Presentation to EFCOG QA & ISM Supply Chain Working Group

1. Presentation to EFCOG QA & ISM Supply Chain Working Group 1.) DOE HQ Structure ~10 Minutes 2.) Kobe Steel Update ~10 Minutes 3.) S/CI Data Warehouse Planning ~10 Minutes October 17, 2018 Presentation by Larry Adkinson, AU-23 Office of ES&H Reporting & Analysis Larry.Adkinson@hq.doe.gov

2. Topic 1 DOE Employees • ~14,000 Federal Employees (2017 numbers) • ~96,000 Contract Employees (2017 numbers) • FY17 DOE Budget Request $32.50 Billion • FY18 DOE Budget Request $28.04 Billion • FY19 DOE Proposed Budget $30.61 Billion

3. James V. Forrestal BuildingWashington D.C. Headquarters

4. Germantown, MD HeadQuarters

5. May 2018

8. DOE Program Offices • Advanced Research Projects Agency – Energy • Cybersecurity, Energy Security, and Emergency Response • Electricity • Energy Efficiency & Renewable Energy • Enterprise Assessments • Environment, Health, Safety, and Security • Environmental Management • Fossil Energy • Indian Energy Policy & Programs • Legacy Management • Loans Programs • Nuclear Energy • Science

9. National Laboratories (17) & Technology Centers (6) • Ames Laboratory • Argonne National Laboratory • Bettis Atomic Power Laboratory • Brookhaven National Laboratory • Fermi National Accelerator Laboratory • Idaho National Laboratory • Knolls Atomic Power Laboratory • Lawrence Berkeley National Laboratory • Lawrence Livermore National Laboratory • Los Alamos National Laboratory • National Energy Technology Laboratory • National Renewable Energy Laboratory • 13. New Brunswick Laboratory • 14. Oak Ridge National Laboratory • 15. Oak Ridge Institute for Science & Education • 16. Pacific Northwest National Laboratory • 17. Princeton Plasma Physics Laboratory • 18. Radiological & Environmental Sciences Lab. • 19. Sandia National Laboratory • 20. Savannah River Ecology Laboratory • 21. Savannah River National Laboratory • 22. SLAC National Accelerator Laboratory • 23. Thomas Jefferson National Accelerator Facility

11. Kobe Steel, Ltd - Kobe Steel USA - Kobelcoaka “Kobe” • Located in Chuo-ku, Kobe, Japan • Formed in 1905, one of Japan’s oldest industries • One of the Largest Steel Manufacturers in the world • Over 36,000 employees • Supply ~Half of the global market of wires used in valve springs of engines • Produce a variety of metals and metal products Kobe Steel HQ

12. October 2017Kobe Steel Makes International News Kobe acknowledged in Japanese Court System that it had: • Falsified Quality Data for almost 10 years • Shipped Improperly Certified metal products, including; • Aluminum • Copper • Iron and Steel • Powdered Steel • To over 500 customers worldwide

13. Kobe Steel Notification Timeline 10-16-2017 6:19 AM Received email referencing a Bloomberg news link RE: Kobe 10-16-2017 7:40 AM Informal Email from AU 23 / LDA to SRS PAD & SWPFPO 10-16-2017 12:36 PM (Informal) “SCI Update; Kobe Steel – Fudging Quality Tests” DNFSB 5 Individuals Mixed Distribution of 40 Sites/Contractors DOE HQ 5 Different Programs NNSA 9 Individuals Office of Science 5 Individuals Office of Nuclear Safety 2 Individuals DOE & Contractor 65 S/CI Coordinators Total ~400 people received this direct notification

14. AU-1 Sent First Notice to ALL of DOE; All PROGRAM Offices & All Sites 11-07-2017 - AU-1 Memorandum w/ DCS #1934 (Data Collection Sheet) • Provided the information that Kobe Steel had admitted to in Japanese Court; • Aware of wrongdoing for <10 years • Customer/Client List with ~525 companies • Japanese Gov’t investigated Kobe Steel, Ltd, Kobelco, Kobe Steel USA and Affiliates • Completed investigation in February, in early March 2018, released expanded scopes: • Wrongdoing went back ~50 years • Customer / Client List was nearly 800 companies

15. Japan’s Investigation concluded Kobe’s Misconduct was: • Falsifying or fabricating inspection data for products falling short of public standards or customer specifications • Shipping or delivering those products to customers as if they conformed to the public standards or customer specifications Kakogawa Works > < Entrance to Kobe Works

16. AU-1 SENT Second NOTICE to ALL of DOE; All PROGRAM Offices & All Sites 04-23-2018 - AU-1 Memorandum w/ DCS #1961 (Data Collection Sheet) • Japanese Gov’t investigated Kobe Steel, Ltd, Kobelco, Kobe Steel USA and Affiliates • Japanese Gov’t completed investigation in late February 2018 and released March 6 report with expanded scopes: • Wrongdoing went back ~50 years • Customer / Client List at nearly 800 companies

17. Fundamental Causes of Misconduct • Management style that overemphasized profitability and inadequate corporate governance • Imbalanced operation of plants that resulted in reduced awareness of quality compliance among employees • Insufficient quality control procedures that allowed the Misconduct to take place • Reduced awareness for the need to strictly comply with contractual specifications • Inadequate organizational system

18. AU-1 SENT Third NOTICEto ALL of DOE; All PROGRAM Offices & All Sites 06-22-2018 - AU-1 Memorandum w/ “Decision Paper” • Provided Guidance in how to address Kobe Steel products, if found; • Guidance included the following: • Treat items as Suspect, and document as nonconforming • Evaluate items to determine if they meet specifications • If sites were satisfied with evaluation results, then use as is • If not satisfied with evaluation results, then replace

19. Reporting Kobe Steel Products Reporting included: • Kobe products that failed evaluation were to be reported: • Into ORPs if ORPs reporting criteria was met • To Office of Inspector General (OIG) • To AU-23 for tracking for potential follow-up actions against Kobe Steel

20. Responses to AU-23 to Date – Summary:

21. Evaluation Status to Date – Summary:

22. Progress to Date – Summary Any Questions on Kobe Steel?

23. S/CI Shareholders Topic 3 The DOE Counterfeit Program Has Many Owners and Users: • DOE Organizationally: • AU 32 Quality Assurance & Nuclear Safety Management Programs • AU 23 ES&H Reporting and Analysis • Environmental Management Program Office (Basically Quality Assurance) • All S/CI Coordinators from DOE Program Offices, and Field Offices • All sites, facilities, and laboratories with differing Requirements and Rigor • Many Sites and Program Offices are Nuclear, with stringent Quality requirements • Many Sites and Program Offices are NON-Nuclear, with less-stringent Quality requirements

24. DOE ORDERS Do Not Always align with Policy and Intended Goals • Errors, Issues, and omissions in DOE O. 414.1D, in reporting, and in end-state disposition of counterfeits • DOE O. 232.2A was rightfully revised to exclude all but worst case S/CI from being reported in ORPs. (At issue was the contradiction between a site’s finding and identifying a counterfeit item, which is not a failure occurrence, and the purpose of ORPs, which is the reporting of failure occurrences.) • DOE O. 232.2A has eliminated required reporting of some counterfeit items, depending on when or where the items are found, while DOE O. 414.1D requires that all identified counterfeits be reported via DOE O. 232A • Misalignments between these two orders need to be resolved, and a number of those misalignments involve the reporting of S/CI.

25. S/CI Data Warehouse Needed: A Tracking and Trending System separate and independent from ORPS for all counterfeit items identified within the DOE complex. It should have multiple capabilities and functions: • Easily accessed by Field Sites & Program Offices, while access-protected with Username and Password. • Have electronic interface to receive inputs from ORPs reports that contain counterfeit items • Have direct feed input from news wires on counterfeits (screened by a selected list of key words) • Store and categorize relevant news articles pertaining to environment, safety, or health topics. • Track, trend, and create statistical reports • Maintain a current list of all Site Counterfeit Coordinators to improve communication between sites • Maintain a Library of relevant Technical documents such as DOE Counterfeit Handbook, NNSA documents, NRC Notices, NASA S/CI Alerts, EPRI Publications, etc. • Provide presentations and tools for training in the identification, evaluation, and processing of counterfeits • Provide a list of recommended S/CI trainers • Provide assessment tools, Lines of Inquiry, and other evaluative information, • Have electronic interface with GIDEP for reporting counterfeit items for cross agency consumption, such as NNSA, Department of Defense, NASA, and ICE

26. Any Questions on the S/Ci Warehouse? I will appreciate your suggestions, comments, inputs as to what should (or should not) be included in the S/CI Data Warehouse. Send your feedback in an email to; Larry.Adkinson@hq.doe.gov Thank You, Thank You very much!