Sandia, Lockheed Martin Missile and Fire Control team on first-of-a-kind project in Taiwan

TIt’s a necessarily complex approach: Sandia and Lockheed Martin’s Missile and Fire Control (LMMFC) in Orlando have forged an agreement with the government of the Republic of China (Taiwan) that makes a win-win-win situation for all three entities.

As a result of complex negotiations over months and years:

• Sandia will provide assistance to Taiwan’s geologic repository science efforts. Hong-Nian Jow, Manager of Program Development and Environmental Decisions Dept. 6849, is leading the Sandia effort, which officially got under way with a signing ceremony in Taiwan in August.
• Taiwan will make a leap forward in the development of technologies needed to safely dispose of spent nuclear fuels and continue to maintain a viable nuclear power industry, and
• LMMFC will fund Sandia’s work and simultaneously earn credit toward a $5.6 million obligation the company presently has with the Taiwanese government.

Needed: Spent fuel repository

"Taiwan is a small country with no repository for nuclear waste, but with a need for one," says Hong-Nian. The nation has three generating nuclear power plants, each with two units. The first began operation in 1978, and a significant amount of spent fuel has accumulated from the six operating reactors. Two additional reactors are scheduled to come on line in 2005.

"Like the US, Taiwan does not reprocess spent fuel and has followed our example for a near-term storage solution as well," says Hong-Nian. That means spent fuel is stored in cooling pools near the reactors. As these pools get full, the oldest fuel rods are moved to dry storage casks.

Sandia’s first task will be an assessment of technology in the island nation (86 islands in all, totaling about 45,000 square miles) to provide an understanding of Taiwan’s technical baseline in geologic repository science.

"We will look at their site characterization work, performance assessment modeling, and conceptual design," says Hong-Nian. "Over the next three or four years, we will identify technological gaps and design specific tech transfer projects to help fill those gaps. We will work with the Taiwanese to analyze the geological data they are gathering and help them model the performance of a repository conceptual design for a potential host rock, such as, granite."

The art of the offset

This work is a "leap in order of magnitude" from past work Sandia has done with Taiwan, Hong-Nian says, and a Lockheed Martin program is the reason it is possible. By brokering this deal, referred to as an "offset" in the international business community, LMMFC earns credit toward an obligation the company incurred several years ago, when it sold Hellfire missiles to Taiwan.

"Essentially, we get paid, but the buying nation wants something else," explains Robert Kelly, LMMFC’s offset manager for Asia and other nations. The "something else" can be provided in a variety of ways and usually involves more than one activity, he says. "I saw this as a path where the first [Sandia] project could lead to a series of projects that can satisfy our future offset obligations associated with future sales." (For more detail, see "The offset" below.)

Sandia’s work for Taiwan will be paid for by LMMFC under a typical work-for-others arrangement. The Lockheed Martin company will in turn apply to the Taiwanese government for appropriate credit to its offset obligations.

Sandia began working with Taiwan following the Labs’ 1999 licensing success at the Waste Isolation Pilot Plant (WIPP) in New Mexico. A DOE-led team traveled to visit Taiwanese nuclear power executives to discuss the successes achieved in the US. "Margaret Chu, who then managed the project, encouraged us to look for ways to leverage what we had accomplished at WIPP to other projects," says Hong-Nian.

Sandia succeeded in getting some small work-for-others projects, mostly in the few tens of thousands of dollars range, in subsequent years. Then in 2001, Hong-Nian started making calls to Lockheed Martin about offset funding possibilities for the effort. He met Kelly, and the two developed a framework for the agreement.

One reason the effort worked was Sandia’s early work with Taiwan’s Institute of Nuclear Energy Research, says Gary Jones, Manager of Sandia’s Energy and Critical Infrastructure and International Partnerships Dept. 1313. As lead for offset programs at Sandia, Gary sees Hong-Nian’s early work and that of the Sandia technical staff to gain credibility as a key.

Dennis Berry, Director of Environmental Security Technology Center 6800, views the Taiwan effort as "an opportunity for Sandia to use its broad experience in repository science and licensing to help others throughout the world solve their nuclear waste problems. By transferring the technology, there will be a benefit for those countries and a benefit to the US, because we will be addressing safe disposal of spent fuel and nuclear waste in the world. This helps other countries solve their problems and sets up circumstances by which nuclear power continues to be a viable global option."

The offset: A military hardware reality

It started with a successful sale of AGM-114 Hellfire missiles to the Republic of China (Taiwan) by Lockheed Martin Missile and Fire Control (LMMFC) in Orlando. But in the case of military hardware, like these air-to-ground missiles used on attack helicopters, sales for cash are only part of the deal.

Buying nations typically add an "offset" clause to military negotiations, explains Robert Kelly, Asia offset manager of LMMFC, and have for the past decade or more. While the concept has gone out of favor in many commercial sectors, it is very much a reality for defense/aerospace deals. It means the seller will offer something besides the hardware that will benefit the buying nation.

The expectation of most nations buying US-built hardware is that the selling company will offset a large percent of the sales value of the contract. Called by different names and governed by frequently changing rules, the offset is seen by the buyer as an opportunity to increase the attractiveness of its own products in world trade.

Some nations permit only direct offsets — related directly to the item being purchased. In the case of the Taiwan sale, the government agreed to an indirect offset, which provides value to the buying nation, but isn’t related directly to the missiles.

"It’s extremely complex," says Gary Jones, Manager of Sandia’s Energy and Critical Infrastructure and International Partnerships Dept. 1313 and lead contact for offset programs. "We’ve been trying to get an agreement like this through for about five years. We had a couple of near-misses. This is the first one to happen." Sandia is not proposing that this ever be a large line of business, Gary says. But when such partnership opportunities arise, the Labs should be ready to take advantage of them. "It’s just a situation that will work in some cases and not others."

"This time we had the right people at the right time," says Kelly. "I wanted it to work and Hong-Nian wanted it to work." An added allure for Kelly and LMMFC was the potential for continued Sandia work beyond the first phase. "This is the first of perhaps as many as six phases," he notes. "This is a first. It’s the result of many years of discussion and learning how to work offsets," Gary says.