POLICY ISSUE 

(Information)

December 14, 2009 SECY-09-0182

FOR: The Commissioners 

FROM: Michael R. Johnson, Director 

Office of New Reactors 

SUBJECT: LEGAL CONSTRAINTS OF RELYING ON VENDOR INSPECTION 

RESULTS OF FOREIGN REGULATORS AND THE NEED FOR 

ADDITIONAL RESOURCES TO ACHIEVE THE APPROPRIATE 

NUMBER OF NRC VENDOR INSPECTIONS 

PURPOSE: 

The purpose of this paper is to inform the Commission of the legal constraints of relying on the 

vendor inspection results of foreign regulators, and the need for additional resources to achieve 

the appropriate number of vendor inspections. This paper is in response to staff requirements 

memorandum (SRM) M090603, “Briefing on New Reactors – Component Fabrication and 

Oversight,” dated June 12, 2009. 

SUMMARY: 

This paper describes the U.S. Nuclear Regulatory Commission (NRC) staff’s interactions with 

foreign regulators through the Multinational Design Evaluation Program, specifically, in the 

Vendor Inspection Cooperation Working Group (VICWG) and the legal constraints of relying on 

the vendor inspection results of foreign regulators. The staff has not identified any legal 

constraints on leveraging foreign authority vendor inspections results and gaining insights from 

them to help inform the prioritization of the Office of New Reactors (NRO) vendor inspection 

resources. As long as the NRC retains the ultimate authority to decide whether any particular 

combined license (COL) holder or licensee satisfies NRC requirements, NRO may choose to 

gain insights from a foreign regulator’s vendor inspection results. Should the staff identify any 

other purpose for which the staff proposes to rely on foreign authority inspection results, the 

NRO staff will inform the Commission of the bases for the proposed reliance. 

CONTACTS: Aida Rivera-Varona, NRO/DCIP 

 (301) 415-4001 

Robert Weisman, OGC/GCHEA/AGCNRP 

(301) 415-1696 
The Commissioners - 2 - 

The NRO staff will continue to evaluate and explore additional areas in which the NRC can 

benefit from its interactions with the VICWG and will continue to keep the Commission informed, 

as appropriate, with respect to the outcomes resulting from VICWG activities. 

Additionally, this paper informs the Commission of the further expansion of NRO’s vendor 

inspection program (VIP), based on the potential increase of activities within the nuclear 

industry associated with the construction of new plants and the expected increases in the 

number of suppliers and allegations received. As such, NRO intends to increase vendor 

inspections from the current 10 inspections per year to 20–25 inspections per year by 2013 and 

2014. 

BACKGROUND: 

In SECY-07-0105, “Enhancement to the Vendor Inspection Program within the Office of New 

Reactors” dated June 27, 2007, the NRC staff from the Division of Construction Inspection and 

Operational Programs in NRO described the VIP and the planned enhancements to that 

program as a result of an expected increase in activities within the nuclear industry associated 

with new plant design and construction. On June 3, 2009, the NRC staff, an industry panel, and 

a peer regulator, briefed the Commission on the fabrication and oversight of new reactor 

components. 

During this briefing, the staff provided an overview of the implementation of the enhanced new 

reactor VIP and discussed vendor oversight, lessons learned, and global regulatory cooperation 

in vendor oversight. 

Following the briefing, the Commission directed the staff in SRM M090603 to continue to seek 

insights from other industries’ and countries’ efforts to ensure quality and regulate fabricated 

components and to inform them of the legal constraints of relying on vendor inspection results of 

foreign regulators. The SRM also directed the staff to inform the Commission of the need for 

any additional resources to achieve the appropriate number of vendor inspections. 

DISCUSSION: 

The NRC staff performs routine vendor inspections on a sampling basis to examine whether 

vendors of safety-related components or services have complied with the requirements of 

Appendix B, “Quality Assurance Criteria for Nuclear Power Plants and Fuel Reprocessing 

Plants,” to Title 10 of the Code of Federal Regulations (10 CFR) Part 50, “Domestic Licensing of 

Production and Utilization Facilities” (hereafter referred to as Appendix B), and 10 CFR Part 21, 

“Reporting of Defects and Noncompliance,” as required under vendor procurement contracts 

with applicants or licensees. The NRO staff, based on the effort described in SECY-07-0105, 

issued Inspection Manual Chapter (IMC) 2507, “Construction Inspection Program: Vendor 

Inspection Program,” dated October 3, 2007, to describe the new reactor VIP and the 

associated inspection procedures that govern staff inspection of contractors and suppliers of 

safety-related components or services to the commercial nuclear industry. 

 

Under Criterion VII, “Control of Purchased Material, Equipment, and Services,” of Appendix B, 

applicants and licensees are required to establish measures to ensure that purchased material, 

equipment, and services, conform to procurement documents. While the ultimate responsibility 

for the quality of procured components and services resides with the applicants and licensees, 
The Commissioners - 3 - 

the NRC performs vendor inspections 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. In addition, under 10 CFR Part 52, “Licenses, 

Certifications, and Approvals for Nuclear Power Plants,” combined license (COL) holders are 

responsible for demonstrating that they have met the inspections, tests, analyses, and 

acceptance criteria (ITAAC) before plant operation. The NRO staff, through a sampling 

inspection basis, verifies the adequacy of the COL holder’s conclusions that the acceptance 

criteria in ITAAC are met. The quality of procured components and services will be an integral 

part of the basis for a COL holder’s determination that the ITAAC are met. As such, NRO’s 

vendor inspections and its knowledge of vendor performance, when combined with the 

submitted ITAAC closure letters and with insights from other inspection and review activities, will 

provide the basis for the NRC to make a determination on whether the COL holder has 

performed and successfully completed the ITAAC. 

Leveraging the Results of Foreign Vendor Inspections

Since the last large-scale construction of domestic nuclear power plants, new reactor 

construction has shifted from a mostly domestic market to a broader international market for the 

design, engineering, procurement and fabrication of items and services. This shift from the 

domestic to the international market has resulted in an increase in the number of nuclear 

component suppliers that are based overseas. 

The NRO staff participates in the VICWG of the Multinational Design Evaluation Program. 

Some of the goals of the VICWG are to identify areas of commonality and differences between 

vendor inspection practices of member countries and to establish a multi-national regulatory 

framework in vendor oversight that provides all participants access to vendor inspection 

information from peer regulators. Through the use of best practices and information sharing, 

the NRO staff expects to improve the efficiency and effectiveness of the vendor inspection 

program. For example, the NRO staff has implemented a best practice by enhancing its use of 

technical experts to supplement the programmatic reviews conducted during vendor 

inspections. 

Currently, 10 countries participate in the VICWG: Canada, China, France, Finland, Japan, the 

Russian Federation, South Korea, South Africa, the United Kingdom, and the United 

States (U.S.). The VICWG has made significant progress in improving the understanding of the 

practices and regulatory framework under which vendor oversight is conducted worldwide. The 

member countries have begun to exchange information, including a list of scheduled vendor 

inspections and samples of recent inspection reports. In addition, the VICWG conducted an 

assessment of the different national quality assurance regulatory requirements and is currently 

assessing the differences in oversight practices to build a common understanding of the 

regulatory framework of each country. 

The NRO staff has also undertaken significant bilateral and, through the VICWG, multilateral 

efforts that have resulted in an unprecedented level of international cooperation and the sharing 

of knowledge on vendor inspections. For example, the NRO staff conducted a vendor 

inspection of a South Korean-based vendor in parallel with the Korean Institute of Nuclear 

Safety—the South Korean regulatory authority. This was the first time the NRC conducted an 

inspection in parallel with a foreign regulator. The NRO staff has also participated as observers 
The Commissioners - 4 - 

for several vendor inspections conducted by South Korea and France; regulatory authorities 

from South Korea, France, Japan, Finland, and Canada have also observed NRC vendor 

inspections. 

The NRO staff will continue to participate in the VICWG to explore additional areas in which the 

NRC can benefit from these interactions. Early interactions have revealed that there are many 

similarities in regulatory framework and vendor inspection practices. Currently, the NRO staff is 

gaining insights from inspections performed by peer regulators to help inform the prioritization of 

NRO staff vendor inspection resources. These insights are another input into the selection 

process for NRO vendor inspections along with other items, including but not limited to the 

safety significance of the component or service, operational and construction experience 

(domestic and foreign), construction inspection program insights, and licensee and applicant 

procurement plans. Further, NRO staff participation in inspections led by foreign regulatory 

authorities could also provide additional insights relative to the effectiveness of licensee (both 

foreign and domestic) oversight of these vendors. 

However, some aspects of international cooperation in this area still remain a challenge. For 

instance, the regulations, laws, and design codes used for the fabrication of components vary 

from country to country. As the VICWG continues to make progress in this area, the NRO staff 

expects to be able to expand its understanding through its participation in foreign-led 

inspections. 

The Office of the General Council (OGC) and the NRO staff have not identified any legal 

constraints on leveraging foreign authority inspection results and gaining insight from them to 

help inform the prioritization of NRO vendor inspection resources, as described above. This 

practice is acceptable because the foreign authority inspection results are merely one source of 

information, and the NRC retains the ultimate authority to decide whether any particular vendor 

satisfies NRC requirements. 

The NRC may choose to rely on a foreign regulator’s inspection results for purposes other than 

setting priorities for inspection resources, provided it has an adequate basis to do so. At this 

time, the staff has not identified any such other purpose. Should the staff identify any such 

purpose for relying on foreign authority inspection results, the staff will inform the Commission of 

the bases for the proposed reliance, which could include, among other things, consideration of 

the comparability of foreign standards to U.S. standards or the nature and extent of the foreign 

regulator inspections. 

Future Vendor Inspection Program Growth

As a result of the development of the enhanced vendor inspection program in 2007, and within 

the framework of IMC 2507, the NRO staff currently conducts a minimum of 10 routine and 

reactive vendor inspections per year. The staff performs routine vendor inspections to verify 

effective implementation of a supplier’s quality assurance program used to furnish safety-related 

components or services to the nuclear industry in compliance with Appendix B. The staff also 

performs focused, reactive inspections of nuclear component suppliers, when needed, to 

support technical staff review of design certification or COL applications or to address 

operational events or allegations. However, the NRO staff believes that further expansion of the 

oversight of nuclear component suppliers is appropriate, based on the potential increase of 

activities within the nuclear industry associated with the construction of new plants. 
The Commissioners - 5 - 

Construction commenced in 2009 with the issuance of a Limited Work Authorization (LWA) for 

Vogtle Unit 3, and construction activities are expected to increase beginning in 2011 if the 

Commission grants any of the COL applications now under review. 

For the last 2 years, NRO vendor inspection activities have primarily focused on performing 

routine vendor inspections of suppliers of long-lead components as applicants procure heavy 

components in preparation to start construction. The staff has been performing inspections to 

ensure that suppliers are providing items and services of a quality commensurate with their 

importance to safety in a manner consistent with applicable regulatory requirements. 

As anticipated, only a few facilities worldwide have the infrastructure and capability to support 

the manufacturing of heavy components. With the current resources, NRO has been able to 

perform at least one vendor inspection at most of these vendors’ facilities. The NRO staff has 

also performed some inspection activities at other key suppliers that support construction 

activities. For example, the NRO staff has conducted inspections at engineering, procurement 

and construction (EPC) contractors for some applicants. This type of supplier provides 

engineering services and translates the certified design and licensing-basis information into 

procurement, fabrication, and construction drawings. 

The NRO staff expects that, if construction commences, the number of nuclear component 

suppliers providing smaller safety-related components will increase in support of the 

construction activities. In addition to this challenge, the NRO staff anticipates that many of 

these suppliers will be new to the industry. 

Should construction begin, and to support the expected increases in the number of suppliers 

and a potential increase of allegations, NRO expects that an increase in the number of vendor 

inspections would be appropriate. There are currently hundreds of suppliers to the nuclear 

industry, and the appropriate number of inspections to be conducted annually will always be a 

matter of judgment. At this time, NRO is recommending an increase in the number of vendor 

inspections from the current number of 10–12 per year to approximately 20–25 per year by 

fiscal year (FY) 2013–2014. To accomplish the recommended number of inspections in a given 

year, NRO estimates that it will need a modest growth in resources. The acquisition of these 

additional resources in FY 2011 and FY 2012 will be necessary to support inspector training and 

development. Depending on the location of the vendor inspections, interpreter services may 

also be required. 

To meet the challenges of the increased NRO vendor inspections anticipated as a result of new 

reactor activities, the NRO staff, as mentioned above, has enhanced the new reactors VIP 

guidance, including inspection requirements and procedures, for all anticipated vendor 

inspection activities identified within the program, including reactive inspections to address 

allegations. Additionally, the NRO staff has developed and implemented a vendor inspector 

training qualification process to qualify staff as vendor inspectors. The successful 

implementation of the NRO VIP requires specific staff expertise related to design, engineering, 

procurement, and fabrication processes (e.g., welding, and non-destructive examination) and 

detailed knowledge of the related industry codes and standards. 
The Commissioners - 6 - 

RESOURCES: 

The NRO FY 2010 budget includes $250K (excluding travel) and 18.2 full-time equivalents 

(FTE) for an estimated 10 vendor inspections and other vendor related activities such as 

American Society of Mechanical Engineers codes and standards committee participation, 

oversight of the Nuclear Utilities Procurement Issues Committee joint utility audit process, and 

VICWG participation. The NRO FY 2011 budget plan requested $231K (excluding travel) and 

22 FTE to conduct approximately 15 inspections as well as to recruit and develop NRO 

inspection resources. NRO’s resources for FY 2012 have not been determined but will be 

requested through the FY 2012 Planning, Budgeting, and Performance Management process. 

These resources will be sufficient to continue to recruit and develop inspection resources in 

order for the new reactors VIP to support an estimated 20-25 vendor inspections per year in 

FY 2013 and FY 2014. 

COORDINATION: 

The Office of the General Counsel has reviewed this paper and has no legal objection. 

The Office of Chief Financial Officer has reviewed this paper and concurs. 

 /RA/ 

 Michael R. Johnson, Director 

 Office of New Reactors 
The Commissioners - 6 - 

RESOURCES: 

The NRO FY 2010 budget includes $250K (excluding travel) and 18.2 full-time equivalents 

(FTE) for an estimated 10 vendor inspections and other vendor related activities such as 

American Society of Mechanical Engineers codes and standards committee participation, 

oversight of the Nuclear Utilities Procurement Issues Committee joint utility audit process, and 

VICWG participation. The NRO FY 2011 budget plan requested $231K (excluding travel) and 

22 FTE to conduct approximately 15 inspections as well as to recruit and develop NRO 

inspection resources. NRO’s resources for FY 2012 have not been determined but will be 

requested through the FY 2012 Planning, Budgeting, and Performance Management process. 

These resources will be sufficient to continue to recruit and develop inspection resources in 

order for the new reactors VIP to support an estimated 20-25 vendor inspections per year in 

FY 2013 and FY 2014. 

COORDINATION: 

The Office of the General Counsel has reviewed this paper and has no legal objection. 

The Office of Chief Financial Officer has reviewed this paper and concurs. 

 

 /RA/

 Michael R. Johnson, Director 

 Office of New Reactors 

WITS 200900134 / EDATS: SECY-2009-0309 / M090603 

ADAMS ACCESSION NUMBER: ML093090461 SECY-012 

OFFICE NRO/DCIP/CQVB Tech Ed NRO/DCIP/CQVB:BC NRO/DCIP/CQVP:BC 

NAME ARivera-Varona via e-mail RRasmussen JPeralta 

DATE 11/09/2009 11/10/2009 11/23/2009 11/23/2009 

OFFICE OGC OCFO NRO/DCIP: D NRR/DE: D 

NAME RWeisman RMitchell (email) GTracy PHiland 

DATE 12/4/2009 11/24/2009 12/7/2009 12/11/2009 

OFFICE NRO/PMDA: D NRO 

NAME BGusack MJohnson 

DATE 12/10/2009 12/14/2009 

OFFICIAL RECORD COPY