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GAO report (RED-75–361), April 4, 1975: Comments on ERDA's pro

posed arrangement for the Clinch River breeder reactor demonstration Page plant project-

73 Letter dated April 7, 1976: G. F. Murphy to Dr. Seamans, requesting comments by ERDA on GAO report-

91 Letter dated April 17, 1975: R. D. Thorne, ERDA to G. F. Murphy, Jr., JCAE, responding to Joint Committee request for ERDA comments on GAO report B164105_

93 Enclosure : Suggested changes (ERDA) to amended criteria

99 Letter dated January 16, 1976: Administrator Seamans to Chairman

Pastore (with enclosures) regarding agreement reached with TVA, CE, and PUC on CRBR contract modification..

100 Enclosure 1. Modification No. 1 to AT (49–18)-12_

101 Enclosure 2. Analysis/comparison of changes.

217 Enclosure 3. Contract No. AT (49–18)-14 between AEC and BRC.- 237 Enclosure 4. Contract No. AT (49–18)-12 among AEC, TVA, Common· wealth Edison Co., and Project Management Corp---

249 Enclosure 5. Revised Program Justification Data Arrangement No. 72-106 (February 1975).

353 Letter dated Feb. 2, 1976: R. W. Roberts, ERDA, to Chairman Pastore, JCAE

366 Letter dated Feb. 4, 1976: R. W. Roberts, ERDA, to Chairman Pastore, JCAE

369 GAO letter report dated March 26, 1976, to Representative John E. Moss

responding to request of February 5, 1976 by Representative Moss' request for GAO review of proposed modification contract.

370 Letter dated March 31, 1976: R. W. Roberts, ERDA, to Comptroller

General Staats reviewing GAO report requested by Representative
Moss

379 Letter dated April 23, 1976: Rep. Lawrence ('oughlin to G, F. Murphy, Jr., elaborating on testimony--

394 Additional comment by JCAE relative to added testimony by Representative Coughlin.

395 Modification No. 1 to Contract No. AT (49–18)-14_

403 Modification No. 1 to Contract 49–18-12–1.

417 Pertinent Contract Provisions Regarding ERDA Control

462 Letter dated April 14, 1976 : Senator John Tunney to Representative Moss forwarding four questions for presentation during the hearing--

503 ERDA responses to Senator Tunney questions.--

511 Appendix : Letter dated June 11, 1975: J. C. Greer, Controller, ERDA, to Chairman Pastore, with budget information -

523

MODIFICATIONS IN THE PROPOSED ARRANGEMENTS

FOR THE CLINCH RIVER BREEDER REACTOR DEMONSTRATION PROJECT

WEDNESDAY, APRIL 14, 1976

CONGRESS OF TUE UNITED STATES,
Joint COMMITTEE ON ATOMIC ENERGY,

Washington, D.C. The Joint Committee met at 10:30 a.m., pursuant to notice, in room S-407, the Capitol, Senator Joseph M. Montoya presiding.

Present: Senators Montoya and Baker; Representatives Young, McCormack, Moss, and Anderson.

Also present: George F. Murphy, Jr., executive director; James B. Graham, assistant director; William C. Parler, committee counsel; James K. Asselstine, assistant counsel; Norman P. Klug and Stephen J. Lanes, technical consultants, and Michael R. Keppel, ĠAO consultant.

OPENING STATEMENT BY SENATOR MONTOYA

Senator MONTOYA. The hearing is called to order.

Today the Joint Committee meets to consider certain matters which relate to modifications in the proposed arrangements for the Clinch River breeder reactor demonstration project.

This is a project which was authorized in 1970 by section 106 of Public Law 01–273 and for which substantial additional governmental funds were authorized and appropriated last year by both Houses of Congress. The argument in justification for this project is that it is an important element in this Nation's overall program to solve its long-term energy needs, and, accordingly, it has been supported by both the administration and the Congress as a high-priority project.

The Joint Committee has considered the Clinch River project on numerous occasions.

Last year, on March 10, 1975, the Administrator of ERDA sent to the Congress a legislative proposal which would amend the authorization for the project."

This proposed amendment was made, in part, to reflect the fact that the estimated cost of the project had escalated to $1.736 billion in 1975, but the funds to be supplied by the utility participants (about $250 million) had not increased. This resulted in a situation where the utilities' financial contributions were not of such magnitude as to continue to justify the management role which the utilities have under the existing contractual arrangements. Even aside from the increasea cost to be borne by the Government, the existing triumvirate arrangement for managing the project appeared to be overly complex and cumbersome.

1 See page 58.

An essential objective of the authorizing legislation for fiscal year 1976 was to adjust this situation by permitting ERDA to control the project through a combined Government-employee-utility-employee management team. The discussion of the Clinch River project during the consideration of the fiscal year 1976 authoriziną legislation focused primarily on whether the project should be funded at all or, in any event, if it should be funded with substantial reductions.

No question was raised during the discussion of the bill concerning the proposed arrangements for the management of the project. The relevant background material is printed in part 4 of the hearing record for ERDA's fiscal year 1976 authorization.

On March 11, 1975, the committee received testimony from ERDA on the overall LMFBR program as well as on the proposed changes in the Clinch River arrangement.

On March 14, 1975, the chairman of the committee asked the General Accounting Office to review and report on ERDA's proposed arrangements for the project. This report was received on April 4, 1975.

The ad hoc Subcommittee on the Breeder Reactor Program which had been established by the Joint Committee on March 19, 1975, to review the national breeder reactor program discussed at several of its public hearing sessions, particularly on May 6 and on June 24, 1975, the role of the private participants in the project.

On June 20, 1975, the House approved the ERDA fiscal year 1976 authorization bill in which most of the debate in the nuclear area centered around the overall LMFBR program and the Clinch River project.

On July 31, 1975, the Senate anproved the ERDA authorization bill, and, as in the House most of the debate related to the breeder reactor matter.

Finally, on December 31, 1975, the President simned the ERDA authorization bill, Public Law 9+-187, which included the congressionally approved amendments to the prior Clinch River authorization.

Public Law 94-187 authorizes continuation of the project even though it was recognized that the project's estimated cost had increased from $669 million to $1.736 billion and that all of the increase would be sunplied by the Government.

The amendment to the authorizing legislation in Public Law 9+-187 provides that the justification data-specific provisions describing the new project management arrangement—which were submitted to the committee on March 10, 1975, must lie before the committee for a 45day review period after the authorization bill is enacted, which occurred on December 31, 1975. That period expired on March 13, 1976.

The authorizing legislation also requires that the criteria for the project be anproved by the Joint Committee. These criteria define the fundamental obiectives of the project and the basic approach for achieving them. Vo time limitation applies to the committee's approval of the criteria. It is the criteria which have been revised to recognize the use of the integrated management team.

1 See page 73.

1

There is no provision in the authorizing legislation, and there has never been, which provides that the contracts among the parties must be reviewed and approved by the committee.

Subsequent to the enactment of Public Law 94–187, the committee, on January 21, 1976, received testimony from Dr. Seamans on ERDA's fiscal year 1977 authorization request, and the Clinch River proposal was again discussed.

On February 4, 1976, the committee received additional testimony from Dr. Richard Roberts, ERDA's Assistant Administrator for Nuclear Energy, on their fiscal year 1977 request and again the proposed changes to the Clinch River arrangement were discussed.

Congressman Moss, on February 10, 1976, asked that the committee's approval of the criteria be delayed pending the receipt of a GAO report which he had requested. In view of that request, no notification has been sent to ERDA regarding committee approval of the criteria.

The requested General Accounting Office report ' has now been completed. The GAO recommended that the proposed modified contract :

(1) More clearly state the extent of the private participants' role in managing the project;

(2) Eliminate options permitting contract termination because of project delays; and

(3) Include a provision penalizing private participants if they are involved in conflict of interest, bribery, and/or graft in relation to the project.

Subsequent to the receipt of this report, the chairman received correspondence from Representative Moss stating that he is seriously troubled by what appears to him to be major deficiencies in the new project agreement. He recommended that the committee schedule a hearing to consider the troublesome features in the proposed amendments to the contract.

The committee met in executive session on April 6, 1976, and decided to schedule this hearing.

We are pleased to have Dr. Seamans here today, as well as Mr. Paul Dembling, General Counsel of the General Accounting Office. Before we hear from them, Congressman Moss is here and he has the privilege of opening this hearing if he so wishes with his statement or whatever he wants to add at this time.

Do you have anything to say at this time, Congressman Moss?

Representative Moss. Mr. Chairman, for purposes of clarification, precisely what is the role of the Joint Committee in the proposed contract revisions? Does it require the concurrence or can the ERDA execute the contract without the concurrence of the committee? There was a portion of your statement that would indicate that the latter case is correct.

Senator Montoya. The staff informs me that we have to have the approval of the criteria by the committee.

Representative Moss. That means the approval of the amended contract?

Senator MONTOYA. Whatever amended criteria is provided in the law or in the agreement, itself.

Representative Moss. The agreement before us would require affirmative action by the committee approving?

1 See p. 370 for GAO report of Mar. 26, 1976 (B-164105).

Senator Montoya. Would staff address that question, please?

Mr. MURPHY. It is my understanding, Mr. Moss—and if you need it, Mr. Parler can elaborate more—the committee does not need to approve specifically the contract but does, as the chairman indicated, need to approve the criteria.

Representative Moss. What is the relevance of the criteria to the contract if it is not considered inherently a part of the contract? The contract governs?

Mr. MURPHY. With the chairman's approval, I will ask Mr. Parler to respond to that.

Mr. PARLER. Mr. Moss, as far as the authorizing legislation is concerned, only two things have to be approved by the committee. The criteria and the justification data. Now, in reviewing those documents I suppose if the committee's review leads them to the contract provisions certainly the committee would have the right to look at the contract provisions. But the fact is, sir, as far as the authorizing legislation, itself, is concerned, as it is written it does not provide specifically for the review of the contractual documents.

Representative Moss. I still believe that we must define the relationship between the criteria and the contract. It is either relevant or it is irrelevant. If it is relevant what is the nature of the relevance of the criteria to the contract? In other words, if we play no part in the contract, then there is no need for a hearing.

If we have a role of substance in the contract, then I think the hearings are appropriate because it is the proposed revisions in the contract which cause me my concern. I don't know what criteria we are talking about other than contract criteria.

Mr. PARLER. This proiect was first authorized in 1970. A requirement in the authorizing legislation was that the arrangement be in accord with statutory criteria approved by the committee. Those statutory criteria were submitted to the committee in May 1969, and were approved by the committee before the project was initiated. The criteria outlined in very broad terms the objectives of the project and how the cooperative objectives of the project are to be achieved.

The justification data also require committeee approval, or at least have to lay before the committee for a 45-day period; these give additional details for the arrangements, such as the important details for the purposes of fleshing out the criteria.

Now, it is obvious, at least to me, that what is in the criteria as well as what is in the justification data relate to the contracts because if the contracts do not reflect that which the committee has to approve there would be no purpose in having the committee approve the criteria or the justification data. So there is that connection, at least in

a

my mind.

Representative Moss. If there is a conflict between the contract provisions and the criteria, which controls ?

Mr. PARLER. The criteria and the justification data which the committee approved.

Representative Moss. In other words, at all times that becomes the dominant factor in interpreting any contract? It must be consistent at all times with the criteria ?

Mr. PARLER. That is my opinion, Mr. Moss; yes, sir.

Senator Montoya. If the Congressman will yield to me. I think it would be appropriate to put this matter in proper perspective.

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