Technical Meeting on Procurement Activities and on

Counterfeit, Fraudulent and Substandard Items

Vienna, 19–21 July

Samvel Ghazaryan

WANO Technical Programme Manager

Analysis of Events Caused by

Counterfeit or Fraudulent parts

WANO developed the report Analysis of Events Caused by Deficient Parts in May

2016.

� In total, 53 event reports were extracted from the WANO OE database for the

period 2012 to early 2016 and binned in three categories:

• incorrect part or material selection – 22 events

• manufacturing deficiencies – 21 events

• counterfeit or fraudulent parts -10 events

� The report includes event details and the lessons learned to help other plants

prevent similar events.

� Counterfeit components are a significant concern because the lower quality

and unexpected failure can reduce the margin of safety and introduce

unrecognised common mode failures. Counterfeit parts may function initially,

but then fail unexpectedly well before the expected end of life.

Analysis of Events Caused by counterfeit or

fraudulent parts

3

� Only 10 counterfeit part related event reports were submitted to

WANO. However, potential consequences from events are a large

vulnerability to nuclear safety and plant reliability when compared to

the other part related events.

� Eight of the 10 event reports are from WANO-Atlanta Centre plants. It

is likely that plants in other WANO regional centres have experienced

similar issues with counterfeit parts that have not been reported.

� Two of the counterfeit parts events were categorised as significant

and one as noteworthy based on the potential impact to nuclear

safety and common cause failure potential.

� Counterfeit items from recent operating experience included circuit

breakers, valves, O-rings, cables, electrolytic capacitors and pressure

gauges. Digital devices and software components are also vulnerable to

counterfeiting but events have not been reported to date.

Analysis of Events Caused by counterfeit or

fraudulent parts

4

The consequences from the 53 part related events fall into five categories: scram,

degraded operating condition, safety system impact, outage extension and other.

About 44% of the part quality related OE events reported to WANO involved

safety-related systems and 10% resulted in either an automatic or a manual

reactor scram.

Analysis of Events Caused by counterfeit or

fraudulent parts

5

Analysis of Event Causes

Weaknesses contributed to some of the counterfeit part issues.

� Some manufacturers knowingly produced fraudulent counterfeit products

indicating a lack of safety culture.

� In several events, quality assurance programmes were ineffective in

preventing the procurement and use of counterfeit parts.

� In one plant, inadequate supervision of contractors during maintenance

performed in a vendor shop led to not identifying the installation of

counterfeit injector O-rings in an emergency diesel generator (EDG), which

resulted in fuel leaks and EDG inoperability. This was a potential common

mode failure for a second EDG.

� Falsified documents contributed to four events. In one significant event,

falsified test reports were discovered for installed safety-related cables in

several operating units. The testing agency manipulated the test results to

show passing results for components that had failed the test. In another

event, the test certificates for 1,228 valves and components were found to be

counterfeit. 6

Analysis of Event Causes

� At one station, 16 counterfeit circuit breakers were identified. Fortunately, the

fraudulent breakers were identified during the receipt inspection process. The

breakers were not purchased through a certified OCM/OEM distributor.

� Pressure gauges installed in a plant were identified to be counterfeit. The

gauges had an unauthorised modification performed by the distributor.

� During an inspection, counterfeit circuit breakers were found installed at

seven electrical panels at a plant’s emergency power supply station.

Counterfeit breakers were installed during initial construction in 1991.

� During construction of a new unit, counterfeit lashing hooks were used for

transporting plant equipment. Although the certificates showed the hooks

were load tested and acceptable, further investigation found the hooks to be

counterfeit material. The suspect hooks had the potential to fail while in use

and could have resulted in personnel injury or damage to the equipment.

7

Significant Industry Events

WER ATL 14-0817, Segments of Installed Emergency Diesel Generators Power Packs with

Different Material than Indicated in Vendors Manual

What happened?

� During an outage, an evaluation identified that materials used in components

installed in emergency diesel generators (EDGs) were different from those

specified in the vendor manual.

Why it happened?

� 13 new components (power packs) were installed in EDGs during an outage

which had a composition of lead and bronze instead of lead and silver.

� There was no administrative process to establish the requirements for

identifying and managing fraudulent spare parts, as well as the technical

requirements for spare parts acquisition for quality control of components

installed in critical equipment.

Why a significant event?

� Because it resulted in the inoperability of EDGs I and III and a 23-day

extension of the refuelling outage. 8

Significant Industry Events

What happened?

� In November 2012, two units were shut down and

experienced extended outages to replace many

parts supplied with fraudulent certifications. The

items had been procured over the preceding 10

years. Some suppliers had provided commercial-

grade items with a certification fraudulently

stating that they had been successfully dedicated.

Items included fuses, relays, diodes and switches.

� In May 2013, two additional nuclear units were

shut down due to falsified test reports for installed

safety-related control cables. Outages at four

additional reactors were extended to replace

installed cables that failed the testing.

9

WER TYO 13-0053, Plants Shutdown due to Use of Cables with Fabricated Equipment

Qualification Test Report

Significant Industry Events

Why it happened?

� The test results for equipment qualification were falsified by local certified

testing institutes.

� The test results were manipulated in the reports to show passing results for

control cables that had failed the test.

Why a significant event?

� The units restarted in January 2014. The event is Significant because of its

widespread interest to WANO members potential impact to nuclear safety

and its effect on operation/construction of four units.

10

Significant Industry Events

WER MOW 15-0188, Counterfeit Material Test Certificates

What happened?

� Test certificates for 1,228 valves and components were discovered to be

counterfeit. In 204 cases, specifications could not be guaranteed due to

fabricated certificates. Four valves could not be verified after additional

checks. Two valves assembled at the plant were replaced and two valves were

quarantined. Another two hundred valves were verified to fulfil the

specifications.

Why it happened?

� Weaknesses in the supply chain. Gaps in approval of suppliers – insufficient

onsite audits and not verifying the management system under which they

operate, relying on certificates issued by third parties.

Why a noteworthy event?

� Because of safety significance and widespread interests related to counterfeit

certificates.

11

Strategies for prevention, early detection and mitigation of

component failures related to counterfeit parts.

� Based on the events reported to WANO, stations found weaknesses in quality

programmes and training related to counterfeit parts. Some stations have a weak or no

policy to provide sufficient focus on preventing counterfeit parts in the supply chain.

� Procurement personnel are challenged by obsolete equipment and sometimes rely on

commercial grade items from various suppliers for replacements. Items from the

original component or equipment manufacturer (OCM/OEM) may no longer be

available or the manufacturer might not be willing to support the required rigorous

testing and documentation.

� As the number of replacement parts from new sources increase, unaware and

unsuspecting suppliers can unknowingly purchase and use substandard or counterfeit

materials or subcomponents in the manufacture of larger components.

Lessons Learned

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Key elements to guard against counterfeit items

� A proactive approach should be used for prevention and early detection of

counterfeit component.

� Establish process and governing procedures with requirements for detecting and

managing counterfeit spare parts. Revise existing guidelines or procedures that

address counterfeit items, to include inspection requirements and actions to be

performed when a counterfeit item is identified.

� Train applicable station personnel on counterfeit item prevention techniques,

including personnel from the utility’s supply chain, procurement, engineering and

work planning departments. Also train personnel that prepare technical

specifications and procurement documentation for new units before and during

construction. Training should be conducted on the requirements to look for

counterfeit parts and the impact on nuclear safety and reliability. Sources of

training materials regarding counterfeit item prevention are publically available.

Lessons Learned

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� Obtain parts directly from the original component manufacturer

(OCM)/original equipment manufacturer (OEM) whenever possible as this will

result in the lowest risk of purchasing counterfeit components.

� OCM/OEM authorised distributors typically have documented agreements

with a manufacturer to sell their items.

� Improve the component procurement process to prevent the installation

of substandard and counterfeit items.

� Key elements for effective procurement include engineering involvement in

procurement and product acceptance, effective source inspection,

thorough receipt inspection and testing, and rigorous programmes for the

testing and dedication of commercial-grade products that may be suitable

for use in both safety-related and critical applications.

Lessons Learned

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� Counterfeit part detection – know the warning signs.

� Item coming from a source other than the OCM or authorised

sources, or from suspect locations

� Price seems too low

� Scarce or obsolete items are suddenly available

� Chain of ownership unverifiable

� No certificate of conformance or other authenticity documentation

� Item does not exactly match similar items

� Packaging is nonstandard

� Item appears to be reworked, repaired or refurbished

� Quality is suspect

Lessons Learned

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� Minimising potential plant impact – If using a supplier that is not the

OCM/OEM or is not OCM/OEM authorised (and there is no other alternative

than to use a third party supplier) then notify procurement personnel for

direction and approval. Quarantine parts from potentially high risk suppliers

until required testing and verification is complete. Treat these items as

suspect until authenticated. Obtain traceability or chain of custody

information, or authenticity testing records associated with the suspect part.

� Counterfeit parts identified – If the item is suspected to be counterfeit,

quarantine and identify it as non-conforming. Do not return the item to the

supplier to prevent resale to another customer. Notify appropriate legal

authorities. Submit an event report to WANO.

� Ensure operating experience personnel collect, evaluate and distribute

industry information and events regarding counterfeit parts.

Lessons Learned

� Many new nuclear units are planned or under construction and the number of counterfeit products are likely to continue to increase. Proactive strategies and processes are essential for detecting and preventing the introduction of counterfeit components into nuclear applications.

� Lessons learned from counterfeit or fraudulent events are important to share globally with all NPPs.

� So please ensure these events are reported to the WANO event database. The database is confidential and can only be used by WANO members.

In Closing…..

For more information please visit

www.wano.info

Thank you for listening