Index


Nuclear Nonproliferation: U.S. International Nuclear Materials Tracking Capabilities Are Limited

(Letter Report, 12/27/94, GAO/RCED/AIMD-95-5)


The Energy Department's (DOE) computerized Nuclear Materials Management
and Safeguards System has significant limitations that impair its
ability to track the international movement of nuclear materials. GAO is
concerned that DOE's new tracking system will not overcome existing
limitations that are often caused by non-system problems. For example,
the system lacks data that are not required to be reported under the
U.S. agreements for cooperation. GAO believes that DOE should have
explored systems alterations and asked its intended users to try to
mitigate some of these limitations. In addition, because DOE has not
followed good systems development practices, it cannot be sure that the
system will be cost-effective or will even fulfill the needs of its
major users.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED/AIMD-95-5
     TITLE:  Nuclear Nonproliferation: U.S. International Nuclear 
             Materials Tracking Capabilities Are Limited
      DATE:  12/27/94
   SUBJECT:  International cooperation
             International agreements
             Foreign governments
             Nuclear proliferation
             Systems design
             Strategic materials
             Data collection operations
             International relations
             Exporting
             Computerized information systems
IDENTIFIER:  DOE Nuclear Materials Management and Safeguard System
             Desert Storm
             U.S. Bilateral Physical Protection Program
             
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Cover
================================================================ COVER


Report to Congressional Requesters

December 1994

NUCLEAR NONPROLIFERATION - U.S. 
INTERNATIONAL NUCLEAR MATERIALS
TRACKING CAPABILITIES ARE LIMITED

GAO/RCED/AIMD-95-5

Nuclear Nonproliferation


Abbreviations
=============================================================== ABBREV

  CFO - Chief Financial Officer
  DOE - Department of Energy
  EURATOM - European Atomic Energy Community
  GAO - General Accounting Office
  HEU - highly enriched uranium
  IAEA - International Atomic Energy Agency
  NMMSS - Nuclear Materials Management and Safeguards System
  NRC - Nuclear Regulatory Commission

Letter
=============================================================== LETTER

<RCED/AIMD>

B-259533

December 27, 1994

The Honorable Charles E.  Schumer
House of Representatives

The Honorable John Glenn
Chairman, Committee on Governmental
 Affairs
United States Senate

This report responds to your request for information on how the
United States tracks its exported civilian (nondefense-use) nuclear
materials and ensures their physical protection.  Specifically, this
report (1) describes the capability of the Department of Energy's
(DOE) computerized Nuclear Materials Management and Safeguards System
(NMMSS) to track the international movement of nuclear materials, (2)
assesses the adequacy of DOE's planned new NMMSS, and (3) provides
information on how the United States ensures the physical protection
of nuclear materials of U.S.  origin that are exported. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

The United States relies primarily on the NMMSS to track the nuclear
materials exported to foreign countries.  However, this system does
not have all the information needed to track the specific current
location (facility) and status of all nuclear materials of U.S. 
origin that are supplied to foreign countries.  For example, the
system does not track exported U.S.  nuclear materials that are moved
from facility to facility within countries, nor does it show the
current status of the nuclear materials (e.g., irradiated,
unirradiated, fabricated, burned up, or reprocessed).  Thus, the
NMMSS may not contain correct data on where (at which facility) these
materials are located within foreign countries or on their current
status.  The system does not contain this information primarily
because the amounts, types, and reliability of data contained in the
NMMSS depend largely on the data required to be reported under
international agreements for peaceful nuclear cooperation, as well as
on foreign countries' and U.S.  and foreign facilities' willingness
to report complete and accurate data. 

Since the NMMSS is an older mainframe-based system, DOE decided to
modernize it using PC technology.  However, since DOE's new NMMSS
will replicate the current NMMSS' functions, the new system will
contain the same tracking limitations that existed previously.  Thus,
the data contained in the new NMMSS on the location and status of
U.S.-supplied nuclear materials internationally will continue to be
limited by the data reported under the agreements for cooperation. 
Moreover, DOE did not adequately plan the development effort for the
new NMMSS.  In planning the new system, DOE did not follow sound
systems development practices.  Furthermore, DOE did not identify and
define the users' needs or adequately explore design alternatives
that would best achieve these needs in the most economic fashion. 
Therefore, DOE cannot ensure that it chose the most cost- effective
alternative or developed a system that will meet users' needs. 

Neither DOE's current nor planned new nuclear materials tracking
system was intended to provide or contain data on nuclear materials
of foreign origin that were never imported into the United States. 
Accordingly, DOE and other agencies collect information on the status
of U.S.  and non-U.S.  nuclear materials worldwide through other
sources.  However, these sources are limited in their ability to
obtain accurate data in certain countries. 

The U.S.  government's ability to ensure that exported nuclear
materials are adequately protected is limited because that ability is
contingent on foreign countries' cooperation.  Many members of the
international community, including the United States, believe that
the physical protection of nuclear materials is the responsibility of
the individual country.  Therefore, the United States must rely on
the individual country's commitment to comply with voluntary
international guidelines for physical protection.  While the United
States conducts on-site physical protection evaluations of facilities
in countries with U.S.-supplied nuclear materials, recommendations
that may result from these visits are not binding on the country. 


   BACKGROUND
------------------------------------------------------------ Letter :2

Hundreds of tons of plutonium and highly enriched uranium (HEU) have
accumulated worldwide, and inventories of plutonium are expected to
continue to grow in years to come as a result of reprocessing\1 or
recovering activities.  Tracking and accounting for these and other
nuclear materials are important in order to (1) ensure that nuclear
materials are used only for peaceful purposes; (2) help protect
nuclear materials from loss, theft, or other diversion; (3) comply
with international treaty obligations; and (4) provide data to
policymakers and other government officials. 

The United States regulates and controls its exports of civilian-use
nuclear materials through three mechanisms-- agreements for
cooperation, export licenses, and subsequent arrangements. 
Subsequent arrangements refer to the regulatory controls over certain
cooperative arrangements for the supply, use, or retransfer\2 of
nuclear materials.  Certain controls in the agreements for
cooperation are designed to assure both the United States and the
recipient nation or group of nations that materials transferred
between parties will be used for authorized purposes only and will be
properly safeguarded.  (See app.  I for a discussion of U.S.  export
license processes.) As of November 1994, the United States had 29
agreements for cooperation with other countries. 

In addition, the United States, as well as many members of the
international community, relies on the International Atomic Energy
Agency (IAEA) to develop and enforce effective international
safeguards--technical measures designed to detect the diversion of
significant quantities of nuclear materials from peaceful uses--for
nuclear materials of U.S.  and non-U.S.  origin. 

The U.S.  agreement with IAEA, as well as some of the U.S. 
agreements for cooperation, requires the United States to maintain a
system of accounting and control over source and special nuclear
materials.\3 In addition, the United States reports data to IAEA on
nuclear materials imported by and exported from the United States. 
DOE's automated tracking system, the NMMSS, is used to fulfill these
accounting, controlling, and reporting obligations for U.S.-supplied
international nuclear materials.  DOE and the Nuclear Regulatory
Commission (NRC) cosponsor the NMMSS, and it is managed and operated
by a DOE contractor--Martin Marietta Energy Systems, Incorporated. 

The NMMSS has been used to account for U.S.  imports and exports of
nuclear materials since 1977.  The NMMSS data base contains data on
U.S.-supplied international nuclear materials transactions, foreign
contracts, import/export licenses, government-to-government
approvals, and other DOE authorizations, such as authorizations to
retransfer U.S.-supplied materials between foreign countries.  The
NMMSS also maintains and provides DOE with information on domestic
production and materials management, safeguards, physical
accountability, financial and cost accounting, and other information
related to nuclear materials.  In addition, the NMMSS provides NRC
with data on nuclear materials accountability and safeguards for NRC
licensees. 


--------------------
\1 Reprocessing is the chemical separation of usable uranium and
plutonium from spent nuclear reactor fuel. 

\2 A retransfer is the transport from one foreign country to another
of nuclear materials previously exported from the United States or
the materials produced through the use of nuclear materials
previously exported by the United States. 

\3 Special nuclear materials are plutonium, uranium-233, and uranium
enriched above 0.711 percent by weight in the isotope uranium 235. 


   U.S.  ABILITY TO TRACK NUCLEAR
   MATERIALS INTERNATIONALLY IS
   LIMITED
------------------------------------------------------------ Letter :3

The United States relies primarily on the NMMSS to track the nuclear
materials that it exports to foreign countries.  However, this system
does not have all of the information needed to track the current
location and status of all nuclear materials of U.S.  origin that are
supplied to foreign countries.  The amounts, types, and reliability
of the data contained in the NMMSS depend largely on data reported
under the international agreements for cooperation, as well as on
foreign countries' and on U.S.  and foreign facilities' willingness
to report complete and accurate data. 


      NMMSS DOES NOT TRACK THE
      CURRENT STATUS AND LOCATION
      OF EXPORTED NUCLEAR
      MATERIALS
---------------------------------------------------------- Letter :3.1

The NMMSS' international tracking capability is limited primarily
because the agreements for cooperation do not require foreign
countries to report data on the current locations of U.S.-supplied
nuclear materials.  For example, as we reported in 1982 and 1985,\4
the U.S.  agreement for cooperation with the European Atomic Energy
Community (EURATOM)\5 does not require most EURATOM countries to
inform the United States of retransfers of U.S.-supplied materials
from one EURATOM country to another EURATOM country, or to report
alterations to U.S.-supplied nuclear materials in most of these
countries.\6 In addition, none of the existing agreements for
cooperation require foreign countries to report intracountry
transfers of U.S.-supplied materials from one facility to another. 
Thus, the NMMSS may not contain correct and current data on either
which EURATOM country has U.S.-supplied nuclear materials or at what
specific facilities these materials are located. 

The NMMSS' international tracking capability also is limited because
the data base does not contain certain data on the current status
(i.e., whether the materials are irradiated, unirradiated,
fabricated, burned up, or reprocessed) of all U.S.  nuclear materials
that have been exported to foreign countries, with the exception of
Sweden, Australia, and Canada.  The NMMSS contains status data about
U.S.-supplied nuclear materials in these three countries because the
United States performs annual reconciliations with them.\7 The
reconciliations compare the NMMSS' data to the foreign countries'
records.  The NMMSS' data are then adjusted, where necessary, to
reflect the current status of U.S.-supplied materials in those
countries.  However, for foreign countries that do not participate in
reconciliations with the United States, the NMMSS contains data only
on the export transactions and on transactions requiring U.S. 
approval (such as retransfers of the nuclear materials) that occurred
subsequent to the export, as required by the agreements for
cooperation. 

The United States has also started an initial nuclear materials
reconciliation with Japan, which illustrates the potential for
substantial differences between data recorded in the NMMSS and the
current status of U.S.-supplied nuclear materials in a foreign
country.  According to the NMMSS' data, Japan produced approximately
20.3 metric tons of plutonium from U.S.-supplied nuclear materials
between 1978 and 1992.  However, Japanese records indicated that
Japan produced about 58.7 metric tons of plutonium from U.S.  nuclear
materials during that period.  The DOE official who is performing the
reconciliation cited two primary reasons for this difference.  First,
Japan was required to report to the United States only the amount of
plutonium retransferred to other countries for reprocessing; thus,
plutonium produced but not sent to other countries for reprocessing
was not reported to the United States.  Second, the current
U.S.-Japanese agreement requires Japan to report certain
retransferred-plutonium transactions under a unique quarterly
reporting arrangement.  The NMMSS was not modified to reflect this
unique reporting arrangement and therefore did not contain data on
the amount of plutonium that Japan reprocessed from U.S.-supplied
nuclear materials after July 17, 1988--the date of the new agreement. 
A DOE official stated that the NMMSS was recently modified to accept
this reporting arrangement, and Martin Marietta has begun entering
these data in the system. 


--------------------
\4 Obstacles to U.S.  Ability to Control and Track Weapons-Grade
Uranium Supplied Abroad (GAO/ID-82-21, Aug.  2, 1982) and The U.S. 
Nuclear Materials Information System Can Improve Service to Its User
Agencies (GAO/NSIAD-85-28, Jan.  14, 1985). 

\5 EURATOM is composed of 12 countries:  Belgium, Denmark, France,
Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands,
Portugal, Spain, and the United Kingdom.  These countries are treated
as a single entity for the purposes of trade in and transfer of
nuclear materials to and from the United States. 

\6 Although Portugal and Spain are members of EURATOM, according to a
DOE official they are subject to agreements for cooperation with the
United States that predate their joining EURATOM.  Therefore, most of
the reporting exceptions in the EURATOM agreement do not apply. 

\7 Sweden, Canada, and Australia have been fully reconciled through
1987, 1991, and 1993, respectively.  A DOE official stated that,
except for minor unresolved differences, reconciliations performed
for Sweden and Canada through 1992 also have been completed and the
NMMSS' data have been updated. 


      RELIABILITY OF NMMSS' DATA
      CONTINGENT ON COMPLETE AND
      ACCURATE REPORTING
---------------------------------------------------------- Letter :3.2

The reliability of the NMMSS' data is also contingent on the
willingness of foreign countries and U.S.  and foreign facilities to
report complete and accurate data on nuclear materials imports,
exports, and retransfers.  Although the NMMSS users whom we
interviewed, such as members of the NMMSS Steering Committee,\8 were
generally or very satisfied with the accuracy and completeness of
information from the NMMSS, DOE occasionally has found instances of
incomplete reporting while reconciling nuclear materials
transactions.  For example, in 1990 a reconciliation of the NMMSS'
data with a foreign country's records identified several
transactions, such as retransfers of low-enriched uranium, that had
not been reported to the United States.  These transactions were
subsequently entered into the NMMSS.  However, because the NMMSS does
not distinguish between normal transactions and those added during
the reconciliation process, we could not determine how many other
NMMSS entries were added as a result of reconciliations with foreign
countries.  A DOE official stated that many transactions may be added
to the NMMSS during the initial reconciliation with a foreign
country, but in later years such entries are infrequent. 

The extent to which the NMMSS can provide data on nuclear materials
is also affected by the accuracy and availability of historical
records.  We have previously reported on problems in this area.  For
example, in 1985 we reported numerous errors in the international
data contained in the NMMSS.\9 These errors resulted from inaccurate
data entries as well as from missing documents of some historical
transactions.  A DOE official told us that DOE attempted to upgrade
the accuracy of the NMMSS' international data by searching for old
records documenting historical transactions.  This official stated
that the current NMMSS data base contains the best available data on
historical transactions, given the limitations of these records. 
Some NMMSS users also told us that although older NMMSS data are
sometimes inaccurate, they are the best data available. 


--------------------
\8 The Steering Committee is a NMMSS user group composed of
representatives from each of DOE's operations and naval reactor
offices, the Office of the Chief Financial Officer, the Office of
Arms Control and Nonproliferation, the Office of Weapons and
Materials Planning, the Office of Safeguards and Security, and NRC's
Office of Nuclear Material Safety and Safeguards and Office of
International Programs. 

\9 GAO/NSIAD-85-28, Jan.  14, 1985. 


   DOE USED POOR SYSTEMS
   DEVELOPMENT PRACTICES IN
   MODERNIZING NMMSS
------------------------------------------------------------ Letter :4

Because the NMMSS was an older system, DOE decided to replace and
modernize it.  However, DOE decided to merely replicate the functions
of the current NMMSS, and therefore its limitations will remain.  In
addition, DOE did not adequately plan the development effort for the
new NMMSS.  For instance, DOE did not identify and define users'
needs or adequately explore design alternatives that would best
achieve these needs in the most economic fashion.  DOE could have
reduced the likelihood that these planning deficiencies would occur
by following the software development requirements set forth in its
own software management order. 


      DOE'S MODERNIZED NMMSS WILL
      REPLICATE CURRENT SYSTEM'S
      FUNCTIONS
---------------------------------------------------------- Letter :4.1

Martin Marietta's NMMSS is housed on a mainframe using unstructured
COBOL code.  Performing modifications on the NMMSS and designing
custom reports is difficult because of the volume and complexity of
the code.  As a result, DOE believed that the NMMSS' operating costs
could be reduced by modernizing the system's hardware and software. 
In addition, NRC supported DOE's decision to modernize the NMMSS'
hardware and software because it believed that the replacement NMMSS
would be less costly than Martin Marietta's existing system. 
Accordingly, DOE's Office of Arms Control and Nonproliferation tasked
the Lawrence Livermore National Laboratory with developing a new
NMMSS data base that would replicate the functions of Martin
Marietta's NMMSS.  Livermore hired a subcontractor to perform this
task.  Livermore's subcontractor wrote new software, developed a
PC-based data base, and will operate the new NMMSS at its facility. 


      DOE DID NOT DETERMINE USERS'
      REQUIREMENTS
---------------------------------------------------------- Letter :4.2

In planning for the development of the new NMMSS, DOE did not analyze
the users' requirements.  Such an analysis documents the
organization's functional and informational needs, the current system
and its effectiveness, and the organization's future needs.  Such
information is important because the more knowledge that is generated
about potential system users and their operational needs, the more
likely it is that the resulting system will meet the users' needs. 
In addition, identifying users' needs at the beginning of a
development effort can help to reduce the need for later systems
modifications, which are typically more expensive, and to eliminate
the need for separate development efforts.  Since the NMMSS' primary
functions were developed during the late 1960s (for DOE facilities)
and 1970s (for international reporting), it was particularly
important that DOE, before the subcontractor's development effort,
determine whether the NMMSS was meeting users' needs in the most
effective manner, or whether changes in the design of the data base
were needed to better serve its users. 

DOE could have assessed users' needs by involving the NMMSS Steering
Committee, which is composed of the major NMMSS users, in the new
NMMSS planning process.  Although the NMMSS Steering Committee is
charged with reviewing and commenting on significant proposed changes
to the NMMSS, it was not consulted about the conversion from Martin
Marietta's NMMSS to the subcontractor's new NMMSS.  Most of the
Steering Committee members were unaware that DOE was even considering
a new system until months after the decision to develop a new NMMSS
was initiated.  Some Steering Committee members told us they felt
that they were deliberately kept in the dark about the new NMMSS. 
For example, one Steering Committee member said he believed written
notification of the new NMMSS was not provided because DOE
headquarters did not want to give users the opportunity to raise any
objections to the program.  Another member said the Committee members
felt that they had been ignored and misled about the proposed changes
in the NMMSS' operations.  Furthermore, several Committee members and
other NMMSS users wrote to DOE's Office of Nonproliferation and
National Security to express dissatisfaction that no effort had been
made to involve the Steering Committee in the departmental
decision-making process. 

In explaining why users' requirements were not assessed, DOE
officials stated that since the new NMMSS data base will duplicate
the existing NMMSS' functions, a requirements analysis was
unnecessary.  They stated that users will be consulted on future
enhancements to the data base.  However, such an approach can result
in a data base that perpetuates system weaknesses and leads to
inefficiencies.  For example, the current NMMSS' financial module
does not contain all of the inventory valuation data needed by DOE's
Office of the Chief Financial Officer (CFO).  Since the new NMMSS is
replicating the current NMMSS' functions, it too will not contain
these data.  In addition, because the Office of the CFO was not aware
that changes to the NMMSS were being considered, in August-September
1993 the Office of the CFO sponsored, and a programmer began
developing, a new system to satisfy these needs.  An official within
the Office of the CFO told us that if the Office had known about the
new NMMSS development effort, they would have considered working with
the new NMMSS development team to enhance the NMMSS' financial
module, rather than developing a separate new system. 


      DOE DID NOT ADEQUATELY
      CONSIDER SYSTEM ALTERNATIVES
---------------------------------------------------------- Letter :4.3

The purpose of an alternatives analysis is to compare and evaluate
the costs and benefits of various alternatives for meeting users'
requirements and to determine which alternative is most advantageous
to the government.  However, DOE did not perform such an analysis for
the new NMMSS development effort.  Instead, DOE's analysis was
limited to a cost comparison of two alternatives:  (1) to have Martin
Marietta modernize the NMMSS or (2) to have the Livermore
subcontractor provide a new NMMSS data base.  Furthermore, this
analysis did not assess the benefits of the two alternatives and was
not used to determine which alternative was most advantageous to the
government because it was prepared after DOE had already chosen to
implement the second alternative. 

In addition, because the new NMMSS will simply replicate the current
NMMSS' functions, it will be subject to the same nuclear materials
tracking limitations that existed previously.  Thus, the data
contained in the new NMMSS on the status and location of
U.S.-supplied nuclear materials internationally will continue to be
limited by the data reported under the agreements for cooperation. 

In addition, the comparison of costs for the two alternatives cited
in the analysis was not supported by adequate documentation and did
not appropriately consider all relevant costs to ensure that DOE
chose the most cost-effective alternative.  Moreover, DOE had already
decided to authorize the subcontractor to begin building the new
NMMSS before this analysis was prepared. 

DOE's cost analysis compared the estimated development cost and
fiscal years 1994, 1995, and 1996 operating costs of the
subcontractor's new NMMSS data base with Martin Marietta's upgrade
proposal for the NMMSS.  However, the documentation provided to
support this analysis was inadequate.  Specifically, the only
documentation offered in support of the new NMMSS was a one-page
document provided by Livermore's subcontractor, which DOE did not
independently verify. 

The cost analysis was also inadequate because it (1) did not include
costs to develop the new NMMSS incurred by Livermore's subcontractor
before the analysis; (2) included fiscal year 1997 costs in Martin
Marietta's alternative but not in the subcontractor's alternative;
(3) did not reduce Martin Marietta's estimated costs by the amount of
indirect costs\10 that will continue to be incurred by Martin
Marietta (and paid by DOE) even if Martin Marietta no longer operates
the NMMSS; and (4) included the NMMSS' operating costs during
development in the estimate for Martin Marietta's alternative but did
not include these costs in the subcontractor's estimate.  DOE's cost
comparison also did not take into account the considerable costs to
transition from Martin Marietta's NMMSS to the new NMMSS data base
housed at the Livermore subcontractor's location.  Moreover, the
analysis did not consider any costs that Livermore will incur
managing and overseeing the subcontractor's development of the new
NMMSS. 

We analyzed the cost documentation that DOE provided, taking the
above factors into consideration.  Although we could not determine
with certainty whether DOE chose the more cost-effective alternative,
since some cost data were not available, our analysis did determine
that any potential savings are, at best, questionable and that
upgrading Martin Marietta's NMMSS may have been a more cost-effective
option. 

Because of the flaws in DOE's initial cost analysis, we asked DOE to
provide us with a total life cycle cost for the new NMMSS.  As of
November 21, 1994, DOE could not provide us with this information. 


--------------------
\10 Indirect costs refer to costs (such as administrative expenses)
that cannot be identified with a specific project or activity and are
allocated to these programs on the basis of a causal/beneficial
relationship.  Many of these costs will continue to be incurred and
allocated to other DOE programs. 


      DOE DID NOT FOLLOW ITS OWN
      SOFTWARE MANAGEMENT ORDER
---------------------------------------------------------- Letter :4.4

Many of the new NMMSS' planning deficiencies could possibly have been
avoided if DOE's Office of Information Resource Management Policy,
Plans, and Oversight had been involved in the development effort. 
DOE's Computer Software Management order (DOE 1330.1D) requires that
this Office approve or disapprove all administrative or
manufacturing-oriented software acquisition or development efforts
that will have an external impact.\11 An official in the Office of
Information Resource Management Policy, Plans, and Oversight told us
that both the current NMMSS and the new NMMSS fall under the software
categories covered by this order.  Another official in this Office
stated that adequate requirements and alternatives analyses
(including the costs and benefits of alternatives) are required
before approval is granted.  However, the Office of Arms Control and
Nonproliferation neither sought nor received such approval for the
new NMMSS development effort.  DOE's Program Manager told us that he
believed the DOE order did not apply because the new NMMSS was
duplicating an already existing system.  However, the order does not
exclude software development efforts that duplicate existing systems. 


--------------------
\11 External impact occurs when a system requires input from, or
output to, one or more organizations (such as NRC-licensed
facilities) besides the one responsible for its implementation. 


   OTHER U.S.  MECHANISMS TO TRACK
   NUCLEAR MATERIALS HAVE
   LIMITATIONS
------------------------------------------------------------ Letter :5

According to DOE, the NMMSS was not intended or designed to track
foreign countries' nuclear materials that were never imported to the
United States.  Accordingly, since the new NMMSS is replicating the
functions of Martin Marietta's NMMSS, the new system will also have
this limitation.  Recognizing that the NMMSS does not contain such
data, and given the NMMSS' other data limitations, the United States
relies on other sources to obtain information on nuclear materials of
both U.S.  and foreign origin that are located in foreign countries. 
For example, the United States has relied on DOE and other agencies
to help determine the quantity, location, origin, and characteristics
of commercial plutonium in noncommunist countries.  DOE also uses
data provided by intelligence sources and technology to support
nuclear materials nonproliferation programs. 

We did not assess the reliability of these information sources. 
However, according to the recent Rand study performed for the Under
Secretary of the Department of Defense, no intelligence community can
know of all of the major nuclear facilities and activities in certain
countries.\12 For example, according to an official from the Arms
Control and Disarmament Agency, U.S.  intelligence sources lacked
reliable information on North Korea and Iraq.  The Director of DOE's
International Safeguards Division told us that the need for an
international nuclear materials tracking system is clear and that if
the U.S.  system for tracking materials had been more effective, the
United States might have known more about Iraq's nuclear program
before Desert Storm.  DOE has initiated efforts to improve the United
States' ability to track nuclear materials internationally.  We are
reporting to you classified information on these efforts and their
limitations separately. 


--------------------
\12 Limiting the Spread of Weapon-Usable Fissile Materials, Rand
National Defense Research Institute, 1993. 


   PHYSICAL PROTECTION OF EXPORTED
   U.S.-SUPPLIED NUCLEAR MATERIALS
   REQUIRES FOREIGN COUNTRIES'
   COOPERATION
------------------------------------------------------------ Letter :6

To ensure the physical protection of exported U.S.-supplied
civilian-use nuclear materials, the United States relies on the
protection systems in recipient countries, these countries'
compliance with IAEA's guidelines, and U.S.  evaluations of the
adequacy of their physical protection systems (e.g., security devices
and guards, etc.).  Once the United States exports nuclear materials,
it is the responsibility of the recipient country to adequately
protect them.  While no international organization is responsible for
establishing or enforcing physical protection standards, IAEA has
developed guidelines that are broadly supported by its member states. 
These guidelines include protection measures such as the use of
physical barriers along the perimeters of protected areas.  The
United States uses these guidelines to help evaluate whether foreign
countries' physical protection systems are adequate.  As a result of
these evaluations, the United States may make nonbinding physical
protection recommendations. 

The international community, including the United States, has
supported states' sovereign rights and responsibilities to establish
and operate physical protection systems for nuclear materials and
facilities.  It is also in the best interest of the sovereign states
to ensure the physical protection of these materials to reduce the
threat of theft or diversion.  Concerns have been expressed about the
physical protection of U.S.-supplied nuclear materials at the High
Flux Petten Reactor in the Netherlands.  Reportedly, Dutch Marines
staged a mock attack on the facility and gained access to its HEU. 
During this review, we visited the High Flux Petten Reactor and met
with Dutch officials, who confirmed that this incident, which was
intended to test the facility's physical security system, did occur. 
These officials also noted that physical security at the reactor has
improved since the incident took place. 

Although the ultimate responsibility for the protection of nuclear
materials resides with the sovereign state, according to IAEA the
protection of these materials is a matter of international concern
and cooperation.  Nevertheless, no international organization is
currently responsible for establishing physical protection standards
or ensuring that nuclear materials are adequately protected from
unauthorized removal and that facilities are protected from sabotage. 
However, beginning in 1972, IAEA convened international experts to
establish and subsequently revise guidelines on the physical
protection of civilian-use nuclear materials.  These guidelines
represent a broad consensus among IAEA's member states on the
requirements for physically protecting nuclear materials and
facilities.  IAEA also assists states that request guidance on
physical protection by providing international physical protection
experts as consultants.  The United States supports these assistance
efforts and provides experts when requested. 

The United States also evaluates foreign countries' physical
protection systems under the U.S.  Bilateral Physical Protection
Program.  According to DOE, the primary objective of this program is
to fulfill U.S.  statutory obligations under the Atomic Energy Act of
1954, as amended by the Nuclear Non-Proliferation Act of 1978, and
the provisions of specific U.S.  agreements for cooperation.  These
obligations require that the United States ensure that U.S.-supplied
nuclear materials are subject to a level of physical protection that
meets or exceeds IAEA's guidelines.  In addition, other objectives of
this program are to (1) address emerging nuclear proliferation
threats and problems, (2) promote technical exchanges and cooperation
for physical protection, and (3) strengthen international cooperation
and the implementation of treaties and agreements. 

According to DOE, the countries participating in the U.S.  Bilateral
Physical Protection Program do so principally because they have or
expect to have

an agreement for peaceful nuclear cooperation with the United States,
or a trilateral supply arrangement with IAEA and the United States;

U.S.-supplied nuclear materials;

category I quantities of nuclear materials;\13 and/or

a pending U.S.  nuclear export or supply arrangement. 

U.S.  teams are led by a DOE representative and usually include
officials from other agencies.\14 The teams visit a variety of
nuclear facilities, including research reactors, fuel cycle
facilities, and nuclear power reactors.  According to an NRC
official, these visits have also been an important source of
information when NRC assesses a country's physical protection system
as part of the process of reviewing export license applications. 

Since 1974, the United States has conducted bilateral consultations
with approximately 46 nations, including site visits to review the
physical protection of nuclear materials at fixed sites and during
transport.  (App.  II identifies the countries that U.S.  officials
have visited.) More recently, program officials have started to
explore possible technical cooperation and information exchanges with
the newly formed states of the former Soviet Union and Eastern
Europe. 

According to DOE, the U.S.  site visit teams will make nonbinding
recommendations for improvements to physical protection when such
improvements are needed.  In cases in which countries have been
revisited, efforts are made to follow up on the previous team's
recommendations.  However, according to a DOE official, DOE does not
have a mechanism to follow up on previous recommendations in between
visits and has not always monitored the status of the sites visited. 
He said that a mechanism to follow up on recommendations in between
visits is important, since some countries may not be revisited for 4
to 5 years. 


--------------------
\13 Category I nuclear materials represent certain types of
unirradiated plutonium (2 kilograms or more), uranium-235 (5
kilograms or more), and uranium-233 (2 kilograms or more). 

\14 This program is an interagency executive branch program
implemented by the Departments of State, Energy, and Defense with the
participation of the NRC and the Arms Control and Disarmament Agency. 


   CONCLUSIONS
------------------------------------------------------------ Letter :7

DOE's NMMSS has significant limitations in its ability to track
nuclear materials internationally; these limitations will continue
under DOE's new NMMSS.  In particular, the new NMMSS will not
overcome previously existing nuclear materials tracking limitations
that are often caused by non-system-related problems; for example,
the system does not contain data that are not required to be reported
under the U.S.  agreements for cooperation.  We believe DOE should
have explored systems alternatives and queried its intended users to
attempt to mitigate some of these limitations.  In addition, because
DOE has not followed good systems development practices, DOE cannot
ensure that the system will be cost-effective or will even fulfill
the needs of its major users. 


   RECOMMENDATION
------------------------------------------------------------ Letter :8

Before investing further resources in the new NMMSS, we recommend
that the Secretary of Energy direct the Office of Arms Control and
Nonproliferation to determine users' requirements, investigate
alternatives, conduct cost-benefit analyses, and develop a plan to
meet any identified needs, either through enhancing the new NMMSS or
designing a different system. 


   AGENCY COMMENTS AND GAO'S
   RESPONSE
------------------------------------------------------------ Letter :9

We discussed the contents of this report with the Director of DOE's
Office of Export Controls and International Safeguards, officials in
the State Department's Office of Nuclear Energy Affairs, and the
Director of NRC's Division of Nonproliferation, Exports, and
Multilateral Relations.  However, as requested, we did not obtain
written agency comments on a draft of this report.  The DOE, State
Department, and NRC officials that we spoke with generally agreed
with the facts presented.  DOE also provided the following comments,
which we evaluated. 

DOE officials commented that the NMMSS' size and complexity and its
role in meeting U.S.  treaty and statutory obligations led DOE to
focus initially on duplicating NMMSS' functions and not on upgrading
the system; such an upgrade will be considered after the duplication
effort has been successfully accomplished.  We believe that the size
and complexity of the NMMSS and its pivotal role in meeting U.S. 
treaty and statutory obligations should have compelled DOE to ensure
that the system was planned and designed properly.  As we point out
in the report, DOE's decision to duplicate the existing NMMSS'
functionality led to a system that may not meet users' needs and that
perpetuates the existing system's weaknesses.  Furthermore, program
modifications to upgrade systems at a later time are typically more
costly and more risky than initially programming the system to meet
users' needs. 


---------------------------------------------------------- Letter :9.1

Our work was performed between October 1993 and November 1994, in
accordance with generally accepted government auditing standards. 
Appendix III describes the scope and methodology of our review. 

As agreed with your offices, unless you publicly announce its
contents earlier, we plan no further distribution of this report
until 30 days from the date of this letter.  At that time, we will
send copies of the report to appropriate congressional committees;
the Secretaries of Energy and State; and the Chairman, Nuclear
Regulatory Commission.  We will make copies available to others upon
request. 

Please call us at (202) 512-3841 and (202) 512-6222, respectively, if
you or your staff have any questions.  Major contributors to this
report are listed in appendix IV. 

Victor S.  Rezendes
Director, Energy and Science Issues
Resources, Community, and Economic Development
 Division

Joel C.  Willemssen
Director, IRM-Resources, Community,
 and Economic Development
Accounting and Information Management
 Division


NUCLEAR MATERIALS EXPORT PROCESSES
=========================================================== Appendix I

The United States regulates its exports of U.S.-supplied nuclear
materials to countries with U.S.  agreements for cooperation through
the implementation of the U.S.  nuclear materials export license
process.  The Nuclear Regulatory Commission (NRC) is responsible for
issuing export licenses for nuclear materials.  In accordance with
the Nuclear Nonproliferation Act of 1978 and the Department of
Energy's (DOE) regulations, the executive branch agencies (DOE, the
Departments of Commerce, Defense, and State and the Arms Control and
Disarmament Agency), led by the Department of State, assist NRC in
reviewing export license applications in certain cases.  NRC
generally grants export licenses if the following criteria are met: 

The International Atomic Energy Agency's (IAEA) safeguards will be
applied pursuant to the Treaty on the Nonproliferation of Nuclear
Weapons\15 and the Treaty of Tlatelolco.\16

No material will be used for a nuclear explosive device or for
research on or the development of a nuclear explosive. 

Adequate physical protection measures will be maintained for
facilities and materials. 

No material will be retransferred\17 without U.S.  consent. 

The exported material will not seriously prejudice U.S. 
nonproliferation objectives or jeopardize the common defense and
security. 

No material will be reprocessed or altered in form or content without
previous approval from the United States. 

Material will be under the terms of the agreement for cooperation. 

As figure I.1 outlines, to apply for a license to export special
nuclear materials, an application must be submitted to NRC.  NRC
checks the application for completeness and accuracy and determines
if an executive branch review (DOE, the Departments of Commerce,
Defense, and State and the Arms Control and Disarmament Agency) is
required.  Executive branch reviews are necessary if, among other
things, the export is (1) more than 1 effective kilogram of highly
enriched uranium or 10 grams of plutonium or U-233 or (2) if source
materials (uranium, thorium, or any ores containing uranium or
thorium) or special nuclear materials are to be exported under the
U.S.-IAEA Agreement for Cooperation.  The executive branch review
determines if

the export request meets U.S.  export criteria;

the proposed export would not be inimical to the common defense and
security of the United States; and

where available, the exported materials would be under the terms of
an agreement for cooperation. 

NRC may request the executive branch to address specific concerns and
to provide additional data and recommendations.  If the executive
branch and NRC determine that the request satisfies the above
criteria, NRC will approve the export license.  The export license
establishes the amount of material that the applicant may export and
the time frame in which that amount may be exported.  The applicant
may make multiple shipments of the material to reach the specified
amount on the license. 

   Figure I.1:  Interagency Review
   of Applications for Nuclear
   Materials Export Licenses

   (See figure in printed
   edition.)

In 1993, the United States received 89 export license applications
for nuclear materials (source, special nuclear material, and
by-product\18 ) of which 71 were issued in 1993 and 11 were
subsequently issued by May 5, 1994.  Of the remaining six
applications, five are pending and one was withdrawn by the applicant
country as of May 5, 1994.  According to an NRC official, of the five
pending applications, the United States is awaiting letters of
assurance, as required, from the applicants before making a decision. 
A letter of assurance is a statement from the government of the
recipient country that the nuclear materials will be handled in
accordance with the terms set forth in the relevant U.S.  agreement
for cooperation. 

Once nuclear materials are exported from the United States, they are
subject to the controls contained in cooperative arrangements
established in the terms of U.S.  agreements for cooperation.  The
subsequent arrangements and retransfer process are regulatory
controls used to control the supply, use, or retransfer of exported
U.S.-supplied nuclear materials and equipment.  Activities that can
be subject to subsequent arrangements are the reprocessing of spent
fuel or the retransfer of nuclear materials to a third country. 
Generally, these requirements enable the United States to determine
that the arrangement or retransfer will not be inimical to the common
defense and security of the United States. 

As figure I.2 outlines, DOE is generally the lead agency for
processing subsequent arrangements and retransfer requests and
coordinating the interagency review required for these requests. 
These interagency reviews provide the Departments of Commerce,
Defense, and State and the Arms Control and Disarmament Agency and
NRC the opportunity to review the request.  For subsequent
arrangements, the State Department must approve the arrangement in
order for it to proceed, and the Arms Control and Disarmament Agency
must determine whether or not the arrangement requires a
nonproliferation assessment statement.  After the interagency review,
DOE will make a determination on the basis of its and the
participating executive agencies' views.  If, during the interagency
review, any agency believes the request raises issues requiring more
extensive consideration or denial, the request may be submitted for
further discussion and concurrence to the Subgroup on Nuclear Export
Coordination.  This interagency group examines dual-use export
issues, retransfers, and related matters to determine that the
proposed activity is consistent with U.S.  foreign policy, national
security, and nonproliferation objectives and that commercial and
economic considerations can be established. 

   Figure I.2:  DOE's Subsequent
   Arrangement and Retransfer
   Review Process

   (See figure in printed
   edition.)


--------------------
\15 Under the Treaty on the Non-Proliferation of Nuclear Weapons,
signatory nonnuclear-weapons states that had not manufactured or
detonated a nuclear device before January 1, 1967, agree not to
acquire nuclear weapons and to accept IAEA's safeguards on all source
and special nuclear materials in peaceful nuclear activities. 

\16 The Treaty of Tlatelolco prohibits nuclear weapons in signatory
Latin American countries and requires commitments to IAEA's
safeguards. 

\17 A retransfer is the transport from one foreign country to another
of nuclear materials previously exported from the United States or
the materials produced through the use of nuclear materials
previously exported by the United States. 

\18 A by-product material means any radioactive material (except
special nuclear material) yielded in or made radioactive by exposure
to radiation in the process of producing or utilizing special nuclear
materials. 


U.S.  BILATERAL PHYSICAL
PROTECTION VISITS (1974-94)
========================================================== Appendix II

Country                 Number of visits  Date of last visit
--------------------  ------------------  ------------------
Argentina                              3                1990
Australia                              3                1991
Austria                                2                1989
Belgium                                3                1988
Brazil                                 2                1990
Bulgaria                               1                1993
Canada                                 3                1989
Columbia                               2                1994
Czechoslovakia                         1                1992
Denmark                                4                1990
Finland                                1                1976
France                                 5                1992
Germany                                4                1992
Greece                                 3                1993
Hungary                                1                1992
India                                  1                1975
Indonesia                              2                1991
Ireland                                1                1976
Israel                                 1                1976
Italy                                  4                1988
Japan                                  6                1992
Luxembourg                             1                1976
Malaysia                               1                1977
Mexico                                 2                1990
Morocco                                1                1993
Netherlands                            4                1990
Norway                                 2                1984
Pakistan                               1                1975
Paraguay                               1                1977
Peru                                   2                1994
Philippines                            2                1976
Portugal                               2                1988
Rep. of Korea                          3                1992
Romania                                4                1993
Slovenia                               1                1993
South Africa                           2                1992
Spain                                  3                1988
Sweden                                 5                1990
Switzerland                            6                1993
Thailand                               2                1977
Taiwan                                 1                1975
Turkey                                 1                1975
United Kingdom                         3                1991
Uruguay                                1                1977
Venezuela                              1                1977
Yugoslavia                             2                1989
------------------------------------------------------------
Source:  DOE. 


SCOPE AND METHODOLOGY
========================================================= Appendix III

To determine the tracking limitations of DOE's Nuclear Materials
Management and Safeguards System (NMMSS), we reviewed reports by NRC
and DOE consultants and the U.S.  agreements for cooperation.  We
also examined the NMMSS' documentation and other documents pertaining
to the system and interviewed DOE, NRC, and Martin Marietta
officials.  While we did not interview a statistical representation
of NMMSS users, we did interview members of the NMMSS Steering
Committee and other major users to obtain their views on the accuracy
and completeness of the NMMSS' data. 

To assess DOE's new NMMSS, we interviewed DOE, Livermore, and Argonne
National Laboratory program officials, NMMSS Steering Committee
members, and other NMMSS users.  We also reviewed the new NMMSS'
planning documentation.  We also spoke with officials with
Livermore's subcontractor, reviewed the subcontracts, and reviewed
the subcontractor's technical and cost proposals.  In addition, we
interviewed officials from the State Department, the Arms Control and
Disarmament Agency, the Central Intelligence Agency, DOE's Pacific
Northwest Laboratory, and the Department of Defense to determine
whether other tracking systems exist. 

To determine the U.S.  process for evaluating the physical protection
of foreign facilities, we interviewed officials from DOE, NRC, and
the State Department.  In addition, we also reviewed program
documentation, including the results of U.S.  site visits. 

To understand the export license and subsequent arrangement process,
we reviewed 10 C.F.R.  Part 110 and interviewed DOE and NRC
officials. 

We performed our review primarily at DOE's headquarters at
Washington, D.C., and Germantown, Maryland, locations; DOE's Lawrence
Livermore National Laboratory, Livermore, California; Oak Ridge
Operations Office and Y-12 Plant in Oak Ridge, Tennessee; Pacific
Northwest Laboratory in Richland, Washington; and NRC's headquarters
in Rockville, Maryland.  We also visited the High Flux Petten Reactor
in the Netherlands. 


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix IV

RESOURCES, ECONOMIC, AND COMMUNITY
DEVELOPMENT DIVISION, WASHINGTON,
D.C. 

Jim Wells, Associate Director
Gene Aloise, Assistant Director
James C.  Charlifue, Evaluator-in-Charge
Mary Alice A.  Hayward, Evaluator

ACCOUNTING AND INFORMATION
MANAGEMENT DIVISION, WASHINGTON,
D.C. 

Valerie C.  Melvin, Assistant Director
Linda J.  Lambert, Senior Auditor

OFFICE OF THE GENERAL COUNSEL

John A.  Carter, Senior Attorney