

cROP.

Why We Did This Review

The U.S. Nuclear Regulatory 

Commission (NRC) licenses and 

oversees new nuclear power 

reactor construction. 

Current construction licenses 

were issued in accordance with 

Title 10, Code of Federal 

Regulations, Part 52, Licenses, 

Certifications, and Approvals for 

Nuclear Power Plants. 

NRC uses the Construction 

Reactor Oversight Process 

(cROP), to evaluate the quality of 

construction of four reactors 

being built in Georgia and South 

Carolina. The cROP also includes 

inspections of ongoing 

construction by inspectors who

verify whether licensees are 

building the new reactors 

according to NRC approved 

designs. 

Construction inspectors also 

perform administrative 

activities, such as adjusting to 

licensee construction schedule

changes and revising inspection 

guidance, known as SmartPlans, 

that provide a list of inspection 

activities such as what should be 

inspected and sample sizes.

The audit objective was to assess 

the efficiency and effectiveness 

of NRC’s Construction Reactor 

Oversight Process.

OIG-15-A-14

June 16, 2015
Audit of NRC’s Construction Reactor Oversight Process

ABBREVIATIONS AND ACRONYNMS........................................................ i

I. BACKGROUND ................................................................................1

II. OBJECTIVE......................................................................................3

III. FINDING...........................................................................................3

cROP Processes Could Be More Efficient...................................3

IV. AGENCY COMMENTS.....................................................................8

APPENDIXES 

A. OBJECTIVE, SCOPE, AND METHODOLODY.................................9

B. AGENCY FORMAL COMMENTS....................................................11

TO REPORT FRAUD, WASTE, OR ABUSE .............................................14

COMMENTS AND SUGGESTIONS..........................................................14

 TABLE OF CONTENTS
Audit of NRC’s Construction Reactor Oversight Process

i

BPI Business Process Improvement

cROP Construction Reactor Oversight Process

ITAAC Inspections, Tests, Analyses, and Acceptance Criteria

NRC Nuclear Regulatory Commission

NRO Office of New Reactors

OIG Office of the Inspector General

 ABBREVIATIONS AND ACRONYMS
Audit of NRC’s Construction Reactor Oversight Process

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Oversight of New Reactor Construction

The U.S. Nuclear Regulatory Commission (NRC) licenses and oversees 

new nuclear power reactor construction. Four reactors are being built 

under combined operating licenses issued in accordance with Title 10, 

Code of Federal Regulations, Part 52, Licenses, Certifications, and 

Approvals for Nuclear Power Plants. Two of the new reactors are in 

Georgia and two in South Carolina. NRC uses the Construction Reactor 

Oversight Process (cROP), a matrix-based tool for evaluating the quality 

of construction, to oversee construction of new nuclear power reactors.

Region II New Reactor Oversight

Figure 1 

Source: NRC Region II

Two organizations in NRC have overall responsibility for overseeing new 

reactor construction. The Office of New Reactors (NRO) provides overall 

program management and planning for the oversight of new reactor 

 I. BACKGROUND
Audit of NRC’s Construction Reactor Oversight Process

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construction. NRC’s Region II conducts inspections of ongoing 

construction. As of April 2015, Region II’s construction inspection staff 

consisted of 29 regional construction inspectors and 6 resident 

construction inspectors (3 in South Carolina and 3 in Georgia). 

Collectively, their role is to verify that licensees are building the new 

reactors according to NRC approved designs by sampling licensee 

Inspections, Tests, Analyses, and Acceptance Criteria (ITAAC).1 

Regional construction inspection staff use SmartPlans to provide detail for 

inspections. Specifically, SmartPlans provide lists of inspection activities, 

such as what items should be inspected and sample sizes. According to 

Region II guidance, SmartPlans are linked to specific ITAAC to provide 

“reasonable assurance” that licensees meet the intent and requirements of 

that ITAAC. 

V.C. Summer Unit 3 Construction

Figure 2

Source: NRC

 

1

ITAAC are a pre-approved set of standards that licensees must meet to show that reactors are built according to 

approved designs. See Audit of NRC’s Inspections, Tests, Analyses, and Acceptance Criteria (ITAAC) Process, OIG12-A-16, July 12, 2012. 
Audit of NRC’s Construction Reactor Oversight Process

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 III. FINDING

The audit objective was to assess the efficiency and effectiveness of NRC’s 

Construction Reactor Oversight Process. Appendix A contains information on 

the audit’s scope and methodology.

NRC’s cROP is generally effective; however, the Office of the Inspector General 

(OIG) identified opportunities to improve efficiency. 

A. cROP Processes Could Be More Efficient

NRC programs should be structured and implemented to provide reasonable 

assurance that the agency is accomplishing its mission efficiently and effectively. 

However, NRC regional construction inspection staff currently spend more time 

on administrative work than on construction inspection. This is because NRC 

efforts to identify process inefficiencies are not comprehensive, leaving the 

agency unable to identify process and functional redundancies, overlap, and 

gaps. As the pace of new reactor construction increases, unaddressed 

administrative inefficiencies could affect future cROP effectiveness.

NRC Programs Should Be Efficient and Effective

Federal and NRC guidance emphasizes that programs should be structured and 

implemented to provide reasonable assurance that the agency is accomplishing 

its mission efficiently and effectively. Office of Management and Budget Circular 

A-123, Management’s Responsibility for Internal Control, and NRC Management 

Directive 4.4, Internal Control, specify requirements for creating an environment 

that assures efficiency and effectiveness. One such requirement is to establish 

What Is Required

 II. OBJECTIVE
Audit of NRC’s Construction Reactor Oversight Process

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and maintain internal controls to achieve the objective of efficient and effective 

operations. 

Further, Management Directive 4.4 establishes a framework for identifying and 

addressing program performance and management challenges, and holds all 

NRC employees responsible for active participation in achieving this objective. 

More Time Spent on Administrative Work Than On Construction 

Inspections

Regional construction inspection staff spend a majority of their time on 

administrative work rather than on construction inspections. As shown in Figure 

3, approximately 60 percent of staff time in Fiscal Year 2014 was spent on 

administrative program support activities rather than conducting inspections. 

Based on OIG analysis of agency data, it is important to note that Region II 

originally envisaged regional inspectors to focus primarily on conducting 

inspections rather than on administrative activities. One experienced senior 

manager opined that if it could be done over again, all construction inspectors 

would be located at the construction sites and they would not have hired any 

regional inspectors. 

Examples of administrative activities include:

 Adjusting to Licensee Construction Schedule Changes — NRC 

planned for a construction oversight process based on a licenseeprovided electronic construction schedule that would be updated 

regularly by the licensee. However, the licensee does not provide real 

time information; rather, licensees provide a projection of upcoming 

construction at 13- and 26-week intervals. Region II construction 

inspection staff are relied upon for monitoring and adjusting to 

construction schedule changes. 

What We Found
Audit of NRC’s Construction Reactor Oversight Process

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 Participating in the SmartPlan Revision Process — The process for 

approving SmartPlan revisions is cumbersome and inefficient. 

Construction inspection staff contend that the review process is 

dominated by multiple levels of review by individuals who do not 

necessarily have the need to participate in the review. Furthermore, 

the large number of reviewers makes it very difficult to obtain 

concurrences in a timely fashion. 

Administrative Hours and Inspection Hours

Fiscal Year 2014

Figure 3

Source: Region II

Management Representation of Current Process Review Efforts

At the May 14, 2015, exit conference, NRO management officials acknowledged 

OIG’s findings and noted that the agency has undertaken a new process review 

effort that should address the process inefficiencies identified by OIG. However, 

the results of this process were not mentioned until the exit conference and was,

therefore, not audited by OIG. OIG has no opinion as to the effectiveness of this 

new process.

15,505

9,853

Administrative/

Program Support

Hours

Inspection Hours
Audit of NRC’s Construction Reactor Oversight Process

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NRC Efforts To Identify Process Inefficiencies Are Not Comprehensive

NRC’s previous and ongoing efforts to identify process inefficiencies fail to yield 

significant process improvements because efforts are not comprehensive. 

Specifically, a Business Process Improvement (BPI) effort and annual selfassessments were methodologically limited from exploring fully the interplay of 

requirements and processes across various offices and functions, as described 

below: 

 BPI Effort Not Comprehensive—Between April 2013 and September 2013, 

NRC headquarters and Region II conducted a BPI effort to streamline the 

construction inspection scheduling process associated with cROP. One of 

the first steps in a BPI is to lay out the current process and structure of an 

organization. Yet, there was no consensus among BPI team members on 

construction program staff roles and responsibilities. Additionally, the BPI 

team could not agree on solutions to the inefficiencies identified by the 

BPI. Nonetheless, the BPI team recommended options to improve 

construction inspection scheduling, including the SmartPlan revision 

process, but management did not commit to the specific recommendations 

or develop a comprehensive action plan with milestones to address the 

identified administrative inefficiencies. A senior manager stated it was 

difficult to proceed with the recommendations because there was no 

consensus on the recommendations provided by the BPI team. 

 cROP Annual Self-Assessments Did Not Identify Administrative 

Inefficiencies—NRO and Region II conducted cROP self-assessments in 

2012 and 2013, and are in the process of evaluating the results for 2014. 

The self-assessment for 2013 concluded that the cROP met its program 

goals and achieved its intended outcomes. However, the self-assessment 

is more of an annual status report and is not designed to comprehensively 

identify administrative inefficiencies.

Why This Occurred
Audit of NRC’s Construction Reactor Oversight Process

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Existing Inefficiencies Could Negatively Affect cROP Effectiveness

As the pace of new reactor construction increases, unaddressed administrative 

inefficiencies could affect future cROP effectiveness. Absent a comprehensive 

review of cROP and related construction inspection activities, the agency may 

not be positioned to proactively identify process and functional redundancies, 

overlap, and gaps, including among offices, branches, and positions, and 

between headquarters and Region II. The pace and complexity of construction 

today is primarily limited to relatively straightforward structural and civil 

engineering ITAAC. As more complex components and systems are installed at 

licensee sites, NRC’s ability to effectively oversee and inspect licensee 

construction activities would be seriously challenged if the pendulum of 

administrative-to-direct inspection hours does not swing more favorably towards 

inspection. 

Recommendations

OIG recommends that the Executive Director for Operations

1. Develop and implement a comprehensive review that identifies process 

inefficiencies associated with cROP. 

2. Implement the results of the comprehensive review through a formal 

action plan, with milestones, in order to address process inefficiencies 

associated with cROP. 

Why This Is Important
Audit of NRC’s Construction Reactor Oversight Process

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 IV. AGENCY COMMENTS

An exit conference was held with the agency on May 14, 2015. At this meeting, 

agency management provided supplemental information that has been 

incorporated into this report as appropriate. On May 22, 2015, the agency 

generally agreed with the draft report and recommendations and notified OIG 

that it would provide formal comments.

On May 29, 2015, NRC provided formal comments to the draft report. The 

agency expressed concerns about how the report findings and recommendations 

could be broadly interpreted as requiring a wholesale review of cROP policies, 

procedures, and practices. While OIG identified specific opportunities for 

improvement, the recommendations are intended to allow the agency to identify 

the best approach to addressing OIG and agency-identified inefficiencies. 

Appendix B contains a copy of the agency’s formal comments. 
Audit of NRC’s Construction Reactor Oversight Process

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Appendix A

Objective

The audit objective was to assess the efficiency and effectiveness of 

NRC’s Construction Reactor Oversight Process (cROP).

Scope

This audit focused on evaluating NRC’s cROP efficiency and 

effectiveness. We conducted this performance audit from October 2014 

through February 2015 at NRC headquarters in Rockville, MD, and 

Region II in Atlanta GA, through interviews, telephone, email, and 

attendance at Region II’s Regional Counterpart Meeting in December, 

2014. Additionally, auditors interviewed staff from the Office of New 

Reactors, Region II construction staff, Office of Enforcement, and Office of 

the General Counsel. Internal controls related to the audit objective were 

reviewed and analyzed. Throughout the audit, auditors were aware of the 

possibility of fraud, waste, and abuse in the program.

Methodology

To address the audit objective within the scope of this audit, OIG auditors 

reviewed the following Federal and agency guidance, key data, and 

documents:

 OMB Circular A-123, Management’s Responsibility for Internal Control, 

December 2004.

 Government Accountability Office’s (GAO) Standards for Internal 

Control in the Federal Government, 1999.

 NRC Principles of Good Regulation and Strategic Plan 2014-18.

 OBJECTIVE, SCOPE, AND METHODOLOGY
Audit of NRC’s Construction Reactor Oversight Process

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 Management Directive 4.4, Internal Control, October 2012.

 Title 10, Code of Federal Regulations, Part 52, Licenses, Certifications, 

and Approvals for Nuclear Power Plants.

 NRC Inspection Manual Chapters.

 NRC Enforcement Manual, August 2014.

 NRC Enforcement Policy, January 2013.

 NRO COM-108, NRO Construction Inspection Interfaces with Region II 

June 2014.

 Region II Desktop Guides pertaining to new reactor construction.

We conducted this performance audit in accordance with generally 

accepted government auditing standards. Those standards require that 

we plan and perform the audit to obtain sufficient, appropriate evidence to 

provide a reasonable basis for our findings and conclusions based on our 

audit objectives. We believe that the evidence obtained provides a 

reasonable basis for our findings and conclusions based on our audit 

objectives. 

The audit was conducted by RK Wild, Team Leader; Levar Cole, Audit 

Manager; Timothy Wilson, Senior Management Analyst; Roxana Hartsock, 

Auditor, Kevin Nietmann, Senior Technical Advisor, and Meredith 

Johnson, Student Analyst.
Audit of NRC’s Construction Reactor Oversight Process

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 AGENCY FORMAL COMMENTS

Appendix B
Audit of NRC’s Construction Reactor Oversight Process

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Audit of NRC’s Construction Reactor Oversight Process

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Audit of NRC’s Construction Reactor Oversight Process

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 TO REPORT FRAUD, WASTE, OR ABUSE

 COMMENTS AND SUGGESTIONS

Please Contact:

Email: Online Form

Telephone: 1-800-233-3497

TDD 1-800-270-2787

Address: U.S. Nuclear Regulatory Commission

Office of the Inspector General

Hotline Program

Mail Stop O5-E13

11555 Rockville Pike

Rockville, MD 20852

If you wish to provide comments on this report, please email OIG using this link.

In addition, if you have suggestions for future OIG audits, please provide them using 

this link.