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Benchmarking D&D Procurement Best Practicesat

Four Commercial Nuclear Power Plants

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● Trojan ● Maine Yankee R E(J e!

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WestinghouseSavannahRiverCo.

October, 1998

U.S. Department of Energy

Benchmarking and Strategic Purchasing Initiativesin partnership with

DOE/Contractor Purchasing Council

DISCLAIMER

This repoti was prepared as an account of work sponsoredbyanagency of the United States Government. Neither theUnited States Government nor any agency thereof, nor anyof their employees, make any warranty, express or implied,or assumes any legal liability or responsibility for theaccuracy, completeness, or usefulness of any information,apparatus, product, or process disclosed, or represents thatits use would not infringe privately owned rights. Referenceherein to any specific commercial product, process, orservice by trade name, trademark, manufacturer, orotherwise does not necessarily constitute or imply itsendorsement, recommendation, or favoring by the UnitedStates Government or any agency thereof. The views andopinions of authors expressed herein do not necessarilystate or reflect those of the United States Government orany agency thereof. . .

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Benchmarking

“The process of continuously comparing and measuring anorganization against business leaders anywhere in the world to gaininformation which will help the organization take action to improveperformance.”

American Productivity and Quality Center

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Preface:

The Department of Energy (DOE) has as two of its strategic objectives the world’s largestenvironmental clean-up of contaminated sites and the adoption of the best management practices ofthe private sector to achieve business-like results efficiently and effectively.

An integral part of the strategic response to the challenges facing the Department has been theuse of benchmarking and best practice management to facilitate identi&ng and implementingleading-edge thinking, practices, approaches, and solutions.

The DOE Federal/Contractor Purchasing Council, founded in 1995, is a unique Governrnent-Industry Partnership dedicated to identi~ing and facilitating common sense business solutions. TheFederal/Contractor Purchasing Council represents a fbndarnental redesign of the traditional “arrns-Iength” relationship between Federal agencies and their contractors, replacing it with a morecooperative relationship focusing on joint Governrnent-Indus@ ventures to remove non-valueadded activities, increase operational effectiveness, increase product and service quality, increasecustomer satisfaction, and reduce costs. The Council has undertaken a wide range of jointGovernment-contractor projects, which have resulted in cutting red tape, reducing costs, andimproving customer satisfaction.

. .

,...

Foreword:

This report summarizes the benchmarking and best practices related to D&D procurementactivities at four American commercial nuclear power plants.

The Department of Energy (DOE) OffIce of Procurement and Assistance Management, inpartnership with the DOE/Contractor Purchasing Council and five DOE Contractors (Kaiser-HillCo., LLC, Mason & Hanger Corp., Westinghouse Savannah River Co., kgonne NationalLaboratory and Parallax, Inc.) have teamed to produce this report. This benchmarking projectidentified several new procurement best practices and confirmed many current practices beingutilized by DOE and its Contractors.

We believe this report and the associated new D&D Procurement Best Practices homepagedescribed in Section 3.0 of this report will provide valuable itiormation with direct and immediateapplication to D&D projects in the DOE Complex.

Jim ArflinManager, Site SupportService Procurement\Vestinghouse Savannah River Site

Brian BidwellProcurement ManagerMason Hanger Corporation

J. CavanaghManager.Benchmarking and Strategic Purchasing InitiativesOffice of Procurement and Assistance \lanagementDeportment of Energy

Gary Baker, Ph.D.Vice PresidentParallax

For copies of this report, go to DOE Procurement Home Page at http://www.pr.doe. gov.

4

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Manager of Proc&ement ~Argonne National Laboratory

Norm %ndlinDirector of ContractsKaiser Hill Company

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Benchmarking information and preparation of this report were made possible through theconcerted efforts and cooperation of many individuals and companies. We would like to specificallyacknowledge the following:

Mr. James E. Hildebrand, Decommissioning DirectorOyster Creek Generating StationForked River, NJ

Mr. Michael E. Niehoff, General ManagerUtility EngineeringDenver, CO

Mr. Michael Lackey, General ManagerTrojan Nuclear Generating StationRainier, OR

Mr. Wayne Norton, Contracts ManagerMaine Yankee Generating StationWiscasset, ME

5

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Preface: 3

Foreword: 4

Acknowledgments: 5

List of Figures: 7

Definitions: 8

Executive Summary 9

1.0 Background 14

1.1 Business Case 14

1.2 Purpose /Objectives 15

1.3 Report Organization 16

2.0 Overview of D&D Procurement Practices at Four Commercial NucIear Power PIants 17

2.1 Genera! Information 172.1.1 Qvster Creek: 1721.2 Trojan: 172. I, 3 Fort St. Vrain: 182.1.4 Maine Yankee: 19

2.2 Lessons Learne&Best Practices 192.2.1 Project Acceleration Saves Big Money 192.2.2 Innovative Contracting Models Solve Old Problems, Save Money/Time 202.2.3Performance Based Incentives (PBI’s) work 232.2.4 Competitive Use of Prequallj7ed Vendors 232.2.5 Unproven technologies are ris~ and time consuming-Keep it simple 232.2.6 Finish Line Focus/Closure Culture 232.2.7 Property Disposition 242.2.8 Planning/Project Controls 242.2.9 Safety/Environmental CompliancelQualily Expectation 242.2.10 Manage or Eliminate Risks 24

3.0 D&D Procurement Best Practices Home Page 28

4.0 Conclusions 29

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List of Figures:

Figure 1. Oyster Creek Nuclear Generating Station 17

Figure 2. Trojan Nuclear Power Plant 17

Figure 3. Fort St. Vrain Nuclear Generating Station 18

Figure 4. Maine Yankee Nuclear Power Plant 19

Figure 5. Accelerated Project Benefit 20

Figure 6. Commercial Contracting Models 21

Figure 7. Commercial PBI Objectives 22

Figure8. Project Management Scaleable Methodology Guide 25

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Definitions:

Deactivation and

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Decommissioning (D&D):

Deactivation: The process of placing a facility in a stie and stable condition at the conclusion ofits operational life. Deactivation includes the removal of readily removable hazardous andradioactive materials to minimize the long-term surveillance and maintenance of the facilitywhile maintaining protection of worker and public health and stiety and the environment.Surveillance and maintenance are maintained at a level necessary to ensure ongoing safe andstable conditions of the deactivated facility.

Decommissioning: Those activities including surveillance and maintenance, decontamination,and/or dismantlement taken at the end of the life of a facility to retire it from service. Theultimate goal of decommissioning is unrestricted or restricted use of the site with proper regardfor the health and safety of workers, and the public, and protection of the environment. The endpoint of decommissioning consists of the disassembly or demolition and removal of anystructure, system, or component from a facility during decommissioning and the proper interimor long-term storage, or disposal of the residue from all dismantlement activities.

Decontamination: The removal of residual radioactive and hazardous materials by mechanical,chemical, or other techniques to achieve a stated objective or condition. Decontamination mayoccur during all phases of deactivation and decommissioning; however, the greatestdecontamination activity usually occurs during decommissioning.

Dismantlement: The end-point of decommissioning consists of theand removal” of any structure, systems or component fi-om adismantlement activities.

disassembly or demolitionfacility residue from all

Mortgage Reduction: Costs consisting of, but not. limited to, utilities, security, maintenance,surveillance, and inspections.

Surveillance and Maintenance: Cost effective periodic inspections and maintenance necessary formaintaining structures, systems, equipment and/or facilities in a safe and stable condition that isprotective of the worker and public, health and safety and the environment.

Niche Subcontractor: Subcontractor providing specialty services such as river bargetransportation.

8

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Executive Summary

“The dogmas of the quiet past are inadequate for the stormy present. The occasion is piledhigh with difficulty, and we must rise to the occasion. As our case is new, so must we thinkanew and act anew.” Abraham Lincoln

The Department of Energy is cormnitied not in the ways it did things in the past. Theto honoring the Government’s obligation to status quo was not an acceptable alternative.clean-up sites across the country thatsupported the Nation’s production of nuclearweapons, to dispose of spent nuclear fielfrom defense and civilian nuclear poweroperations, and to protect human health andthe environment.

Cleanup of the radioactive, chemical, andother hazardous waste left after 50 years ofU.S. production of nuclear weapons is thelargest environmental management programin the world, encompassing 353 projectsnationwide. Current life-cycle estimates forcleanup total $155 billion. Completion of thescope of work of the program will take morethan 50 years.

To reduce the monumental costs of thecleanup effort, DOE sites must seek, and find,significant opportunities to accelerate thescope of work of the cleanup. Therefore, wemust explore opportunities to increaseefficiency and thereby enhance petiorrnancethat will enable the clean-up program toachieve its cleanup mission more quickly andat a lower cost. The Department hasdeveloped extremely ambitious goals andtimetables, recognizing that significant costsaving and performance gains can be achievedthrough aggressive site cleanup and closure.In addition, this daunting challenge must beaccomplished during a time of significantbudget and resource restrictions.

It has become clear that to achieve thegoals that the Department has set for itself, itcould not pursue business as usual, i.e., itcould do what it did in the past, and certainly

Consistent with this mandate for imovatethinking, there was created a uniqueGovernment-Industry Partnership dedicated toidentifying and facilitating common sensebusiness solutions. In 1994, the DOEProcurement Executive and senior executivesfrom a wide range of DOE contractororganizations joined together to create theDOE Federal/Contractor Purchasing Council(CPC) to seek better ways of leveragingresources and knowledge.

One of the strategic tools employed bythis group has been seeking best practicesthrough benchmarking. Benchmarking can bedefined as:

“l%e process of continuously comparingand measuring an organization againstbusiness leaders anywhere in the world togain information, which will help theorganization, take action to improveperformance. ”

American Prodttctivity and Qua[ity Center

The CPC has sponsored, through itsconstituent members, numerousbenchmarking and best practice studies,including a study of “D&D” procurementactivities. For the purpose of the study, wehave defined D&D as:

“a. Deactivation.” The process of placing afacility in a safe and stable condition at theconclusion of its operational life.Deactivation includes the removal ofreadily removable hazardous andradioactive materials to minimize the long-

9

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term surveillance and maintenance of thefacility while maintaining protection ofworker and public health and safety andthe environment. Surveillance andmaintenance are maintained at a levelnecessary to ensure ongoing safe andstable conditions of the deactivatedfacility; and b. Decmnrnissimzing: Thoseactivities including surveillance andmaintenance, decontamination, and/ordismantlement taken at the end of the lifeof a facility to retire it from service. Theultimate goal of decommissioning isunrestricted or restricted use of the sitewith proper regard for the health andsafety of workers, and the public, andprotection of the environment. The endpoint of decommissioning consists of thedisassembly or demolition and removal ofany structure, system, or component floma facility during decommissioning and theproper interim or long-term storage, ordisposal of the residue from alldismantlement activities.”

The team involved in this study was fromKaiser-Hill, LLC, Mason & HangerCorporation, Westinghouse Savannah RiverCo., Argonne National Laboratory, Parallax,and DOE. The Team first had to understandin-depth the processes and performance ineach of their own organizations and at theirown sites. The next step was to identi~ thosebest-in-class organizations that excel atefficiently and effectively D&D operationsand management. The Team memberspartnered with these leading-edge pefiormersto understand why they are the best.

This report documents the team’s findingsand hopefully serves as a usefi,d tool forleaders and managers at all levels ofgovernment and contractor organizations inadapting those best practices and formulas forsuccess to governmental programs andoperations, so that federal agencies and

contractors can meet or exceed the best inD&D. This report focuses on benchmarkingof four American commercial nuclear powerplants (Oyster Creek, Trojan, Fort Saint Vrainand Maine Yankee) to identi~ bestprocurement practices being utiIized toperform D&D projects.

The Objective of this report is to sharewith the DOE complex the accomplishments,successes and lessons learned that provide themost cost-effective commercial approaches tosafe completion of D&D projects. Examplesof lessons learned and best practices identifiedand discussed in this report include thefollowing:

Project Acceleration Saves Big Money

Accelerating the decommissioningproject plan can save huge sums ofmoney through mortgage reduction,personnel cost reductions, . andperformance of the work under knownregulatory requirements at present daydollars.

Innovative Contracting Models SolveOld Problems, Save Money/Time

Using innovative contracting modelsranging from the owner as projectmanager over an integrated contractorteam, to an owner and managementcontractor as an integrated team overD&D contractor(s). Four commercialcontracting models are diagramed andexplained in detail in Section 2.2.2 of thisreport.

Performance Based Incentives (PBI’s)Work

Utilizing firm fixed price type contractsfor D&D activities by developingdefinitive and performance-based scopesof work.

Competitive Use of PrequalljiedVendors

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Utilizing “best value” techniques throughthe use of prequalified vendors knownfor their capabilities and performance.

Unproven technologies are risky andtime consuming - Keep it simple

Going with proven and knowntechnology in D&D activities andkeeping it simple. In addition, allowingcompetition and contract structure todrive innovation.

Finish Line Focus/Closure Culture

Creating a finish line focus and closureculture through contracting methods andperformance incentives.

Property Disposition

Using generally accepted commercialaccounting practices allows dispositiondecisions based upon the depreciated“real” value of property. In contrast, thegovernment “books” and maintainsproperty at acquisition value, potentiallyinflating and complicatingdecisions.

PlanningProject Controis

Involving all team members

disposition

early in theplanning stages of a project. D&D workshould be approached with a “project”mentality, requiring a different set ofmanagement skills than needed forroutine operations.

Safety/Environnlenta[ Comp[ianct#Qua[ity Expectation

Having strong and effective safety,environmental compliance and qualityperformance as an expectation in thepre-qualification process. This must bedemonstrated through past performanceand is an expectation throughout the

performance period of the project

● Manage or Eliminate Risks

Managing or eliminating risks throughidenti~ing, analyzing, and responding torisk through decision analysis andinnovative contracting methods. Inaddition, aligning procurement strategiesand technical initiatives throughintegration of procurement and technicalorganizations.

But will all this work in DOE........???

We recognize these are private sectorpractices, pursued in predominantlycommercial environment. We also recognizethat not everything that works smoothly andeffectively outside the DOE complex can beinstantly adopted for use within the complex.

Processes, practices, and approaches existwithin a fiarnework of (1) the organization,which includes management structure,strategic information, strategic skills, rewardsand recognition systems, etc.; and (2) theenvironment or culture, which provides thesupport for the systems and processes whichoperate in the organization. The organizationand culture at your site may not be the sameas that which made the best practicesidentified in this report so effective for ourbenchmarking partners. The good news is thatyou do not have to be one of ourbenchmarking partners for their best practicesto help you, but you do have to understandyour own organization’s culture, systems, andprocesses and then “adapt” the best-in-classpractices to your own reality to makesubstantive improvements locally.

We also recognize that there are somevery real barriers that may complicate yourreadily adapting these best practices, such as:

0 Local Purchasing and Socio-economicConcerns

0 Workforce Retiuction Issues

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Property Disposition/Accounting Issues

Private Financing Issues

Necessary and Sufficient TechnicalRequirements

Labor agreements

Technology development transfer vs.proven technology

For example, the best in class firms visitedemployed generally accepted commercialaccounting practices to record the cost ofgoods acquired, then recognized thedepreciation of those goods in accordancewith an established schedule. This allowsthese firms to make disposition decisionsbased upon the “real” value of the goodstoward the end of their usefil lives. One theother hand, the government generally “books”the acquisition cost of goods, and thencontinues to maintain the acquisition costthroughout the life of the goods. This couldinflate the actual value of the goods andcomplicate disposition decisions by allowingthe evaluation of the property to beunrealistically high.

The Team believes that these issues can bedealt with within the context of existingauthorities for waivers, deviations, andtesting. Therefore, the Team proposes toinitiate a “proof of principle” pilot todemonstrate the efficiency and effectivenessof applying the best practices identified in thisreport to D&D activities in DOE.

In order to demonstrate several of thecommercial best practices identified in thisreport, a proof of concept pilot project will beaccomplished. It is anticipated that RockyFlats Environmental Technology Site (Kaiser-Hill) will select a D&D project in FY99 for apilot demonstration. A procurement plan willbe developed to identifi acquisition specificsand to identify the barriers to effectiveincorporation of appropriate commercial best

practices. Kaiser-Hill and DOE/Rocky FlatsField Office will coordinate this effort withDOE Headquarters OffIce of Procurement andAssistance Management and the OffIce ofContract Reform to obtain support inremoving the barriers identified.Subsequently, metrics will be established tomeasure the effectiveness of the pilot for theD&D Homepage. Other projects at otherlocations may be identified in FY99 tosimilarly demonstrate the proof of conceptexplained in this report.

Homepage

Finally, this report provides a descriptionof a new Web Site benchmarking Homepagefor D&D Procurement Best Practices. ThisHomepage provides this Final Report, site-by-site D&D procurement lessons learned andinquiry capabilities to obtain or shareadditional itiormation. The Office ofProcurement and Assistance managementcurrently has a website www.doe.pr.gov thatcaptures and displays many of the initiativescurrently underway within the department andamong the various contractors pefiormingwork at DOE facilities. Contained at this siteare links to other sites that provide up-to-dateinformation on regulations, access to othergovernment agency innovative practices, andmost important, a communication tool thatprovides easy access to the best practicesbeing implemented within the complex. Thissite is being updated to provide accessinformation specifically related todecontamination and decommissioningactivities. In addition to this report, amechanism will be provided for the sites topost a description of those experiences andlessons learned in this area. It is hoped that allsites will use the web page for this purpose.

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initiatives to allow D&D to be pefiormedsafer, faster, better at reduced costs.

The approaches identified in thk reportwill come to life by being shared, debated,and implemented in the context oforganizational realities. Then, whereappropriate, they need to be used andimproved upon. We encourage theprocurement and technical communities touse this document to facilitate an on-goingdialog in ways of integrating the procurementimovations to accomplish their missionobjectives.

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Not an End, But a Beginning...

In conclusion, if the Department ofEnergy is going to achieve the strategicobjectives of the world’s largest environmentclean-up of contaminated sites, then they aregoing to have to identi~ and implementleading edge thinking, practices and solutions.This report should serve not as the end of bestpractices, identification and implementationrather it creates a platform for a wide range ofbeginnings, and establishes a starting point forcontinuous . improvement of DOE andcontractor’s processes, practices and

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1.1 Business Case

America won the cold war. TheDepartment of Energy and its Contractorsplayed critical roles in this victory throughweapons development, production ahdassembly over a fifty year period. Thisunprecedented accomplishment cost taxpayersbillions of dollars and, unfortunately, resultedin a legacy of environmental hazards that areonly recently being recognized.

Cleanup of the radioactive, chemical, andother hazardous waste left after 50 years ofU.S. production of nuclear weapons is thelargest environmental management programin the world, encompassing 353 projectsnationwide. Current life-cycle estimates forcleanup total $155 billion. Completion of thescope of work of the program will take morethan 50 years.

To reduce the monumental costs of thecleanup effort, DOE sites must seek, and find,significant opportunities to accelerate thescope of work of the cleanup. Therefore, wemust explore opportunities to increaseefficiency and thereby enhance performancethat will enable the clean-up program toachieve its cleanup mission more quickly andat a lower cost. The Department hasdeveloped extremely ambitious goals andtimetables, recognizing that significant costsavings and performance gains can beachieved through aggressive site cleanup andclosure. In addition, this daunting challengemust be accomplished during a time ofsignificant budget and resource restrictions.

In the post cold war era, DOE’s emphasisshified to environmental clean-up throughDeactivation and Decommissioning (D&D) ofcertain facilities not required for the nationson-going defense or energy programs. DOEand its clean-up Contractors have prepared

14

plans to accomplish major environmentalrestoration projects at DOE facilities on orbefore 2010 (the “Ten Year Plan”). This hasresulted in clean-up (D&D) work definition,schedule and cost estimates not previouslyaccomplished in the DOE Complex.

As DOE’s “Ten Year Plan” cametogether, many new challenges wereidentified such as accurate baselining andestimating, efficient project management,waste management and disposal, specialnuclear material clean-up and, of course,funding. DOE’s “overnight” shift fromweapons production to environmental clean-up and restoration within a ten year periodrequires a whole new contracting andsubcontracting approach with emph~is onCommercial industry experience andpractices. In response, DOE and itsContractors developed and implementedContract Reform.

Key features of Contract Reform areperformance-based accountability andinitiatives, appropriate fixed pricing andcompetition, balanced riskheward, andoutcome orientation rather than process focus.The common element to effective ContractReform implementation is DOE andContractors’ procurement strategies.Consequently, procurement management mustplay a leadership role to develop andimplement new procurement strategies toappropriately support the objectives of the“Ten Year Plan”.

In order to implement D&D procurementstrategies under Contract Reform, it isimportant to understand what D&Dprocurement practices are being utilized in thecommercial industry. Accordingly, throughsponsorship by the DOE/Contractor

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Purchasing Council, a commercial D&Dprocurement benchmarking project wasinitiated. Procurement representatives fromHeadquarters, Rocky Flats, Savannah River,Pantex and Argonne participated in thisproject. The project team selected fourcommercial nuclear plants to benchmark thathave completed or are in the process offacility D&D work. The four plants are OysterCreek, Trojan, Fort Saint Vrain, and MaineYankee. The benchmarking visits identifiedseveral new procurement strategies andconfirmed many other practices already beingimplemented under DOE’s Contract Reforminitiatives.

This Final Report provides thebenchmarking results and identifies bestpractices for D&D procurement.

Betlchmarking:

The term “benchmark’ comes fromgeographic surveying. In surveying, it is theprocess of taking a measurement against aspecific reference point. For process

.improvement purposes, a benchmark 1S ameasured “best-in-class” achievement,recognized as the standard of excellence for aparticular process.

Benchmarking is more than simplycomparing one’s own organization againstanother. Benchmarking provides a focused,data-driven decision-making tool toimplement change.

Benchmarking itself provides us with amethodology for learning. Benchmarking is amethodical process involving carefil researchand an understanding of our own processes,products and services. This process helps usto gain management support for improvement,identi~ those who petiorm well, determinewhat needs to be improved, and incorporatewhat we have learned to change ourpetiorrnance for the better.

The desired end result of benchmarking isthe identification of best practices that lead tosuperior pefiorrnance. Benchmarking involvesseeing a need for change, -discovering what tochange, learning how to change it, anddeveloping a vision of the fiture state. TOchange; we must be willing to change andadapt, share information with others, be opento ideas from the “outside”, and focus “how tochange.”

To increase the chances of ac~evingchange based upon our benchmarkingrecommendations we should tie ourbenchmarking efforts to our organization’sstrategic planning and goals. This helps us toobtain leadership support -- leadershipsupport is vital to implementation. Asuccessfully conducted study, which sits upona shelf, has accomplished nothing;implementation is the part of thebenchmarking process that improves ourperformance and achieves ourvision of a fiture state.

1.2 Purpose /Objectives

Learn from others experience and . Identi& type(s) of contract / subcontract

practices. This was the primary purpose of the approach that works best for D&D

benchmarking project to address the new . Identi@ methods for incentive-basedD&D procurement challenges across the DOE contracting / subcontracting

Complex in consideration of the following . Identi$ improved source selectionobjectives: methods

●

. Identi@ best property disposition process

. Identifj commercial labor relations andworkforce restructuring practices

. Identi@ best D&D procurement practices

and lessons learned

Each of the foregoing objectives and the associated findings are explained in greater detail inSection 2.2 of this report.

1.3 Report Organization

Section 1.0 of this report provides the best practices were derived. Section 3.0background purpose and objectives of the provides an explanation of a new D&Dreport. Section 2.0 presents an overview of the Procurement Best Practices Homepage andD&D procurement benchmarking activities Section 4.0 provides wrap-up conclusions.from which the lessons learned and

●

2.0 Overview of D&D Procurement Practices at FourCommercial Nuclear Power Plants

2.1 General InformationListed below is a brief description of each of the nuclear power plants, some general background

information and a current status of each facility’s D&D efforts.

2.I.1 Oyster Creek:

Oyster Creek Nuclear Generating

Station located at Forked River, New Jersey,

is operated by GPU Nuclear, Inc. GPUNuclear, Inc., operates two commercial

nuclear power plants at Oyster Creek and

Three Mile Island and an experimental unit,

Saxton, which was placed in safe store in1972. Oyster Creek is a boiling water reactor,capable of producing 640 megawatts ofelectricity. Oyster Creek has operated for 29years and has an operating license thatextends to the year 2009. With the expectedderegulation of the industry, it was decided byGPU that the plant would not be economicallycompetitive and should move to the D&D

stage. Therefore, GPU is in the planning

process of D&D.

GPU is planning on acting as theDecommissioning Operations Contractor(DOC), when they go to D&D and will

2.1.2 Trojan:

The Trojan Nuclear Power Plant, located

at Rainier, Oregon, is operated by PortlandGeneral Electric (PGE). Trojan is a

pressurized water reactor that commencedoperations in 1976 and is capable ofproducing 1100 megawatts of electricity. In1992, PGE was faced with a decisionregarding major maintenance of their steamgenerators. at the same time the area was

17

Figure 1. Oyster Creek NuclearGeneratingStation

establish an integrated team and supplement

with specialty contractors. Their objective is

to perform as much work in-house in order to

reduce job loss; however, they will also enter

into specific contracts, on a tearned basis for

additional support.

Figure2.Trojan NuclearPower Plant

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experiencing an abundance of inexpensivepower due to excess capacity of the hydro-

electric generated power from Canada. A

cost-benefit analysis determined that it was in

the best interest of the stockholders and

ratepayers to shut down Trojan prior to theend of its design life instead of incurring theexpense to repair amlor replace the

generators. PGE ceased its nuclear operation

in 1995 and has begun decommissioningactivities to totally close the plant.

PGE’s approach to D&D is performing

D&D as the integrator with several specialty

contracts. They rely on detailed up-front and

multi-year planning and adequate in-houseresources.

2.I.3 Fort St. Vrain:

Fort St. Vrain Nuclear Generating

Station, located 35 miles north of Denver, is

operated by Public Service Company (PSC)

of Colorado and received its operating

license in 1973. The license was for a period

of 60 years. The plant went online in

December 1976. Fort St. Vrain was a high

temperature, gas-cooled reactor, capable of

producing 330 megawatts of electricity.

PSC notified the Nuclear Regulatory

Commission (NRC) in 1988 that it had

decided to halt Fort St. Vrain operations

early because of high operating costs and

the plant’s frequent shutdowns. me

company closed the reactor permanently the

following year.

The NRC staff in 1992 authorized

decommissioning in accordance with the

utility’s plan. Decommissioning was

completed in 1996. Based on the

decommissioning activities conducted by

the licensee, NRC’s review of the company’s

final radiation survey report, and NRC

inspections and confirmatory surveys, the

agency concluded that the site and facility

were suitable to be released for unrestricted

use and terminated the nuclear operating

Figure 3. Fort St. Vrain Nuclear GeneratingStation

In June, 1995 a project was started to

repower the plant for continued power

generation capability. The plant was fitted

with a gas-fired turbine capable of

generating 130 MW of electricity, and

began providing power to the grid in May,

1996. At the time of the team’s visit in

April, 1998, Public Service Company of

Colorado was considering additional

projects to recapture the 1100 degree F.

discharge from the gas turbine and route it

through the old steam generators to generate

an additional 100 MW of electricity, should

the power demand call for such additional

capacity.

18

-w>> -,:7 . .. . . .. ..’.—~——-—— ———.

- ,$.. . . .. .. . .. \., .-,. - ; ; .:jp ~ ,

o●

2.1.4 Maine Yankee:

Maine Yankee Nuclear Power Plant,located at Wiscasset, Maine, is operated byMaine Yankee Atomic Power Company.Maine Yankee is a pressurized water reactorthat commenced operations in 1972 and iscapable of producing 820 megawatt ofelectricity. In 1997, the Board of Directorsvoted to shut down Maine Yankee due toderegulation and economics.

Maine. Yankee as the owner andEntergy, a management contractor, willpetiorrn as an integrated team, employingDuratek as a firm fixed price characterizationteam, and Stone and Webster as a Firm FixedPrice D&D contractor.

Figure 4. Maine Yankee Nuclear Power Plant

Appendix A provides a complete matrix of all benchmarking findings, lessons learned and bestpractices for each nuclear power plant.

2.2 Lessons LearneW3est Practices

This section of the report discusses in more detail the “best of the best” practices and lessonslearned from the survey participants.

2.2.1 Project Acceleration Saves BigMoney

o

All the plants surveyed as part of thisbenchmarking study have elected to shutdown their facilities well in advance of

o

expiration of their operating licenses, and topursue D&D activities on an acceleratedschedule. Cited as the major benefit to thisapproach is the substantial cost savings that o

can accrue to the ratepayers and owners whomust finance such operations. Once a plantis taken offline and is no longer “earning itskeep”, failure to proceed with the D&D

0

incurs costs.

Savings from accelerated D&D can bederived from:

0 Present value of the work. It is obvious

19

that the amount of money required in

today’s dollar is substantially less thanthat which will be required in futureyears to perform the work.

Mortgage reduction, meaning costsconsisting of, but not limited to, utilities,security, maintenance, surveillance, andinspections.

Reduction in labor costs through theplanned reassignment or separation ofthe operating workforce.

Conducting such operations in a knownregulatory environment. It is notexpected that the regulatory burden ofnuclear operations and D&D willbecome less in the outyears, and thepotential for additional costly

,●

regulations is great.

Lastly, accelerated contracting/subcontracting and project completion saved significant dollars as

700 ROCKY FLATS CLOSURE PROJECT~—”—~ FUNDING PROFILE

600

500

‘2

200

100

# -.-A-

h. ..a -.

h ,Dividends

\\Y,

\ case 2J S9.0 Billion

Total Project Cost

Goal \

‘II...

S6.0 ❑ illion 1.

/

.Total Project Cost

---

\

1 ...

Case SaI

.

$7.3 BillionTotal Pmje et Cost\

\\

o

FY97FY98 FY58 FYCO WO1 FY02 FY03 FY04 FY05FY06FY07 FYC6 FY09 FYIO FYll FY12 FY13 FY14 FY15

Figure 5. Accelerated Project Benefit

pictured in Figure 5.

2.2.2 Innovative Contracting Models SolveOld Problems, Save Money/Time

Commercial best practice contractingmodels begin with effective fi.mdarnentaldiscipline to plan and prepare good scope,schedule, cost estimate and identification ofspecial objectives. This is followed byidentification of in-house core competenciesand available resources to accomplish thework. Subsequently, a make/buydetermination is accomplished (albeitsomewhat informal). Then, if outsourcing isselected, the contractisubcontract is awardedon a best value basis usually throughcompetition.Owner/contractor/subcontractor roles and

responsibilities are established up frontbased on the contracting model utilized.

Commercial models range from the owneras project manager over an integratedcontract team, to an owner and managementcontractor as an integrated team over D&Dcontractor(s). Four commercial contractingmodels are diagramed and are explainedbelow in Figure 6.

Another best practice identified is up-frontdetermination of the elements for sourceevaluations. Although routinely performedby DOE and contractors in the complex, itwas notable that the commercial practice(although not required) is to utilize this

20

●

Owner is project manager with Owner is Integrator (Trojan)Integrated Team (Oyster Creek)

I

O is IntegratorO is project manager

I I I I I I Ic II NC

[NC

Ic c1 NC C2

I I I ISc Sc Sc se

Different companieslp ersonncl co-mingled Owner and contractors are

into single organization separate organizations

. Owner awards Integrator ContractOwnersnd Msnagem ent Contractor

(Fort St. Vrain)are Integrated Team

(M sine Yankee)

o 0 Ic

c

C is IntegratorI

c

I

I I I r I I I

NC xcI I

Sc Sc,Nc NCSc II Sc

Owner Manages IntegratorOwner and Contractor co-mingled

as project manager

approach as well. Figure 7 provides one benchmarked.example of source evaluation guidelines .utilized by one of the companies

21

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.-: -.,-, , . .Ti’’53= ,.. .. ..=- — —-. %- .. .. . ,---- -.. . . . . :.” ,.,:, -. -..> -> .~,: ,- ,- .-,. ,+.. ..-. A....,.. .,.W*=. - . ‘“—” .{, ,.—.. —--

, ,,

Four conunercia[models: O = Owner SC= SubcontractorC= Contractor NC= “~icJle” Contractor

Figure 6. Commercial Contracting Models

22

●✎✎

2.2.3 Performance Based Incentives(PBI’s) Work

PBIs are used extensively in commercialcontracting because they work. Theobjectives established by DOE’s ContractReform initiatives regarding performancebased contracting are consistent withcommercial best practices and ifimplemented properly will significantlyimprove .D&D performance and costeffectiveness. Figure 8 below provides asummary of the commercial PBI objectives.

Performance-Based Incentives(PBIs) Work

Commercial Objectives:o

0

0

0

0

0

0

0

0

0

Outcome Orientation rather thanprocess

Force improved scope definition,scheduling and estimating

Focus entire project on what isimportant (including safety and costeffectiveness)

“Right” work is emphasized

Increase project managementdiscipline and reporting

Measure the work progress to getattention

Increase innovation and productivity

Engage (reward) workforce with feesharing

Pay for completion performance, notefforts

Accomplish more work with samefunding level

lgure 7. C ommerclal P’Bl Ub Jectwfes

Although some commercial companiesutilize target labor hours with incentives,most are using Firm Fixed ~Price (FFP).

Definitive scopes of work are critical forFFP and one company awarded a FFP sitecharacterization contract and invited allpotential follow-on D&D bidders toparticipate in the characterization at no costto the owner. This resulted in a veryeffective scope of work which the biddersfully understood and was effectively appliedunder a FFP Request For Proposal.

2.2.4 Competitive Use of Prequal~jiedVendors

In selecting suppliers for the D&Deffort, the plants that have passed this phase(Maine Yankee, Trojan and Fort St. Vrain)relied upon the firms whose names stand outin the decommissioning field. Within thisset of suppliers, the plants chose a select setof contractors to act as business partners andparticipate in the competition for the”work.Suppliers that were not in the set of pre-qualified suppliers, even though theypossessed the necessary qualifications, weredenied an opportunity to propose on thework, on the basis that the plant hadsufficient competition among qualifiedsuppliers. The awards that were made werebased on negotiated, “best-value” concepts,rather than exclusively on low price. Inaddition, it was acknowledged that certainspecialty work would fall to a smallernumber of “specialty” contractors.

2.2.5 Unproven technologies are risky andtime consuming – Keep it simple

Technology in the decontamination anddecommissioning field is growing, and thereexists among the technical community anurge to “find the better mouse trap”. Whilepotential rewards for such innovation maybe great, the risks of pursuing a D&Dapproach which has not yet been proven are

22

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... .,.,, ,/. . . ...”. >,.. X. ~.-.!-..! ,–<’ .,. J.. .x ..>;:...-T=-, --- ,., < , .-.> .=, ——.—— T—— —-- -— -- -.–— -

, .

greater in terms of costs and scheduleimpact, if the technology fails. A themecommon to the plants interviewed is “keepit simple”.

This is not to say that the plantpersonnel are uninterested in technologicaladvances; rather it is a sign that they are notwilling to gamble with ratepayer andstockholder assets. Also, the plants or theirmanagement contractors recognized that theexpertise for choosing the right technologylay more with the D&D contractor than itdid with the plant management andoperations personnel. In order to achieve thebest of all worlds, Maine Yankee and FortSt. Vrain, utilized petiormance basedstatements of work and firm fixed pricecontractual instruments. They believed thatdefining the work in terms of the ultimatedesired outcome, and passing, the risk forfinancial and schedule performance to theexperts, would result in the selection of thebest practices and technologies toaccomplish the work. The Team concurswith this approach as representing the bestpractice.

2.2.6 FinisJl Line Focus/C[osure Culture

Habit 2 of Steven Covey’s book “TheSeven Habits of Highly Effective People” is“Begin with the End in Mind@.” Siteclosures and D&D projects must begin witha vision and “end in mind.””One of the mainchallenges is that of creating a finish linefocus and closure culture. Many timesconflicting objectives involving multiplestakeholders, concerns for downsizing, andretention of technical skills and individualswith plant specific knowledge presents adifficult and complex problem.

Whenever a plant moves to thedecommissioning phase. management isfaced with the dilemma of how to retainpersonnel knowledgeable of plant history

and determined necessary for successfuldecommissioning versus the separation ofsurplus personnel. This is especiallydifficult when the ultimate decision on theplant’s fiture has not been determined (i.e.,total demolition or reuse). The plantssurveyed as part of this study addressed thisissue primarily through the use of employeeincentives. For selected personnel who staywith the company during thedecommissioning phase, monetaryincentives are provided. Early retirementincentives, placements at other locationswithin the company, where possible, andcareer assistance services were provided topersonnel not retained.

For those personnel retained with thenecessary skills, clearly one of the mostdifficult issues to deal with is the shift froman “operations” mentality to “closure”mentality. Through all the years ofoperation, management places considerableeffort in the well being and safety of itsemployees, and the employees in turn feel astrong sense of loyalty and pride in theiremployment. In many cases, the personnelare long service employees. Their lives andlivelihood, and their ftilies’ security hasdepended on the continued existence of theplant. Due to these emotional ties to theplant and for job security reasons, thetendency may be to drag the project out aslong as possible. The challenge is toovercome the shock of closure and moveforward.

The right approach to addressing thisissue is largely dependent on the setting andthe culture at the specific site. MaineYankee elected to go to an outsidecontractor for D&D work and allow theDecontamination Operations Contractor(DOC) to come in and “rip-and-ship.”Oyster Creek’s objective was to pefiorrn asmuch work in-house in order to mitigatepersonnel reductions. The team found

23

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.. #

various ways to deal with the issue, but acommon theme among the plants was to“focus on the finish line.”

2.2.7 Property Dxkposition

Major decommissioning work such as anuclear power plant produces excessequipment that represents substantialinvestment by the plants. Spare, unusedequipment, alone could be valued in thehundreds of millions of dollars. There is anatural desire to recover as much of thisinvestment as possible. Part of the delusionaround this effort is a belief that the value ofthe equipment in the plant will pay asubstantial portion of the decommissioningcosts. While the decommissioning teammakes attempts, the realities are that, exceptfor major components, the costs and effortexpended to sell the plant remnantsoutweighs any recovery through the sale.Even with the major components, theproblems with interchangeability betweenthe plants and costs associated withcerti~ing components for use at a particularsite make success in the nuclear aftermarketseldom beneficial.

Several industry sales agencies exist foradvertising the sale of nuclear components.NUS Corp. maintains a database forsubscribers called RAPID. Additionally,Hackman Capital Partners provides awebsite for posting items for sale atwww.buynuclear. corn.

2.2.8 Plmtning/Project Controls

All plants surveyed emphasized theimportance of early involvement by allentities in the planning phase of the work.Exclusion of any segment of the operationsstaff (i.e.. procurement, finance, accounting,etc.) would result in less of a product thanwas necessary for success.

D&D activities must be approached witha “project” mentality versus an “operations”mentality. In decommissioning, a differentset of skills is needed for managing cost andschedule than that needed to manage day-to-day production schedules and costs. In theevaluation of subcontractors for the work tobe done, considerable emphasis was placedon the proposers’ project management andproject controls expertise.

2.2.9 Safety/EnvironmentalComplianct#Quality Expectation

All of the companies benchmarked statedthat strong and effective safety,environmental compliance and qualityperformance are pre-qualificationexpectations as demonstrated by pastperformance. Further, these expectations aremaintained throughout the performanceperiod on the project.

2.2.10 Manage or Eliminate Risks

Contracting for decontamination anddecommissioning of facilities is a complexproblem that involves multiple objectivesand uncertainties. Clearly, no course ofaction may achieve all objectives, so onemust consider the trade-offs between thebenefits offered by the various alternativesand associate the organization’s attitudetoward risk. Risk is the element ofuncertainty in an undertaking and thepossibility that actual future returns willdeviate fi-om expected returns. In order tomanage or eliminate the risks associatedwith D&D activities requires decisionanalysis to integrate the results so that acourse of action can be selected. Although,in general, decisions made in organizationsare ultimately the responsibility of anindividual, often a group of people willparticipate in the decision-making process.This is where effective procurement

24

.●

planning and alignment of procurementstrategies and technical initiatives requiresthe successful integration of procurementand technical organizations.

All plants utilized methodologies foridentifying, evaluating and responding torisks in the procurement process.Procurement, project and technicalpersonnel are involved in the early planningstages and in writing clear and concisespecifications, recognizing all “loose ends”represent financial risk. Trojan utilizes a“work window” provision in their contractsto reduce the cost and schedule risksassociated with unscheduled downtime or

be flexible and maintain a schedule withouta constant request for change orders.

Most plants require offerors, to submit“what-if’ pricing for add/deducts up-front inthe competition phase. Offerors are alsoencouraged to submit alternate proposals inorder to reduce contingencies in bidsnecessary to limit risk. All elements of theproposal are evaluated, compared and riskestablish for use in decision analysis. Auseful tool that provides a structuredmethod for identifying, evaluating, andresponding to risks is the ProjectManagement Scalable Methodolo~ Guide -Risk published by AMX International,

activities that are affected by two Incorporated and is depicted in Figure 8.contractors performing work requiringinterfaces. This required each contractor to

Risk

Area

Risk ElementsAnnIysis

Risk Avoidanceand Mitigation

RiskManagementPksn

I

Not a signtjicantinvestment; fam”liarproject tasks; Iow risktechnologies; low impactof project failure

Use managementjudgment to list expectedrisk areas; compareproject objectives to riskitems and identifymanageable risks.

Identify technologies orapproaches presentingunattractive risks; planactions to minimize riskexposure.

Structure PM approachand work processesspecifically to addressrisk areas and exploitopportunities; usemodular and phasedapproach tocompartmentalize riskand minimize riskcompounding.

Identify issues to monitorrisingsubjective orqualitative riskassessments: follow-up

Priority

2

Moderate investment;some unfand[iar tasks andtechnologies; medium riskinpactr.

Document risk areas andevaluate Iow-medium-high risks; identify riskswith significant impact.

Assign study teams todevelop risk avoidanceand/or mitigation plansfor excessive risk items.

Address each significantrisk item and apply aspecific PM or technicalapproach to minimize,manage, and control riskevents.

Assign all risk areas low-medium-high assessmentmul update and reportstatus and trends: use

Risk iilctrics

25

3

Sigrdjicant investment;unfanu”[iarproject tasks;new or innovativetechnologies

Establish structuredmethodology foridentifying, quantifying,and assessing all potentialproject risks.

Develop risk deflectionstrategies for allsignificant project risks;incorporate adaptiveactions into project plans.

Develop action steps andstatTmgto reduceuncertainties and controlrisk areas.

Develop measurableindicators or riskexposure: report statusrnndtrends.

4Compk?xproject withpotential~ vo2atiIeriskissues andizposures;uncertainties inherent inphzn andtechnoIogim.

Document riskidentification,probability, andconsequences forobjectives, specifications,and stakeholder interests;employ Delphi, multi-attribute utility andPERT analysis.

Conduct costlbenetitanalysis to selectcandidates and strategiesfor risk deflection.

Document plans for riskfocused managementattention to respond to allrisk areas; apply risktemplates (or lessonslearned) to project lifecycle.

Develop metrics for riskareas, report status andtrends; track impact riskcontrol actions on

— .-——-

●●

reporting risk issues at qualitative or subjective lessening risks; focus onperiodic reviews: metrics if none better areas not responding tohighlight high risk areas available. corrective actions.and adverse trends.

Figure 8. Project Management Scaleable Methodology Guide

EXAMPLE: “WORK WINDOW”CONCEPTLANGUAGEUSEDBY PGE AT TROJAN

“A finalized schedule will be developed during contract negotiationsbetweenPGE and the Bidder. Thisschedule will be used as the basis for addressing delays on the project.The delays will be addressed using awork period concept. The subject schedule will have defined work periods for the scope of work addressedin Bidder’s Technical and Commercial proposal. This schedulewill be based on a 40-hourweek (4-1O’s)schedule. Delays during the project caused by PGE or other PGE contractorswill not be compensable unlessthe work period is extended or overtime is required to meet the schedule.Each potential delay will bedocumented as it occurs and at completion of that work period, delayswill be addressedas a whole using thework period concept. The specific work periods will be defined duringthe contract negotiations. Typicalwork periods would be 1)mobilization through lift 2) package preparation3) packagepreparation tocomponent shipment. Extra costs or additional work hours requiredto completethe scope of work containedin the Bidders proposal, within the scheduled periods due to the performanceof the Bidder are the ,responsibility of the Bidder. If the work is completed earlier than scheduled,the respective fixed priceportions of the contract will be paid in fill.”

While all plants recognize and assess the project and technical persomel. The objectiverisk impact, Maine Yankee incorporates of these analyses is to apply expert judgementsolicitation language that specifically requires in the areas of cost, schedule and technicalofferors to communicate assumptions, performance, which is qualitative by nature,quantify and quali~ such assumptions, and and convert this to a quantitative formassign appropriate risks and consequences by through a probability assessment (seecompleting a Risk Matrix (see example). example). A Refined Risk/Cost Profile andOnce this information is received, a Kepner- Maximum Estimated Risk is then derived forTregoe analysis and adverse consequence each offeror for use in decision analysis.analysis are performed by the contracts,

EXAMPLE: RISK INVENTORY PERFORMED BY MAINE YANKEE(Note: ActuaIj7guresLit formationhave been revised to protect confidential information)

Rkk Inventory

Event Discussion Impact

Berm on XVZ - included in bid Included as an option in base bid. We(S600JIOO)

Impact S600.000select this option, price added to base bid. Probability I

Net Impact S600,000

26

PCBS in paint greater than MDA limits Question #104 Impact S2!500,000See Note (2) on letter dated xx/xx/xx Probability .1

Net Impact S250,000

Rubbilization of concrete structures Sce Note (a) on letter dated xx/xx/xx Impact Sl$oo,oooProbability .2Net Impact S300,000

Restricted area roofs contaminated Maintained for risk of fryable asbestos Impact S350,000Probability .5Net Impact S175,000

Excludes all licensing fees L!censing fees were accepted as part of the Impact S4,000,000base bid Probability oNote on letter dated xx/xx/xx Net Impact so

Containment outer building wall Straight estimate of impact and Impact S600,000disposed to local landfill probability . Probability .3

Net Impact S180,000

MY has responsibility to drain systems Accept risk in this area. No additional cost Impactand oil, remove batteries, radioactive See Note (d) on letter dated xx/xx/xx Probability omaterial backlog, etc. Net Impact so

Facilities outside of scope for Accept risk in this area. No additional cost Impact S300,000dismantlemcnfi Building A, Building B. Item (5) on letter dated xx/xx/xx Probability obarge slip Net Impact so

EXAMPLE: PROPOSALINSTRUCTIONS@IIXZED BY MAINEYANKEE

“The Contractor shall identi~ and clearly communicateall assumptionsmade relative to its BaseProposal and shall quantifi and qualifi such assumptionsand assign appropriaterisks andconsequences for those assumptions.(AttachmentV)”

Attachment V

Request for Proposal No.—

Risk Matrix

Rkk Event Risk Risk Response StrategyProbability Impact

27

● ✎

With the shift in mission at DOE fromproduction to clean-up, all sites wi~in thecomplex, with the exception of thoseassociated with the long term waste disposalmission, are executing at some level aprogram to demolish contaminatedfacilities. It is important that those sites withthe experience base in this effort share theirexperiences and lessons learned so thatothers may continually improve upon theD&D process.

The Department of Energy hasestablished a progressive approach tocontract reform. It has encouraged itscontractors through innovative contractingmechanisms, to identify and implement thebest practices that exist in industry andacademi~ with the intent to drive downoperating costs and increase the efficiencyof those operations. Additionally, it hasencouraged its contractors to “thinkcorporately,” meaning that the various sites,despite being operated by differentcontractors, should strive to standardizeoperations, consolidate purchases formaximum price benefit, share lessonslearned and “steal shamelessly” from oneanother those practices which havedemonstrated benefit. The Integrated

28

Contractor Purchasing Team, which is the-. —...

parent of the effort reflected in this report,has accomplished many of the objectives ofthe new approach, at a level once thoughtimpossible to achieve.

The OffIce of Procurement andAssistance Management currently has awebsite, which captures and displays manyof the initiatives currently underway withinthe department and among the variouscontractors petiorming work at DOEfacilities. Contained at this site are links toother sites that provide up-to-dateinformation on regulations, access to othergovernment agency innovative practices,and, most important, a communication toolthat provides easy access to the bestpractices being implemented within thecomplex. This site is being updated toprovide access itiormation specificallyrelated to decontamination anddecommissioning activities. In addition tothis report, a mechanism will be providedfor the sites to post a description of thoseexperiences and lessons learned in this area.The site can be accessed athttp:\\www.pr.doe.gov. It is hoped that allsites will use the web page for this purpose.

-—-—. ...

In conclusion, if the Department of Energy is contractor’s processes, practices andgoing to achieve the strategic objectives of the initiatives to allow D&D to be performedworld’s largest environment clean-up of stier, fhster, better at reduced costs.contaminated sites, then they are going tohave to identi~ and implement leading edgethinking, practices and solutions. This reportshould serve not as the end of best practices,identification and implementation rather itcreates a platform for a wide range ofbeginnings, and establishes a starting point forcontinuous improvement of DOE and

The approaches identified in this report willcome to life by being shared, debated, andimplemented in the context of organizationalrealities. Then, where appropriate, they needto be used and improved upon. We encouragethe procurement and technical communities touse this document to facilitate an on-goingdialog.

29

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Appendix A

Benchmarking findings, lessons learned and best practices for four commercialnuclear power plants.

Topic Oyster Creek Trojan Fort Saint Vrain Maine YankeeGeneral ● Commercial Nuclear Plant ● Commercial Nuclear Plant 8 Commercial Nuclear Plant ● Commercial Nuclear Plant

Information ● 130ilingWiltCr Reactor ● Pressurized Water Reactor ● IIclium Gas Cooled Reactor ● Pressurized Water Reactor● OplX’illLXtfor 30 yews (Ywrr ● (lpwated t’or25 years ● Opcmtcd for 20 years ● Operated for 25 years

2009 closure targcl) ● Gwncd by Porhrd (km-al ● Owned by Public Service ● owned by Maine Yirnlwc● O\VIWdby GI)U Nucl~i\r Ekclric Company of Colorado 9 I,oeatcd in Wiscassct, MidnC● Located at Forked River, Ncw . Located at Rainier, Oregon ● Located near Longmont, ● Reason for D&D:

Jersey ● Reason for D&D: Deregulation / Colorado Deregulation/Economics● Reason for D&D: Economics ● Reason for D&D: Excessive

Deregulation / Economics Operation Costs

D&D Contracting . Acting as Project Manager, . Owner is integrator with several ● Owner awarded integrator . Owner and Management ,Approach Owner will establish specialty contracts contract Contractor (Entcrgy) are

integrated team with single ● Relies on detailed up-front and ● Integrator (Westinghouse) integrated teamcontractor and other niche multi-year planning and adequate ● Subcontracted niche specialty ● FFP Characterizationcontractors in-house resources work Contractor (Duratek)

● Based on Three Mile Island ● FFP D&D Contractor (Stone&experience Webster)

● Potential Conversion to GasTurbine

Status of D&D ● Planning stage ● Nuclear Steam Supply Systcm ● D&D completed ● Characterization Complete● Target start-year 2000 D&D Complete ● Gas turbine conversion phase 1 ● D&D starts September 1998

● Balance of facility to be completed May 96determined

D&D Schedule ● Detailed up-front planning ● Accelerate D&D to save money ● Accelerate D&D to save money ● Accelerate D&D to save moneyStrategy integrated with business ● D&D Contractors participate in

strategy site characterization at no costto establish baseline prior toFFP competition

● Area-by-area estimate andproject controls

-------- I - -. 0.,. ....... ,—..—.,. .._ –—3r!-m – “..-,.,.. . . . ... . .. --- ——— .- .uuntract / 1 w i c.uw wml mccnnvcs ma rrr 1 . r ixca umt Kate wmr mcermves I ● r r r I ● WT~ckwifred” assumptions

30

●

✎

✎

.-

,,,,-.

.4

Appendix A

Tooic I Oyster Creek I Trojan I Fort Saint Vrain I Maine Yankee

Srrbcontrisct ● Emphasis 011 FFP and FFP - with risk ma[rix and mitigationPricing ● Some Cost Reimbursement plan)

● Fixed prices for potentialchanges (regulatory, etc.)

● Reconstruction mentality andculture

Incentives ● T&h4 - used trsrge[labor hour ● Incentives on target labor hours ● FFP – Profit ● FFP – Profit (progressincentives where owner would split 50/50 between owner and payments on earned value)pay 50% of dollars for Ihe contractor ● 100% performance/paymentamount over and reward 1500/0 ● Owner pays costs without fce for bondfor i~nlr)i]ntundm overrun ● Potential bonus for D&D

● Used schrxlulc inccnlivcs, ● Runrrs opportunity fur cmployccs completion before 2004snfcly inccnlivcs. imdencouraged Subcontractor toincentivize workers

Source Selection 9 Prc-qrmlify offerors ● Pre-qualitied business partners ● Pre-qualified sources with . Source selection plan up-front● Usc best value technique, with competition to obtain best competition and negotiation to ● Expressions of interest (22 top

encourage alternate proposals value through negotiated awards obtain best value ENR companies)and negotiate prior to award ● Six Offerors participated in no-

cost characterization study (6me.)

● Four Offerors submitted D&Dproposals

● Clarification questions (2 me.)with adverse consequencesanalysis

● Major off-site twahrirtorsconsensus meeting

Terms and ● Commercial standard practices ● Standard commercial practices ● Standard commercial practices ● Used “construction” T&CsConditions ● Use incentives and liquidated ● Established “work window” ● Moving to new performance- ● Standard Commercial practices

damages concept for alternative work based model for integrated . 100% performance/paymentduring slow periods team bond

● Required EnvironmentalLiability Ins, ($200m)

9 Performance contract (outcomeoriented) ...

- Safety- FFP- 2004 site release

m-_-.. -. —--- 1 - 0.. ---- -.A_...-L:- 0------ -...A----L:— 0----- ---.-_--L!- 0.–.—— . ~ -.-, .rrucuremtmt I 1 w mrung pmutwsmp I . mrung pmnlcrsmp I 9 swung parmcrsmp I w owong parmersmp

31

Appendix A

..

.{

Topic Oyster Creek

Technical Teaming ● Procurcnwnl nurlriwxi 10technical organization

SBISDB G Corpnmlu guals and a mentorprot@t progrmn

Trojan● Procuremtmt malrixed 10technical

organization● Project focus

● Curporalc gOillS

PropertyDisposition

Labor Relations

● Asscl Recovery throughRAPID

● Nuclear assetinventorymaintained by NUS

● Inventory of spareequipmentmaintained by NUSfor entire industry

● Asset recovery group formajor components only,otherwise everything isdisposed of rapidly

● Labor brokerage for union● Decommissioning - they

wou Id have a core group ofcrafi which they wouldsupplement through a MasterService Agreement through abrokerage subcontract

● Asset rccovcry group krr nurjorcomponents only, otherwiseeverything is disposed of rapidly

● lBEW maintenance/operations● Building trade utilized for

construction● Utilize in-house labor services

company (North American EnergyServices)

● No jurisdiction problems

Innovation and ● Keep technology as simple as ● Request innovation through newNew Technologies possible tools and technology

● Unproventechnologiesare advancement;however, emphasisrisky and time consuming on off-the-shelf technology

Work Force ● Retention of work force ● Emphasis on preserving technicalRestructuring through incentives skills through employee incentives

● Essential during D&D ● Work force reductions emphasized

Fort Saint Vrain● Procurement in line with

project manager organization● Project focus

● Curpomtc ~UillS

● Nuckxir components dispowxlas waste

● Balance utilized in conversionto gas turbine generation

● IBEW maintenance/operations9 Building trade utilized for

construction● Nojurisdiction problems

● Request innovation throughnew tools and technology-advancemenc however,emphasis on off-the-shelftechnology

● Emphasis on preservingtechnical skills throughemdovee incentives

Maine Yankee● Tri-party “ream consislirrg of...

Project Contro~– Tech. Oversight– Owner Contract

Administration● Get what works to benefit

Owner and Contractor

● No special cmphusis orrequirements

● Market-place competition

● Usc Ihrckmim Lhpitrrl I’w[ncrsat www.buynuclear.com

● Building Trades do D&D work● No jurisdiction problems

● FFP will drive innovationhrewtechnologies

● 160 now, going to 120 then100

● Emphasis on preserving core

\ 32

Appendix A

Tonic ! Ovster Creek I Troian I Fort Saint Vrain I Maine Yankee. ...—...- -—..----J)lilCINIClll ill olhcr olliux / 9 Work force ruluclimrs cumpclencicslocations emphasized placement at other ● Early retirementkeverancc

offices / locations incentives● Career assistance services

Best Practices and . Short-term Long-term ● Planning is critical (short term - ● Owner must keep core Safety and Radiation ProtectionLessons Learned

9planning is critical long term, including baseline competencies arc critical

● Benchmark with industry scope and estimate) PGE “model” ● Oversight roles I responsibility ● Aggressive Project Controls arcIcadcrs developed training is critical mandatory

● I:ixcd Price CUlllrilcls hcsl ● Arc~iby arcir I)&l> works bcs[ ● Strong chamcleriziition slndy P-2 Anidysis 10

wlwrevcr possible ● I’crformance based incentives and up front (by owner or identify problems● KIX!plCChllUlogJf il!i simple ilS wccldy earned WIlnc irrc critical contractor) early

possihlc ● Slill~illlglllClltillioll Iiw ● lklUCiltc Wglllillurs ● Well-cldinwl hawlirw● Asset rccovwy must hc profwsionid swviccs ● l.k[ilbliSh ntxxxsirry illl(l ● OUICOIIIC” nricnhd pt3fUrtlliulcc-

antrlyzed as part of D&D ● Accelerate D&D to save money suflicicnt standards based contracting (Fl:l’)● QAIQC essential in oversight ● Competition emphasis ● Safety and quality programs ● Up-front planning

● Prc-award discussions/ established up front ● Kepner-Tregoe Analysis withclarifications critical ● Communications / teamwork adverse consequences analysis

● Requirements specifications (internal and external are ● Risk matrix with mitigationimportant critical) plan and FFP for “what ifs”

● Internal and external teaming arc ● Establish appropriate owner ● Traditional Contracting Officercritical intervention practices authority

● Safety and quality are expected ● Don’t go Cost Plus ● Procurement rigor and● Task Order contracting works ● Project controls training is documentation● Mine the budget to fund surprises critical ● Planning

and more work ● Use risk I reward sharing . Obtain best value Contractor● Owner as integrator worked best approach (lowest cost doesn’t always

for Trojan ● Process records daily win)● Tie payments to performance ● Eliminate or manage● Competition emphasis uncertainties● Owner controlled insurance ● Must have “Closure Culture”● Create a “finish line” ● Executives must work within

philosophy with boundary Procurement processconditions ● Eliminate all unnecessary

Owner interference

33