January 14, 2009 Mr. Peter J. Miner, Director Regulatory and Quality Assurance USEC Inc. 6903 Rockledge Drive Bethesda, MD 20817 SUBJECT: NRC INSPECTION REPORT NO. 70-7004/2008-001 Dear Mr. Miner: During the weeks of September 15, September 29, and October 13, 2008, the U.S. Nuclear Regulatory Commission (NRC) completed a quality assurance inspection of supplier audit activities associated with the construction of the American Centrifuge Plant. The enclosed inspection report documents the inspection results, which were discussed on January 8, 2009, with Terry Sensue of your staff. The inspection examined activities conducted under your license as they relate to safety and compliance with the Commission=s rules and regulations. The inspectors reviewed selected procedures and records, observed activities, and interviewed personnel. Based on the results of this inspection, no violations of NRC requirements were identified. In accordance with 10 CFR 2.390 of NRC=s ARules of Practice,@ a copy of this document and its enclosures may be accessed through the NRC=s public electronic reading room, Agency-Wide Document Access and Management System (ADAMS) on the Internet at http://www.nrc.gov/reading-rm/adams.html. Should you have any questions concerning this letter, please contact us.

Sincerely, /RA/ M. Layton for Jay L. Henson, Chief Fuel Facility Inspection Branch 2 Division of Fuel Facility Inspection

Docket No. 70-7004 License No. SNM-2011 Enclosure: (See page 2)

P. Miner 2 Enclosure: NRC Inspection Report 70-7004/2008-001 cc w/encl: Russell Starkey, Vice President American Centrifuge USEC Inc. 6903 Rockledge Drive Bethesda, MD 20817 Jim Bolon, Director, Commercial Plant EPC USEC Inc. 3930 U. S. 23 South P.O. Box 628 Piketon, OH 45661 Terry Sensue, Regulatory Manager USEC Inc. 3930 U.S. 23 South P.O. Box 628 Piketon, OH 45661 R. M. DeVault, Regulatory Oversight Manager Department of Energy P.O. Box 2001 Oak Ridge, TN 37831 Carol O'Claire Ohio Emergency Management Agency 2855 West Dublin-Granville Road Columbus, OH 43235-2206 Distribution w/encl: B. Smith, NMSS D. Hartland, RII J. Henson, RII *see previous concurrence

G X PUBLICLY AVAILABLE G NON-PUBLICLY AVAILABLE G SENSITIVE G X NON-SENSITIVE

ADAMS: G X Yes ACCESSION NUMBER:_________________________ G SUNSI REVIEW COMPLETE

OFFICE RII:DCI RII:DCI RII:DCI HQ:NMSS RII:DFFI DOE:ADC SIGNATURE /RA/ /RA/ /RA/ /RA/ /RA/ /RA/

NAME J. Calle* A. Artayet* D. Harmon* P. Bell* D. Hartland* DOE*

DATE 1/8/2009 1/8/2009 1/8/2009 1/8/2009 1/8/2009 1/13/2009 1/ /2009

E-MAIL COPY? YES NO YES NO YES NO YES NO YES NO XYES NO YES N

OFFICIAL RECORD COPY DOCUMENT NAME: G:\FFBII\REPORTS\FINAL REPORTS\USEC\IR 2008-001.DOC

Enclosure

U.S. NUCLEAR REGULATORY COMMISSION

REGION II

Docket No.: 70-7004 License No.: SNM-2011 Report No.: 70-7004/2008-001 Licensee: USEC Inc. Location: Piketon, Ohio Inspection Dates: September 16-18, September 30-October 2, and October 14-16, 2008 Inspectors: D. Hartland, Senior Fuel Facility Inspector, Region II

P. Bell, Senior Quality Assurance Analyst, NMSS J. Calle, Senior Construction Inspector, Region II A. Artayet, Senior Construction Inspector, Region II D. Harmon, Construction Inspector, Region II

\ Approved: Jay L. Henson, Chief

Fuel Facility Inspection Branch 2 Division of Fuel Facility Inspection

EXECUTIVE SUMMARY

USEC Inc. American Centrifuge Plant

NRC Inspection Report No. 70-7004/2008-001 This inspection was conducted by regional inspectors and a quality assurance specialist during normal shifts and involved observation and evaluation of the licensee=s implementation of its quality assurance program. The scope of this inspection included a review of the supplier audit program. The inspection identified the following aspects of the licensee=s programs as outlined below: Supplier/Vendor Inspection ! Implementation of the Quality Assurance Program Description pertaining to the

licensee=s conduct of observed vendor audit activities was adequate. The planned objectives for each audit were attained and findings were clearly communicated to the vendors.

Attachment: Persons Contacted Inspection Procedures List of Items Opened, Closed, and Discussed List of Acronyms Used

REPORT DETAILS 1. Summary of Facility Status

The licensee=s oversight of the preparation and implementation of site construction activities continued throughout this reporting cycle. During this reporting cycle, no safety-related construction activities had commenced.

2. Supplier/Vendor Inspection (Inspection Procedure 88115) a. Fluor Enterprises, Inc. (1) Scope and Observations

On September 16-18, 2008, the inspectors observed the licensee conduct an audit of its engineering, procurement, and construction contractor, Fluor Enterprises, at its corporate office in Greenville, South Carolina. The audit was a follow-up to one performed in April 2007, and the purpose was to confirm that programs and procedures were being implemented to maintain Fluor on the licensee=s approved supplier list for design and procurement services. In addition, the audit scope also included an evaluation to expand the scope of approval to include construction support services. On September 30 - October 2, 2008, the inspectors also observed the licensee continue the audit of Fluor in Piketon, Ohio, to assess its readiness to begin safety-related construction activities at the site.

The inspectors reviewed the licensee=s audit checklist that included a review of issues identified during the previous audit to ensure adequate corrective action was taken to address those items. The scope of the checklist included a review of all aspects of Fluor=s Quality Assurance Program Description (QAPD), which was consistent with the licensee=s own Plan. The inspectors noted that the items on the checklist were clearly stated and the overall scope of the audit was comprehensive. The audit team for each week consisted of a leader, three qualified auditors, a trainee, and two technical specialists from the engineering department.

The inspectors observed the licensee=s performance regarding the following activities: (1) pre-audit meeting; (2) execution and performance of the audit; (3) identification, categorization, and summarization of deficiencies; and, (4) the close-out meeting. The inspectors noted that the audit was conducted in a professional manner and adequately covered key programmatic aspects of Fluor=s QAPD implementation. Throughout the audit, the licensee caucused and kept the inspectors abreast of the status of ongoing activities.

Overall, the certificate holder=s planned audit objectives were attained and the safety-significance of the vendor=s activities was clearly communicated during the close-out meeting. The inspectors noted that the results of the licensee=s audit culminated in the identification of some findings and other observations. The findings of noteworthy

2

significance included failure to flow down 10 CFR Part 21 requirements into purchase orders, no trending performed as part of the corrective action program, and no approved procedures for processing construction work packages and design change notices. Additional findings identified by the inspectors were that Fluor had not developed and implemented a software quality assurance plan or a formal commercial grade dedication process. The findings were required to be corrected prior to Fluor being authorized to begin safety-related construction activities.

b. Teledyne Brown Engineering, Inc. (1) Scope and Observations

On October 14-16, 2008, the inspectors observed Fluor conduct an audit of one of it suppliers, Teledyne Brown Engineering, at its manufacturing facility in Huntsville, Alabama. The purpose of the audit was to evaluate implementation of the supplier=s QAPD. Teledyne Brown was contracted by Fluor to fabricate Quality Level -1 service modules which were used to connect individual machines to the cascade. Representatives from the licensee were also present to observe the audit.

The inspectors reviewed the licensee=s audit checklist which included a review of all aspects of the supplier=s QAPD, which was consistent with the Fluor=s own Plan. The inspectors noted that the overall scope of the audit was adequate but that a generic checklist was used. Discussions with the audit team leader indicated that Fluor had intended to revise its audit program implementing procedure to require unique checklists be prepared for each audit. The audit team consisted of a leader and three qualified contractor auditors.

Overall, Fluor=s planned audit objectives were attained and the safety-significance of the vendor=s activities was clearly communicated during the close-out meeting. The inspectors noted that the results of the audit culminated in the identification of some findings and other observations. The findings of noteworthy significance included weaknesses in the corrective action program and no approved procedure for implementing the audit program. An additional finding identified by the inspectors was that the supplier was not checking the preheat temperature prior to welding as required by the its welding procedure. The inspectors also noted that the supplier=s general procedure for bending stainless steel pipe needed to be revised to document the specific application of acceptable minimum wall thickness. Fluor intended to provide enhanced oversight of the supplier=s implementation of its corrective action program until the weaknesses were corrected.

(2) Conclusions

Implementation of the QAPD program pertaining to the licensee=s conduct of observed vendor audit activities was adequate. The planned objectives for each audit were attained and findings were clearly communicated to the vendors.

3 3. Follow up on Previously Identified Issues a. (Closed) IFI 70-7004/2007-001-02: The licensee was to revise its liquid penetrant test

inspection procedure to incorporate the applicable code requirements. In lieu of a procedure revision, the licensee cancelled the procedure and plans to have its construction contractor conduct inspections. This item is closed.

b. (Closed) IFI 70-7004/2007-001-03: The licensee was to provide documentation to verify

the qualifications of the licensee=s liquid penetrant test Level III inspector. The licensee was unable to find the documentation. As a result, the licensee put a hold on the inspector’s qualifications and plans to have its construction contractor conduct inspections. This item is closed.

c. (Closed) VIO 70-7004/2007-001-04: The licensee authorized its primary construction

contractor as a Quality Level-1 supplier with no limitations without having examined objective evidence that all elements of the contractor=s QAPD were being implemented. As corrective action, the licensee revised the applicable procedure to include instructions for when limitations were to be documented on the approved supplier list. This item is closed.

4. Exit Interview

The inspection scope and results were summarized on January 8, 2009. Although proprietary documents and processes may have been reviewed during this inspection, the proprietary nature of these documents or processes was deleted from this report. No dissenting comments were received from the licensee.

ATTACHMENT 1. PARTIAL LIST OF PERSONS CONTACTED

Licensee P. Miner, Director, Regulatory and Quality Assurance J. Bolon, Director, Commercial Plant EPC T. Sensue, Regulatory Manager M. MacCrae, Quality Assurance Manager Other individuals contacted included supervisors, engineers, and auditors.

2. INSPECTION PROCEDURES (IPs) USED

IP 88115 Supplier/Vendor Inspection

3. LIST OF ITEMS OPENED, CLOSED, AND DISCUSSED

Item Status Description

IFI 70-7004/2007-001-02 Closed The licensee=s revision to its liquid penetrant test inspection procedure to incorporate the applicable code requirements.

IFI 70-7004/2007-001-03 Closed Documentation to verify the qualifications of

the licensee=s liquid penetrant test Level III inspector.

VIO 70-7004/2007-001-04 Closed The licensee authorized its primary

construction contractor as a Quality Level-1 supplier with no limitations without having examined objective evidence that all elements of the contractor=s QAPD were being implemented.

4. LIST OF ACRONYMS USED

ACP American Centrifuge Plant IFI Inspector Followup Item NRC Nuclear Regulatory Commission QAPD Quality Assurance Program Description VIO Violation