Mr. DEMBLING. If I may, Mr. Chairman, there needs to be the rest of that provision mentioned and that is that if the troika does not render a unanimous resolution to the question that has been raised either by the ERDA member of the steering committee or one of the members of PMC, then the ERDA administrator has the sole authority to render a decision consistent with the terms of the contract. Representative Moss. Could we examine that for a moment?

Senator MONTOYA. I want to put this matter in proper perspective. Now, you insert in the record at this point and then tell us about the specific provision in the existing contract which delineates and spells out the specific authority and on whom it rests and what the extent of that authority is and then proceed from that base to tell us what the modification does to that particular authority. Could you do that? Mr. DEMBLING. Yes, sir. I will be happy to. Senator MONTOYA. Can you do that now? Mr. DEMBLING. Section 2.3.5 states that

After the PMC Board has announced its position on any matter relating to the project, including any matter referred to by the BRC, the ERDA member of PSC or any member of the Board may, by giving notice within 48 hours, reserve the right to refer the matter to the head of ERDA, CE, and TVA within a reasonable time-by "head" is meant the Administrator in the case of ERDA, Chairman or President in the case of CE and Chairman or designated Director in the case of TVA-for their unanimous resolution of the matter. The heads shall attempt to resolve the matter within 30 days of the time of referral to them. Upon unanimous resolution of the matter by the heads within the 30-day period the parties shall be advised of the decision of the heads, which decision shall be binding upon the parties and shall be implemented by appropriate action. In the event the heads are unable to reach a unanimous resolution of the matter within a 30-day period the Administrator of ERDA shall decide the matter consistent with the principal project objective and the contractual rights and obligations of the parties under this contract and the other principal project agreements. The Administrator's decision shall control and ERDA shall have the right to implement such decision by appropriate action. No such decision shall affect the right of any party to proceed under paragraph 11.0— And that paragraph deals with termination.

Senator MONTOYA. Now, read me the modified provision. Mr. DEMBLING. That is the modified provision that I read. Senator MONTOYA. Read me the provision in the existing contract. Mr. DEMBLING. It is identical with the exception that at the beginning of that which I read to you it states "After the Board has announced its action or resolution of any matter, including actions with respect to general policy for the project, the AEC member of PSC or any member of the Board may, by giving notice within 48 hours, reserve the right," and the rest is identical.

Senator MONTOYA. What significant difference do you find between the two provisions?

Mr. DEMBLING. In the existing contract PMC has the authority to take action. You must realize that the existing contract deals with the PMC as running the project, so that provision was consistent with the overall tenor of the contract where PMC ran the project. The modified contract speaks of the PMC Board announcing its position. In other words, it can take a position on any matter which is being dealt with.

Senator MONTOYA. Does ERDA have the authority under the modified provision to superimpose its judgment consistent with the objectives of the project?

Mr. DEMBLING. It can ignore the position that PMC has announced by taking no action. In other words, the ERDA member of the steering committee need not bring the matter to the troika but he is authorized and may do so, or any member of the Board may do so. So that there is no requirement that this be brought to the attention of the three members.

Senator MONTOYA. What authority does the Administrator of ERDA have in making any decisions which might be contrary to the recommendations by the Board?

Mr. DEMBLING. The Board could make a recommendation in announcing its position but he has the final authority. If there is no unanimous resolution by the three heads, then he [the ERDA Administrator] makes the final determination with regard to the matter. Representative Moss. Mr. Chairman.

Senator MONTOYA. Does work go on pending the decision?

Mr. DEMBLING. In accordance with the contract, work does proceed. Senator MONTOYA. Mr. Moss.

Representative Moss. I think on that, work does proceed under whose decision and under what policy? You have had an announcement-I don't know what the announcement is but assume we have had an announcement and there is conflict. During the period of the conflict whose policy prevails?

Mr. DEMBLING. I would assume that since there had been no change, whatever ERDA's decision was prior to the announcement would continue. Section 2.3.5 in the last paragraph states "No action or inaction on the part of any party hereto necessitated by or resulting from a referral under this paragraph 2.3.5 shall be regarded as a breach of this contract or any other principal project agreement. While the matter in question is being considered according to the referral mechanism provided in this paragraph, ERDA may proceed with the project." Representative Moss. Let us go now to the referral procedure. How long a time can that take?

Mr. DEMBLING. If the ERDA member of PMC or any member of the Board wants to refer a matter he has to give notice within 48 hours. Then after the referral the heads shall attempt to resolve the matter within 30 days of the time of referral to them.

Senator MONTOYA. Would the Congressman yield at this point? Representative Moss. Yes.

Senator MONTOYA. What happens under the existing contract if the three parties cannot agree?

Mr. DEMBLING. I will read from that section:

In the event the heads are unable to reach a unanimous resolution of the matter within a 30-day period, matters of the following type as determined by the Commission as a body shall be referred to the Commission as a body for binding resolution in the manner and under the conditions provided in paragraph 2.3.

Then it lists two conditions under which that would happen. So that in the present contract the Administrator of ERDA does not have final authority.

Representative Moss. Mr. Chairman, following up on that point. the authority here is if it is consistent with the principal project objectives and the contractual rights and obligations to the parties under the contract and other principal project agreements. That would in

the event of a continuing disagreement be a matter for adjudication. by the courts rather than action by the Commission. Is that correct? Mr. DEMBLING. Yes, sir.

Representative Moss. I point out again, Mr. Chairman, that this is an invitation to considerable litigation.

I might point out that the delay in this instance, that was the avenue open, could have a serious effect upon the rights under section 11 of the contract and might lead to termination.

Senator MONTOYA. Let me ask you this question: Is this a correct statement of the situation? Neither the project steering committee nor PMC will have any direct authority in management of the project? Any member of the PMC Board can, as before, appeal a decision of the ERDA project director to the heads of ERDA, CE, and TVA. However, the project director's decision will stand until ultimate resolution by the Administrator, and ERDA will continue the work during the appeal. Is that a fair statement?

Mr. DEMBLING. That is a correct statement.

Senator MONTOYA. You may proceed, sir.

Mr. DEMBLING. Project Termination may result from design changes to meet licensing requirements:

The proposed modified contract provides that the four contracting parties and the Breeder Reactor Corp. may terminate the project if ERDA fails to obtain any necessary governmental permit, license, authorization or approval for constructing or operating the plant within 6 months of the approved schedule for these actions, and any of these seriously delays or hinders the project. That is a condition on the provision.

Although ERDA can initiate changes in the project schedule to allow for delays, if the project is delayed and the participating parties do not agree to a change in the schedule. the project may be terminated.

There are strong indications that the utility participants are opposed to including a core catcher in the Clinch River breeder reactor design. If the Nuclear Regulatory Commission rules that a core catcher must be added to the design it seems likely that the project will be delayed more than 6 months beyond ERDA's approved schedule. The participating parties would then be free to initiate termination proceedings.

We are concerned that although licensability is a prime objective of the proposed modified contract a change in the reference design required for NRC licensing-while no longer a specific criterion for termination-may seriously delay the project, thus permitting its termination.

In view of licensability as a principal project objective we question whether the industrial participants should be allowed to terminate after a delay of only 6 months caused by required changes in design to meet license criteria.

The committee may wish to explore the position of the industrial participants concerning termination of the project in the event the Nuclear Regulatory Commission requires inclusion of a core catcher in the design of the Clinch River breeder reactor.

PROJECT MANAGEMENT ARRANGEMENT

The proposed contract assigns ERDA the responsibility for managing and carrying out the Clinch River breeder reactor project "through an integrated project management organization."

Of the 19 top positions in the integrated project management organization, 8 will be occupied by employees of the private participants subject to ERDA's approval. Approximately 70 of an estimated 200 persons in the project organization are to be ERDA personnel, the remaining 130 to be PMC or utility employees.

In light of the obvious interrelationships between ERDA and nonGovernment personnel which will exist, we believe that close attention will be required as to the administrative arrangements, procedures, and policies governing all personnel engaged in the project.

Basically, the proposed contract terms placing in ERDA the authority to approve and remove all private participant employees provides sufficient control in ERDA to take whatever steps are necessary to assure that proper relationships are maintained. Cause for concern does not lie in the provisions of the proposed modified contract but rather in the extent to which ERDA will appreciate the need for close control over the situation.

For example, private participant employees would not be subject, as are Federal employees, to the provisions of title 18 of the United States Code relating to bribery, graft, and conflict of interest. It will therefore be necessary for ERDA to establish appropriate criteria governing the approval and retention on the project of private participant employees.

Also, in light of the mixture of Government and private employees to be working on the project it will be necessary for ERDA to establish precise administrative controls over the manner in which such employees relate to each other.

In concluding. I would like to make clear that the concerns expressed relate only to certain features of the proposed contract for the Clinch River breeder reactor project.

The General Accounting Office position presently is that the United States should not abandon the research and development program for the liquid metal fast breeder reactor of which the Clinch River breeder reactor is an integral part.

Mr. Chairman, this concludes my prepared statement and I will be glad to respond to any questions you or the other members of the committee may have.

Representative ANDERSON. You have indicated, Mr. Dembling, some concern about the termination clause in the contract. Frankly, that gives me some difficulty, too, because of what seems to be an inordinately short period of time should there be a change in design brought about in order to obtain licensability of the plant.

The 6 months delay would then entitle the private participants to terminate. Do you have any positive suggestions for this committee as to what might be a more reasonable period? Obviously they should not be bound to an inordinate period of delay if changes are brought about in design but, on the other hand, 6 months is, I think, as you have pointed out, a short period of time. What would be more reasonable?

Mr. DEMBLING. I am not an expert. It is 6 months after the schedule that ERDA has provided. So it is not 6 months after the announcement of any particular item. It is 6 months slippage in the schedule as we read it. We were concerned with the 6 months' provision and primarily because of one large item, the core catcher. If it were necessary to include, it would probably take longer than 6 months after the schedule as it presently exists. We felt that rather than try to reopen and try to renegotiate the entire contract, that some provision be made by the committee by soliciting the views of the industrial participants. In my prepared statement I have made that suggestion, if that is a matter of concern.

Senator MONTOYA. Specifically what is GAO's position on the acceptability of the proposed amendments to the contract? Do they protect the interests of the Government?

Mr. DEMBLING. I think we had some concern with the way they might be interpreted. We had some concern with the language. We recognized that any contract of this kind or any contract has compromising lanaguage. If one had to do it oneself one might use different language. But considering the entire modification that has been agreed to, we feel that in the circumstances that the contract is acceptable.

Senator MONTOYA. Are there any further questions?

Representative Moss. Mr. Chairman, I have just been handed a letter from Senator Tunney. He asks that I raise four questions.

The statutory criteria which this committee adopted states that these contracts should include definitive arrangements for the construction and operation of the CRBR. As I understand it, it is ERDA's intention that TVA will carry on the operation of the CRBR. Administrator Seamans recent letter to Chairman Anders states that the contract with TVA is yet to be negotiated. Does this mean that definitive arrangements for the operation of the reactor have not been arranged?

Mr. DEMBLING. GAO has not looked into that matter.

Representative Moss. I will address the question then to Dr. Seamans when he is before the committee.

Senator MONTOYA. Do you have any other questions?

Senator BAKER. Mr. Chairman, could I ask what your intentions are about the hearing?

Senator MONTOYA. We are trying to finish the hearing. We only have two more witnesses. I don't want to ask them to come back this afternoon unless the committee thinks otherwise.

Representative MCCORMACK. Let us finish it up this morning. Senator MONTOYA. If there are no further questions of this witness we will call on the next one.

Thank you very much.

Mr. DEMBLING. Thank you, Mr. Chairman.

Representative MCCORMACK. Could we ask Mr. Dembling to stay around for a while?

Senator MONTOYA. Would you mind staying here until we finish with Dr. Seamans and the other witness?

Senator MONTOYA. Dr. Seamans, you have a statement. Do you mind if we include it in the record at this point and then you can proceed to summarize it, or would you prefer to read it?