COUNTERCLAIM OF DEFENDANT/COUNTER-PLAINTIFF CONNECTICUT YANKEE ATOMIC POWER COMPANY

Transcription

1 DOCKET NO. CV S : SUPERIOR COURT : BECHTEL POWER CORPORATION : JUDICIAL DISTRICT OF : MIDDLESEX AT MIDDLETOWN VS. : : CONNECTICUT YANKEE ATOMIC : POWER COMPANY : AUGUST 22, 2003 COUNTERCLAIM OF DEFENDANT/COUNTER-PLAINTIFF CONNECTICUT YANKEE ATOMIC POWER COMPANY Defendant/Counter-plaintiff, Connecticut Yankee Atomic Power Company ("CY"), by its undersigned counsel, hereby claims against Bechtel Power Corporation ("Bechtel") as follows: Background I. CY Plant History 1. On or about May 26, 1964, pursuant to 42 U.S.C (b) (2002) of the Atomic Energy Act of 1954, and 10 C.F.R. Part 50 (2003), the Atomic Energy Commission ("AEC"), the predecessor to the Nuclear Regulatory Commission ("NRC"), issued a construction permit to CY for a single unit, pressurized water reactor nuclear power plant situated at Haddam Neck, a section of the Town of Haddam, in the State of Connecticut (the "CY Plant"). CY Plant construction was completed in On or about June 30, 1967, pursuant to the Atomic Energy Act of 1954, 42 U.S.C (b) (2002) and 10 C.F.R. Part 50 (2003), the AEC issued a provisional operating license August 22, :53 PM

2 to CY for the CY Plant. The license was subsequently replaced by a full term operating license authorizing operation for a period of 40 years. 3. From approximately June, 1967 to July 1996, CY operated the CY Plant for the production of electricity. On December 4, 1996, the Connecticut Yankee Board of Directors voted to discontinue commercial operation. This decision to retire the CY Plant was based on economic analyses of the ongoing operating and capital costs compared to the costs of CY Plant shutdown and replacement power costs over the remaining term of the CY Plant's operating license. 4. In accordance with 10 C.F.R (a) (1) (i) and (ii) (2003), certification to the NRC of the permanent cessation of operation and permanent removal of fuel from the reactor vessel was transmitted to the NRC on December 5, Following the permanent cessation of operation of the reactor, CY commenced the process of "decommissioning" the CY Plant as defined in 10 C.F.R (2003). CY is required under federal law to remove the CY Plant and CY Site from service and reduce the residual radioactivity to a level that permits license termination in conjunction with: (a) release of the CY Site for unrestricted use; or (b) release of the CY Site under restricted conditions. CY decided to release the CY Site for unrestricted use. The maximum amount of residual radioactivity that may remain on surfaces, in groundwater, or in any media such as soil and debris after completion of decommissioning activities and at the time of license termination is called the Derived Concentration Guideline Level ("DCGL"). The process used to determine August 22, :53 PM -2-

3 DCGLs is described in a License Termination Plan ("LTP") which must be approved by the NRC before termination of the 10 C.F.R. Part 50 (2003) license. This approval is not required before using the DCGLs to perform decommissioning activities. 6. In 1998, CY determined that the balance to CY and its customers of costs, benefits, and risks inherent in the ongoing decommissioning process favored the continued conduct of such operations by a decommissioning operations contractor on a turnkey basis assuming that a mutually acceptable contract could be negotiated with a qualified contractor at a reasonable price. A. Negotiation of the Decommissioning Operations Contract 7. CY issued a Request for Proposal ("RFP") for the Decommissioning Work and related services at the CY Plant and CY Site on December 18, Bechtel and Stone & Webster Engineers and Contractors ("SWEC") were the only contractors to submit proposals. 8. Bechtel conducted site inspections and had access to all CY records, including, but not limited to, CY Plant and CY Site operating records, site characterization records, test data, fuel data, spent fuel records, CY Plant Spill Log, and groundwater monitoring data. Bechtel had the explicit opportunity to perform and request CY to perform additional site characterization Work. August 22, :53 PM -3-

4 9. Bechtel submitted its first proposal on February 9, Bechtel and CY representatives met to discuss the proposal. Bechtel also continued to review and have access to CY records and other historical data. Based on these discussions and additional records review, Bechtel submitted revised proposals dated March 1, 1999, March 8, 1999 and March 22, During the intervals between and after Bechtel's proposal revisions, Bechtel and CY met to review the specific technical and commercial terms. The purpose of this process was to confirm Bechtel's understanding of the nature and scope of work, and the risks and difficulties inherent in performing it. 10. In its proposals, Bechtel represented to CY that it had a "vast experience base in the nuclear power industry" and had "demonstrated experience in successfully completing D&D projects at numerous facilities." Bechtel also represented to CY that by selecting Bechtel, CY could "assure all interested parties that the Haddam Neck Decommissioning Project will not only achieve all of its stated commitments, but will also become a model for future projects of this nature." Bechtel's proposal represented that it was capable and "fully committed to providing CY with all of the resources and corporate support needed to guarantee its success." Bechtel specifically represented to CY that the leadership team for the Project would be composed of "the most experienced and capable individuals in the area of nuclear plant decommissioning, operations support, and contaminated heavy component lift activities." 11. Bechtel proposed a 54 month Work schedule. Bechtel acknowledged that this schedule was aggressive, but assured CY that Bechtel's site proposal team had thoroughly August 22, :53 PM -4-

5 reviewed, walked down, and estimated the specific scope of work activities. Bechtel's plan was to "perform the background determination, historic site assessment, establish DCGLs and perform a preliminary release of a large, unaffected portion of the site in the first 18 months of the project." As the demolition progressed, the buildings would be released in phases so that the concrete rubble generated during demolition could be used as fill material for the below-grade building foundations. 12. The License Termination Plan ("LTP") was identified by Bechtel in its proposals as a major deliverable to CY that would meet the requirements of 10 CFR 50.82(a)(9), and support CY's eventual application to the NRC for termination of the CY operating license. Bechtel assured CY that "Bechtel's reputation with the NRC and the D&D community will ensure a predictable licensing process." 13. Bechtel's proposals included a detailed work plan for a "dry cask" fuel storage facility called an Independent Spent Fuel Storage Installation or "ISFSI". The purpose of the plan was to relocate spent fuel stored underwater in the CY Spent Fuel Pool to dry canisters, shielded by concrete and steel casks. The dry casks would be placed on a secured, concrete pad located away from the CY Spent Fuel Pool. The plan indicated that Bechtel would be responsible for ISFSI construction and operation as well as the removal, loading, and transfer of the contents of the Spent Fuel Pool to the ISFSI, including all fuel assemblies, fuel rods, Greater Than Class C ("GTCC") waste and other waste in the Spent Fuel Pool. Bechtel's proposal also detailed the process that it would employ both to inventory and to classify the waste, including spent fuel August 22, :53 PM -5-

6 assemblies, contained in the Spent Fuel Pool. GTCC waste is a category of waste, defined in 10 C.F.R (2003), that contains radioactive materials that must be isolated from the public for a very long time and as a result must generally be disposed of in a geologic repository like that envisioned for spent fuel. 14. On March 8, 1999, Bechtel confirmed that it was revising its base proposal and pricing to include "processing, packaging and storage of the Spent Fuel Pool contents". In developing this revised proposal, Bechtel assured CY that "we are working with our vendors to get a good handle on the Spent Fuel Pool contents and what it takes to package/place in dry storage, and hopefully we will have all of the pricing (we mention (sic) 1 million dollars on Thursday) such that we can lump-sum the contents by shipment time tomorrow." Bechtel included the classification, removal and disposition of the contents of the Spent Fuel Pool in its final revised proposal and increased its final price for this Work by $1.6 million. 15. Bechtel's proposal reflected Bechtel's knowledge of the existence of contaminated groundwater at the site. Bechtel's proposal represented to CY that Bechtel would perform early testing (within six months of Contract Award) of groundwater in the immediate vicinity of the CY Plant's power block to characterize accurately the site and any possible contamination. The proposal stated that, from this characterization data, Bechtel would be positioned to develop solutions for groundwater remediation. 16. The Reactor Pressure Vessel ("RPV") is a major component of the Nuclear Steam Supply System at the CY Plant. Bechtel's proposal represented to CY that RPV segmentation August 22, :53 PM -6-

7 and removal would be "tested at the subcontractor's test facility and all methods and operations fully tested and proven prior to site mobilization." Removal of the RPV is an important decommissioning activity. In addition to the RPV being the heaviest and most radioactive single component (other than spent fuel) in the CY Plant, removal of the RPV is needed to complete decommissioning of the building housing the RPV ("Containment") as well as other buildings which house CY Plant systems that support Containment decommissioning activities. 17. Following segmentation and removal of the GTCC material from the RPV, Bechtel's plan for decommissioning and disposal consisted of severing the RPV from its piping connection, rigging it to a crane, packaging it in a shipping canister, removing it from Containment, transporting it to the CY Site barge slip, shipping it by barge via the Connecticut River and inter-coastal waterways, up the Savannah River to the Department of Energy's ("DOE") Savannah River Site in South Carolina, and transporting it over land to the low level waste disposal site in Barnwell, South Carolina. Bechtel represented to CY that: (a) Bechtel "had checked with several barge transportation companies and confirmed that for both the Connecticut River and the Savannah River, during the months of August through early December, there have not been any problems with barge shipments for a number of years"; (b) the Connecticut River and Savannah River have adequate depths for barge berthing, and if necessary shallow draft barges could be used; and (c) Bechtel would, as part of its base work scope and if necessary, sound and dredge to accommodate barge shipments from the Haddam Neck Site. August 22, :53 PM -7-

8 18. Bechtel's final written proposal for decommissioning and related services was submitted on March 22, After a thorough evaluation of the proposal, CY determined that Bechtel's proposal was more responsive to the RFP on the basis of technical, schedule and cost. In selecting Bechtel over SWEC, CY relied on Bechtel's representations regarding its decommissioning and regulatory experience, corporate resources and construction management capability. It also relied on Bechtel's representations that it fully understood its Turnkey obligations and risks and difficulties associated with the CY Plant and CY Site decommissioning and related services. II. Contract for the Performance of Decommissioning Operations and Related Services 19. After final negotiations, Bechtel and CY entered into a Contract for the Performance of Decommissioning Operations and Related Services ("Contract") on April 3, 1999 for the decommissioning of the CY Plant. 20. In the Contract, Bechtel agreed that it "had ample opportunity to familiarize itself with the CY Plant and Site and available documentation and programs related thereto and has satisfied itself regarding all of the technical, radiological, construction, logistical, environmental, health, safety, and legal and regulatory requirements, conditions, and hazards relating to and/or affecting the Work and Contractor's performance thereof." 21. In the Contract, Bechtel also agreed that it had ". satisfied itself regarding the character, quality, quantity, setting, and location of all facilities, equipment, materials, August 22, :53 PM -8-

9 contamination, actual and threatened obstacles existing or expected to be encountered in the course of performance of the Work." 22. The Contract contains the following terms defining Bechtel's scope of Work: "Decommissioning" (also referred to as "Work"): All activities necessary to comply with Contract requirements and to achieve Unrestricted Release of the Site and Site Restoration. These activities include, without limitation, evaluation, decontamination, deconstruction, removal, beneficial re-use of those structures related to repowering, dismantlement, storage, transportation, remediation, and disposal of all radioactive, hazardous and mixed contaminants, wastes, materials, fluids, soils, gases, facilities, structures, systems and components. Decommissioning or Work may include, but is not necessarily limited to various activities such as planning, execution, coordination, supervision, operations, regulatory and community relations, document preparation and delivery, written interim acceptance by the NRC, subject only to verification, that a portion of the Site meets the Site release criteria specified in the License Termination Plan, and follow-up and may relate to the Base Work Scope and any Option(s) exercised by CY Contractor's Scope: Contractor shall, on a Turnkey basis, complete the Work including but not limited to the furnishing, delivery, and provision of such equipment, materials, and supplies, the conduct of such operations, and the performance of such services as may be required to achieve Final Acceptance in accordance with all requirements set forth and more particularly described in the Scope Document, provided that Contractor's responsibility for remediation of Groundwater shall terminate at the conclusion of Contractor's warranty period under this Contract. 23. The Contract defined the turnkey nature of the Project and Bechtel's Turnkey responsibilities as follows: "Turnkey": For purposes of this Contract, the term used to denote the basis for conduct of the Work in which the Contractor accepts the obligation of all performance, and the burden of all risks related thereto, associated with delivering a contractually defined end state as defined and set forth in the Contract Documents including without limitation (i) fulfillment of all requirements and duties associated with Final Acceptance and (ii) compliance with all requirements of law, regulation, code, standard, permit, and provisions of licenses including but not limited to CY's License to the satisfaction of CY. August 22, :53 PM -9-

10 2.5. Contractor's Turnkey Responsibility: Contractor represents that it has had an opportunity to examine the entire Contract and has fully acquainted itself with the climate, general topography, soil structure, obstructions, existing structures and/or equipment, the Site of the Work and its surroundings, including without limitation the access roads, waterways and docking facilities, and other site improvements and features; that it has made all investigations essential to a full understanding of the Work and the difficulties which may reasonably be encountered in the performance thereof; that it has reviewed and satisfied itself with respect to such Work as may have been performed by or on behalf of CY to date including without limitation reactor coolant system decontamination, asbestos abatement, facilities modifications, construction power for Decommissioning, Spent Fuel Island modifications, water management, and related Work; that it has reviewed all technical, nuclear quality assurance, site characterization, waste quantity, and other documentation associated with the Plant and its current status; and that, notwithstanding any statements made or information furnished by CY or its representatives, Contractor will, regardless of any such conditions pertaining to the Work, range of climate conditions and the effect thereof, or the Site and its surroundings, or condition of the Plant or status of Plant systems and components, or the nature and extent of documentation associated therewith, plan, complete the Work in full compliance with the Contract Documents within the time specified in the Schedule and for the Contract Price and Contractor assumes full and complete Turnkey responsibility for any such conditions as they apply to the Work and all risks in connection therewith and otherwise unless and to the extent relieved of same by express written limitations or disclaimers in or amendments to the Contract Documents. 24. Under the Contract, Bechtel was required to achieve the Contract "end states" of Final Acceptance and Unrestricted Release. The Contract defined these terms as follows: 1.16 "Final Acceptance": Progress of the Work to the point of approval by CY, which approval shall not be unreasonably withheld, of all physical and regulatory requirements associated with Contractor's Work under this Contract including and limited to (i) delivery of all documentation reasonably required by CY under this Contract such as but not necessarily limited to all documentation necessary to satisfy the requirements of regulatory agencies, and (ii) completion of all other activities associated with Decommissioning. CY's Final Acceptance of any item of Work shall not, in any respect, relieve or limit the Contractor's obligation to satisfy fully and completely the requirements of the Contract Documents. By Final Acceptance, CY shall not assume, in any respect, the obligation of the Contractor to perform the Work. August 22, :53 PM -10-

11 1.37. "Unrestricted Release": Final acceptance by the NRC of the Final Status Survey demonstrating that the site release criteria of 10 CFR Part 20 applicable to unrestricted release have been met and final approval by all other federal and state agencies having jurisdiction necessary to allow public access to the Site (original emphasis). 25. The Contract required Bechtel to commence its Work immediately upon receipt of the signed Contract and "to prosecute the Work continuously and diligently and at such a rate and in such a manner as necessary for the achievement of Key Milestones and Final Acceptance in accordance with the Schedule." Under the Contract, the last Key Milestone was to be completed by September 30, 2004 (Key Milestone 21). 26. The Contract set forth the Key Milestones in the Key Milestone Payment Schedule. Contract Section 3.2 specified that "Time is of the Essence" with respect to certain Key Milestones within the time limits set forth in Section and Exhibit B of the Contract. Contract Section 1.29 defined "Milestones" as events scheduled to be completed or performed within specific time periods and/or by specific dates set forth in Exhibit B that may or may not be on the Critical Path for accomplishment of Final Acceptance. 27. CY could assess liquidated damages for Bechtel's failure to meet the specified Contract Key Milestones. Accordingly, under Contract Section 3.2, Bechtel agreed to "perform the Work with such diligence, at such a rate, and in such a manner as is necessary to insure proper completion of the Key Milestones within the time limits set forth" in the Contract and agreed to "acquire and utilize such additional equipment, work or cause to be worked such overtime, and perform such other acts as may be necessary." August 22, :53 PM -11-

12 28. Bechtel's Turnkey responsibility included its sole obligation to plan and schedule the Work. This responsibility included the obligation to submit the Work schedule within 60 calendar days after the execution of the Contract. It was to be a detailed, time-phased Critical Path Method (CPM) schedule showing all Work activities and containing all the Key Milestones and intermediate Milestones delineated in the Contract. The Work schedule was to be revised and updated on a weekly basis and then an updated current schedule issued to CY. 29. Under Contract Exhibit A, Section , Bechtel was required to "assign dedicated, qualified scheduling personnel to control the scheduling effort, maintain the Contractor's schedule and provide update information to CY scheduling staff." 30. The "Critical Path" of the Work was defined in Contract Section 1.10 as "the particular sequence of Milestones associated with performance of the Work which must be accomplished in order for the Work as a whole to be completed on time and in accordance with the Contract." 31. Under the Contract, Bechtel provided CY with various express warranties. For example, Contract Section 6.1 states Bechtel's warranty that "any and all Work performed pursuant to this Contract shall conform to the requirements of the Contract Documents and shall be performed or provided in accordance with high professional standards applicable to Decommissioning and related activities in the nuclear utility industry unless otherwise approved in writing by CY..." August 22, :53 PM -12-

13 32. Another example is Contract Subsection 6.5 that states "Contractor warrants that services performed by, through, or on behalf of Contractor pursuant to this Contract shall be performed or provided in a professionally competent manner by properly qualified personnel in accordance with the high professional standards applicable to Decommissioning and related activities in the nuclear utility industry." 33. Bechtel also provided various Performance Warranties under Contract Section 6.6. These Performance Warranties included among others: Site Condition (Contract Section 6.6.1), License Status (Contract Section 6.6.2), Worker and Public Health and Safety (Contract Section 6.6.3), under which Bechtel warranted that the performance of the Work would not result in a total dose of radioactivity to workers in excess of 660 person rem, and Environmental Compliance (Contract Section 6.6.4). 34. The Contract Warranties and Performance Warranties are consistent with Bechtel's Turnkey obligation to satisfy the requirements of regulatory agencies. Fulfillment of these Warranties and Performance Warranties also depended upon Bechtel's proper planning, scheduling, coordination, supervision and execution of the Work. 35. Under the Contract, CY had the right to make additions, deletions, and alterations of the Work. CY could accomplish these changes through Agreed Change Orders signed by both parties or Directed Change Orders signed only by CY. Under Contract Section 3.1 Bechtel was obligated to prosecute the Work, including disputed Work, as necessary to achieve Key Milestones and Final Acceptance. August 22, :53 PM -13-

14 36. CY agreed to pay Bechtel the Contract Price for performance of the Work in a manner fully compliant with the Contract. CY would pay the sums enumerated in, or as applicable, calculated in accordance with the Price Summary included in Contract Exhibit C. 37. Contract Section 4 specified that certain items of Work were included in Bechtel's Base Work Scope but would be treated as agreed changes or directed changes with respect to cost and schedule. Bechtel Base Work scope items included in Contract Section 4.1 were, for example, "[R]emediation, storage, transportation, disposal, and directly related services associated with contaminated Groundwater at the Site." Another such Work item was "Work materially altered or affected or required by reason of, and then only to the extent due to, adoption or implementation of new laws or regulations or amendments to existing laws or regulations." 38. Contract Section 21.5 required "Alternate Dispute Resolution" ("ADR"). This provision obligated the parties through their respective senior managements to consult in good faith to resolve disputes. 39. Contract Section 9.2 "Termination" provided in relevant part: 9.2 Termination. Anything in this Contract to the contrary notwithstanding, and subject always to Contractor's right to cure within fifteen (15) days after its receipt of any notice of termination pursuant to this subsection 9.2, if a petition in bankruptcy should be filed by Contractor or if Contractor should be adjudicated as bankrupt, or if Contractor should make a general assignment for the benefit of creditors, or if Contractor becomes insolvent or otherwise financially embarrassed, or if a receiver should be appointed on account of the insolvency of Contractor, or if Contractor should refuse or fail to pay its debts in the ordinary course of business, or if Contractor should refuse or fail to supply enough properly skilled workers or proper equipment or materials or fail to make prompt August 22, :53 PM -14-

15 payment to suppliers or subcontractors, or if Contractor should refuse or fail to perform the Work properly in any material respect or disregard laws or regulations or the instruction of CY, or if Contractor should otherwise be guilty of a violation of any material provision of the Contract Documents, CY may, subject to the provisions of section 12 hereof, but otherwise without prejudice to any other right or remedy it may have at law or in equity, and without notice to any surety, terminate the Work of the Contractor by giving written notice of termination to Contractor and noting therein the effective date of termination, which date shall be no less than fifteen (15) days from the date of Contractor's receipt of such notice, and, at CY's option, CY may use all or part of Contractor's construction equipment and materials and may finish the Work by whatever means CY may deem expedient or may abandon the Work. In such event: Cessation of Contractor's Work. Contractor shall immediately proceed to take all actions necessary to wind up its Work and shall co-operate with and follow instructions issued by CY in connection therewith including but not necessarily limited to any CY instructions for bringing the Work to an orderly halt, canceling or assigning purchase orders and subcontracts, turning over all completed and in-process documentation and completed and in-process deliverable Work product, documenting the status of in-process or planned Work, and otherwise assisting CY in bringing the Work to a controlled halt or transition Payments. If the cost to CY of completing the Work, including all amounts previously paid to Contractor, claims, losses, damages, CY overhead and supervision expenses, reasonable attorney's fees, and other expenses is more than the value of the Work properly performed by Contractor, including the amount of any payments previously made to Contractor plus any amount(s) properly due and payable for Work properly performed in compliance with all Contract requirements prior to the effective date of termination, excluding termination costs, Contractor shall pay such excess to CY together with the amount of all other damages suffered by CY as a result of Contractor's default or, at CY's discretion, CY may withhold such amount, in whole or in part, from any payment otherwise due to Contractor. The expense incurred by CY and the amount of damages incurred through Contractor's default shall be reviewed with, and may be audited by, Contractor and, with any amendments resulting from such review, shall then be certified by CY and, as certified, shall, in the absence of actual fraud, control as between the parties and the issuer of any performance bond, provided that Contractor shall not be entitled to receive any further payment until the Work has been completed or abandoned by CY. The provisions of this subparagraph are in addition to any further rights that CY may have under this Contract or otherwise at law or in equity, subject to the provisions of section 12 hereof. August 22, :53 PM -15-

16 40. The Contract contains a "Non-Waiver of Defaults" section for the benefit of CY. Contract Section 21.4 provides: 21.4 Non-Waiver of Defaults. Any failure by CY at any time, or from time to time, to enforce or require the strict keeping and performing of any of the terms, conditions, and/or provisions of this Contract shall not constitute a waiver of such terms, conditions, and/or provisions and shall not affect or impair such terms, conditions, and/or provisions in any way or the right of CY at any time to avail itself of such remedy(ies) under this Contract or, subject to the provisions of section 12 hereof, otherwise at law or in equity as CY may have for any breach or default of such terms, conditions, and/or provisions. The waiver of any breach or default in any instance by CY shall not operate as a waiver of any breach or default in any other instance. 41. Contract Section 10 requires Bechtel to provide an irrevocable Performance Bond for an amount equal to 15% of the Contract price as of the date of execution of the Contract. American Home Assurance Company ("Surety") provided a Performance Bond to CY as named Obligee in the amount of $36 million. This bond obligated the Surety to pay and reimburse CY for all losses and damages which CY may sustain by reason of failure or default by Bechtel under the Contract. III. Bechtel Contract Performance 42. Bechtel began the Contract Work on April 4, A. License Termination Plan 43. CY as the CY Plant licensee was required to submit the application for termination of the CY Plant license to the NRC. Under the Contract Bechtel agreed to provide "all services including but not limited to engineering, technical, and licensing necessary to August 22, :53 PM -16-

17 prepare and to support NRC approval of a CY License Termination Plan 'LTP'." CY relied on Bechtel's representations that its prior experience with the NRC would assure a smooth and quick approval to the LTP. 44. Under Bechtel's Work schedule, the LTP was to be approved by December 14, This was based on a six month NRC approval process which is a very aggressive schedule compared to industry experience. 45. The NRC review and LTP approval process is a time intensive activity that includes responding to requests for additional information (RAIs), meeting with the NRC staff, and supporting resolution of contentions and hearings on any admitted contentions. The duration of the NRC review and approval process of the CY LTP was prolonged by the lack of quality and clarity of the initial LTP prepared by Bechtel. 46. Bechtel's LTP received over 100 RAIs from the NRC. In issuing the RAIs, the NRC stated that the LTP "provides insufficient information to completely satisfy the criteria (i.e., site characterization, plans for site remediation, detailed plans for the final radiation survey, etc.) specified in 10 CFR 50.82(a)(9)." 47. Bechtel took many months to develop the responses to the RAIs and to resolve issues with the NRC. CY technical and management personnel devoted extensive time to helping Bechtel prepare the responses, negotiate with the NRC to get LTP approval, and resolve LTP contentions. The LTP received numerous contentions from the State of Connecticut Department of Public Utility Control ("DPUC") and the Citizens Awareness Network ("CAN"). August 22, :53 PM -17-

18 All of the contentions were resolved with the exception of two which were subject to an NRC Atomic Safety Licensing Board ("ASLB") hearing. The ASLB is expected to rule later in Although the LTP was submitted to the NRC on July 7, 2000, the NRC did not approve it until November 25, 2002, more than 23 months later than Bechtel's schedule date. CY reserved it rights against Bechtel for the impact of the extended LTP approval process and the costs incurred by CY to help Bechtel complete its LTP Work. 49. Bechtel claimed that the delays in the LTP approval process impacted completion of the Work. However, Contract Exhibit A, Section specifically stated that "the Contractor shall coordinate all licensing activities including routine submittal and License Termination Plan to ensure that no delays in the Work will be caused by the need for such activities." Bechtel did not properly coordinate and execute its Work to account for the LTP approval process. 50. Contrary to Bechtel's representation, the LTP process was not predictable. It was unpredictable because Bechtel failed to provide an LTP that satisfied regulatory requirements. Bechtel also has used the unexcused delay in LTP approval as an excuse for not establishing DCGLs and not performing decontamination Work. There is no NRC regulation that requires an approved LTP to establish DCGLs or to perform decontamination Work. August 22, :53 PM -18-

19 B. RPV Disposal 51. Key Milestone 6 "RPV at Disposal Site" was required to be completed on October 26, As of the July 14, 2003 effective date of Contract termination, Bechtel had not achieved this Key Milestone and was at least four months away from its completion, a more than three year delay. Bechtel offered no valid contractual excuse for this delay. 52. Bechtel's achievement of Key Milestone 6 was delayed by numerous performance shortfalls for which it is responsible. These shortfalls included poor planning, scheduling, and execution; unexcused delays from the poor performance of Bechtel's subcontractor responsible for RPV internal components removal; and unexcused delays from the cleanup of excessive highly radioactive debris created during RPV internal component removal. 53. In addition to the schedule delay, these performance shortfalls significantly increased worker radiation dose. This increased dose will cause the total Project radiation dose to exceed the corresponding Contract Performance Warranty. 54. Bechtel represented to CY that the RPV segmentation subcontractor's methods and operations would be fully tested and proven prior to site mobilization. They were not. Bechtel's only defense to the unexcused delay was a claim that its subcontractor's poor performance was a force majeure event. 55. The delays to Key Milestone 6 also delayed the timely completion of Key Milestone 11 "Containment Decontamination Completed and Waste Disposed", required to be August 22, :53 PM -19-

20 completed by November 15, 2002, and Key Milestone 16 "Containment FSS and Provisional Acceptance by NRC", required to be achieved by December 22, Both of these Key Milestones were not initiated because of the RPV removal delays. Bechtel offered no valid contractual basis for an extension of time to complete these Key Milestones. Pursuant to Contract Section 3.1, CY notified Bechtel of its obligation to take all necessary steps to recover delay and complete the Work in accordance with the Key Milestones. Bechtel refused to fulfill this Contract obligation. 56. On August 29, 2002, CY notified Bechtel that it would assess liquidated damages for Bechtel's unexcused failure to achieve Key Milestones 5 and 6. C. Failed Fuel 57. Bechtel s Work included design and construction of an ISFSI and dry cask storage system followed by transferring spent fuel from the Spent Fuel Pool to the ISFSI. The CY Spent Fuel Pool contains 1,019 fuel assemblies and five containers of damaged fuel rods. The spent fuel assemblies stored in the CY Spent Fuel Pool are composed of fuel assemblies with intact fuel rods ( Intact Fuel Assemblies ) and fuel assemblies with a mixture of intact fuel rods and fuel rods with known or suspected cladding defects greater than a hairline crack or pinhole leak ( Damaged Fuel Assemblies ). 58. Spent fuel stored in the dry cask storage system must conform to the conditions set forth in the NRC Certificate of Compliance issued under 10 CFR Part 72. The Certificate of August 22, :53 PM -20-

21 Compliance limits the storage of Damaged Fuel Assemblies to specialized fuel assembly-sized containers called Damaged Fuel Cans. 59. Bechtel s Work to transfer spent fuel to an ISFSI included determining how many of the 1,019 fuel assemblies stored in the CY Spent Fuel Pool are Damaged Fuel Assemblies. Damaged Fuel Assemblies must either be repaired by replacing the damaged fuel rods with either solid stainless steel rods or "intact" fuel rods from donor fuel assemblies ( Spent Fuel Reconstitution ) or placing the Damaged Fuel Assemblies in Damaged Fuel Canisters. Any damaged fuel rods removed from Damaged Fuel Assemblies are consolidated in either damaged fuel rod containers or donor fuel assemblies that are packaged in Damaged Fuel Cans. The five containers of damaged fuel rods also must be placed in Damaged Fuel Canisters before transferring to the ISFSI. 60. CY made all its historical fuel records available to Bechtel both before and after the execution of the Contract. These records included information regarding the condition of the spent fuel assemblies including, but not limited, reports of two CY Spent Fuel Reconstitution projects in and 1991 as well as "Fuel Assembly History Cards", test reports and cycle chemistry reports for the fuel assemblies stored in the CY Spent Fuel Pool. 61. The Contract, particularly Bechtel's obligation to comply with applicable NRC regulations, required a determination of the number of Intact Fuel Assemblies and Damaged Fuel Assemblies. Otherwise, Bechtel would not be able to determine which spent fuel assemblies would have to be Reconstituted or placed in Damaged Fuel Cans. August 22, :53 PM -21-

22 62. In August 2000, Bechtel requested payment of an additional $372,412 to disposition what it claimed to be additional damaged fuel assemblies. In particular, Bechtel claimed that it had identified a total of 37 Damaged Fuel Assemblies as part of its fuel characterization efforts. Based on Bechtel's assertion that it was only required to process five Damaged Fuel Assemblies under the Contract, Bechtel sought payment for packaging the additional damaged fuel assemblies. 63. On June 28, 2001, the parties executed Amendment 3 to the Contract resolving this dispute. Under this amendment, Bechtel accepted a lump sum payment of $223,447 to satisfy its claim for packaging additional Damaged Fuel Assemblies and expressly waived any and all claims or future claims for damaged fuel. The only exception to this express waiver was Bechtel's remedy under Contract, Section that relates to extra Work resulting from implementation of new laws or regulations. Bechtel has not identified any changes in law applicable to characterization of the fuel assemblies. 64. Bechtel did not properly characterize the spent fuel. Although Bechtel claimed that they reviewed historical records, Bechtel failed to identify all Damaged Fuel Assemblies. 65. On July 25, 2002 CY notified Bechtel of the inadequacies in its fuel characterization. CY requested Bechtel to reconcile the results of its fuel characterization with the results of fuel characterization Work performed by a separate CY contractor. Bechtel refused to perform the requested reconciliation. August 22, :53 PM -22-

23 66. The characterization of the additional damaged fuel assemblies needed to occur without delay. Therefore, CY issued Directed Change Order ("DCO") on September 12, This DCO directed Bechtel to proceed with additional fuel characterization and Spent Fuel Reconstitution activities based on CY s input and was issued with the understanding that resolution of responsibility for this Work would continue through the Contract ADR process. Bechtel refused to perform the DCO Work. 67. In December 2002, as part of the Contract ADR process, CY agreed to advance payment for this Work under a reservation of rights. However, Bechtel failed to promptly engage a subcontractor to perform this Work. It also failed to properly plan, schedule, and execute this Work. As a result, the completion of this Work was delayed for months and impacted Work under Key Milestone 21. D. ISFSI 68. On December 14, 2000, CY requested Bechtel to postpone starting Work associated with construction of the ISFSI and the haul road leading to it until further notice. This decision resulted from the rejection by the Town of Haddam, Planning and Zoning Commission, of a zoning amendment and site plan application regarding the proposed ISFSI. The zoning dispute was resolved after extensive efforts by CY and on February 1, 2002, a building permit was issued by the Town of Haddam for the construction of the ISFSI. This building permit allowed Bechtel to start Work associated with construction of the ISFSI. August 22, :53 PM -23-

24 69. By letter dated March 27, 2002, Bechtel presented its change order proposal in the amount of $11,654,848 for a time extension and Work impact costs, including claimed subcontractor costs, resulting from the delayed start of Bechtel's Work on the ISFSI. 70. Bechtel and CY executed Agreed Change Order Number 02-15, dated September 15, It compensated Bechtel in the lump sum amount of $2,510,000, representing full and final compensation for all damages claimed by Bechtel and its subcontractors, including all direct and indirect costs, resulting from the delayed start of Bechtel's Work at the ISFSI. Bechtel reserved only its right to present a separate change order proposal for its additional costs, if any, resulting from the delay, if any, to the overall completion of the Project actually caused by the delayed start to Bechtel's Work at the ISFSI and for increased subcontractor labor costs, if any. E. Groundwater 71. Decommissioning requires the continued identification and characterization of radiological and non-radiological source terms that must be considered in Work planning and remedied by Work execution. Contract Exhibit A, Section requires Bechtel to perform "...continuous characterization of the Site... to support its Work, including but not limited to... Final Status Survey, License Termination Plan, and Unrestricted Release of the Site." The Contract incorporated all groundwater Work in Bechtel s Work scope. Contract Section required that contaminated groundwater Work be treated as a change with respect to cost and August 22, :53 PM -24-

25 schedule for [R]emediation, storage, transportation, disposal, and directly related services associated with contaminated Groundwater at the Site. 72. Bechtel's proposal represented to CY that groundwater characterization Work would be conducted in the first six months after Contract award. After the Contract was signed, Bechtel failed to perform this Work. Bechtel denied that groundwater characterization was within its scope of Work. Bechtel provided no Contract basis for this position. In June 2001, agreement was reached between Bechtel and CY to compensate Bechtel through a change order for cost impacts of selected groundwater characterization activities. Pursuant to Contract Section 4.2.1, CY issued eleven Agreed Change Orders to allow Bechtel to implement its plan. 73. Groundwater samples taken from three of the CY Site s thirty-eight groundwater monitoring wells in June 2001 indicated the presence of strontium The presence of strontium-90 at the CY Site is not unexpected. Strontium-90 is a common fission product present in the reactor system and is more likely in plants, such as CY, with Damaged Fuel Assemblies. During CY Plant operations, spills and leaks occurred which affected the soil and groundwater. These spills and leaks were well documented in the site characterization information, including the CY Plant Spill Log, that was made available to Bechtel before Contract signing. 75. Rather than address the contaminated groundwater under the Contract, Bechtel concluded that Work should be suspended. Bechtel also took the commercial position in August 22, :53 PM -25-

26 October 2001 that because of this contamination, it would be impossible for Bechtel to ever achieve Unrestricted Release and therefore the Contract should be completely restructured. 76. CY's letters of December 20, 2001 and January 29, 2002 advised Bechtel that it had provided no valid basis for stopping Work and restructuring the Contract in the absence of information regarding the extent of strontium-90 and its impact on Bechtel's Work. CY requested Bechtel to provide, by February 15, 2002, its characterization plan and schedule to confirm the source and extent of the strontium-90 affecting the groundwater. Bechtel did not provide a plan. 77. By the summer of 2002, Bechtel's refusal to address the impacts of strontium-90 in groundwater had brought the decontamination and decommissioning Work almost to a standstill. CY again requested Bechtel to develop the contractually required site characterization plan and schedule to confirm the source and extent of contaminated groundwater. Bechtel again refused to provide a plan, claiming that CY was contractually responsible for all contaminated groundwater Work. 78. Only as the result of a joint effort by CY and Bechtel was a groundwater and soil characterization plan to address strontium-90 developed. Analysis of soil made under this plan indicated soil contaminated with strontium-90 under the Tank Farm. The soil is apparently a significant contributor to the contaminated groundwater. The CY Plant Spill Logs identified the Tank Farm as an area with components that leaked into the soil. August 22, :53 PM -26-

27 79. One important component of the Work which Bechtel refused to execute was establishing DCGLs for building decontamination and starting building decontamination. Bechtel maintained that contaminated groundwater precluded establishing DCGLs until the level of contamination was less than the NRC s license termination criteria. An evaluation of the LTP by CY indicated that Bechtel could establish the DCGLs for building decontamination. Bechtel refused to verify this evaluation. Bechtel's failure to establish DCGLs delayed achievement of Key Milestone 12 "Primary Auxiliary Building Decontamination Completed and Waste Disposed" and other Milestones related to the decommissioning of the CY Site buildings and led to a significant reduction in Bechtel s overall Work effort. 80. Bechtel never accepted its Contract responsibility for groundwater Work. Instead, Bechtel refused to perform the Work without CY's direction and slowed the pace of all other Work. 81. Bechtel also claimed that contaminated groundwater was on the Project Critical Path. Bechtel never provided a Work schedule to support this position. It also never explained why the unrestrained RPV Work that was years behind schedule was not the Project Critical Path. F. Work Schedule 82. Contract Exhibit A, Section 8.9 "Schedule/Planning" requires Bechtel to submit a Work schedule. The Work schedule is required to include all Work activities and logical August 22, :53 PM -27-

28 restraints, including relationships between activities. It also is required to contain the Key Milestones and intermediate Milestones delineated in the Contract. Bechtel's schedule is required "to provide all requested detail such that the schedule demonstrates to CY's satisfaction, that all Work under the Contract is properly planned and accounted for." 83. This Work schedule is necessary to allow Bechtel to fulfill its Turnkey responsibility, including planning, scheduling and implementing the Work. It is also necessary to allow CY to fulfill its Project oversight responsibility and plan its actions. 84. Bechtel provided monthly updated complete Work schedules until May Between May 2002 and CY's Notice of Termination of Bechtel on June 13, 2003, Bechtel refused to provide a complete and updated Work schedule. Bechtel's refusal to comply with this Contract requirement resulted from its own deficiencies in Work planning and scheduling. Bechtel's decision was also intended to avoid Bechtel's responsibility for its performance defaults through depriving CY of the schedule necessary to monitor Bechtel's Work. During this time, CY regularly notified Bechtel both orally and in writing, that it had all information necessary to prepare a complete Work schedule. 85. During the thirty day cure period following termination, Bechtel submitted a schedule. In its July 2, 2003 transmittal letter, Bechtel stated that the schedule submission was meaningless. On July 11, 2003 CY rejected the schedule submission and stated it was unacceptable for the following reasons: Bechtel refused to commit to meet the schedule; it transferred many Work activities to CY that were clearly Bechtel's Contract responsibility; all August 22, :53 PM -28-

29 Work stopped in the first quarter of 2005 while groundwater characterization and monitoring was performed; and the planned duration of decontamination and demolition work was shortened from four years to one year, without explanation. 86. There is no justification for Bechtel's failure to provide an updated complete Work schedule after May 2002 and failure to commit to a Project completion date. Without a complete Work schedule and Project completion date, CY could not fulfill its responsibilities. Without a complete Work schedule, Bechtel could not plan, manage and implement its Work. 87. Bechtel failed to establish reasonable work sequences to meet its schedule obligations. Bechtel managed its work sequences to obtain maximum payments rather than to achieve Key Milestones and to comply with the "Time is of the Essence" contractual requirements. This conduct substantially delayed activities important to Final Acceptance and to the mitigation of groundwater contamination such as early tank and soil removal. G. Project Mismanagement 88. Bechtel mismanaged the Work by refusing to establish DCGLs and to initiate structural decontamination activities. Bechtel also refused to perform Contract Work including but not limited to: installing electrical power and telecommunications to the ISFSI; decontaminating the discharge canal; cleaning up the landfill adjacent to the shooting range; and removing debris blocking access to the discharge canal. August 22, :53 PM -29-