Nuclear Procurement System: Fraudulent Items of Nuclear Power Plant in Republic of Korea

Abstract

In May 2013, it turned out that a few items were supplied to NPPs with fraudulent certificate. The documents were the reports of verification - Quality Verification Document (QVD), Equipment qualification (EQ), and Commercial Grade Items Dedication (CGID) - which are required to submit when suppliers deliver the items to the operator. The fraudulent documents were the result of collusion between suppliers and certificate authorities. As the unqualified items were detected, operators had to halt the operation and delay the construction of NPPs for the replacement of fraudulent items and inspection on overall facilities. As the result, power reserve level dropped significantly and rolling blackouts were conducted, which led to economic loss of industry. In addition, the disclosure of fraudulent items acted as the catalyst for the public negativity which has been grown since Fukushima Daiichi nuclear accident. These unqualified items are dealt with the concept of Counterfeit, Fraudulent, and Sub-standard Items (CFSIs). CFSIs are detected in various components of NPPs, and these could be direct factors of accidents, such as reactor shutdown, unanticipated release of radioactive materials, and damage of fuel. CFSIs also have the potential to degrade the performance of safety functions and safety-related system. Since 1980s, regulations on CFSIs were first developed in USA, and currently adopted globally. However, in Korea, the CFSIs had not been considered as a significant issue, and meanwhile, CFSIs occurred. The purpose of research is to define the root cause of CFSIs and suggest policy recommendations as solutions. For the comprehensive research of nuclear procurement system, three different methodologies were applied

the analysis on Korean laws and regulations, interviews on the subjects of nuclear procurement, and statistical analysis on contracts between suppliers and operators. According to Nuclear Safety Law, regulatory authority has a duty to inspect on operators, suppliers, and certificate authorities, regarding to quality assurance. The laws and regulations were well-organized to prevent the CFSIs. Therefore, interviews were conducted to figure out the inherent issues, and following problems were pointed out

shortage of manpower for verification and independence of certificate authorities. In addition, statistical analysis on bidding and contract procedures were conducted to understand the issues. First of all, it was recognized that bidding processes were delayed up to 5 weeks, without extending the deadlines for supply, as the compensation of delay. Moreover, in a few bidding processes, procedures were ignored at all. Based on the analysis on the laws and regulations, interviews, and statistical analysis, nuclear procurement system was modeled. System dynamics was taken as the methodology to find out the interrelation between various factors. In the early of NPPs operation, the investment had been concentrated on safety issues, and as the result, the operating hours were increased consistently. However, when the operation of NPPs became stable with barely no safety issues, the operator has decreased planned maintenance period for stable power generation. The reduced period was a burden to suppliers, because the deadlines for supply are cut down. Accordingly, it caused the CFSIs in NPPs. Another aspect shown in the nuclear procurement system is the concern on quality control. If there are a number of safety issues, quality control is conducted intensively, which lead to reduction of CFSIs. However, because the safety-related issues barely occurred since 1990s, the control on CFSIs couldnt be conducted properly. The requirement of registration for suppliers is another factor of CFSIs. During the bidding, open tendering with the lowest price is performed for the profit of operators. Thus the fewer suppliers apply, the more income they get. To keep other competitors from applying, suppliers pushed operator to maintain the high requirement and the small number of suppliers was preserved. But it induced the delay on bidding process. It caused suppliers not to have enough time for verification and became the reason for the CFSIs. In addition, the confined pool of suppliers made operators to involve vendors and foreign countries into the supply chain. The extension of supply chain disturbed quality control, which led to CFSIs. Finally, the number of certificate authorities could be the reason of CFSIs. In the case of QVD, since the private authorities could be qualified to conduct verification, the number of authorities have increased up to 2500. The competition among them became fierce, so that suppliers could exert power over certificate authorities. It undermined the independence of certificate authorities and led to the corruption during the verification procedure. On the other hand, in the case of CGID, there is only one domestic certificate authority. It made the time for verification to be extended, which also induced the CFSIs. As the solutions to the four mentioned problems, policy recommendations were suggested in the aspect of operator, supplier, regulatory authority, and certificate authorities. First of all, operators need to adopt a storage inventory management. Foreign operators have developed various researches for inventory management. However, Korean operator doesnt have such program because of insufficient budget. If the inventory management could be conducted properly, operators could guarantee the deadlines for supply, and quality assurance also could be conducted in comprehensive way. Operator should alleviate the standard for suppliers, and allow more suppliers to register. It reduce the period of bidding procedure. In addition, government should support the control of CFSIs by supplementing manpower for certificate authorities, reinforcing specialty, and establishing institution for verification. Certificate authorities for QVD should secure their independence and perform verification procedure properly by reducing the number of authorities through the reinforcement of standard for themselves. In case of CGID, the establishment of domestic certificate authorities should be promoted. It will decrease the time for verification and CFSIs also will be reduced.