Appendixes



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Appendixes

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Appendix A Two Earlier Reports The first report summarized in this appendix is the 2001 study Corrosion Costs and Preentie Strategies in the United States.1 The U.S. Federal Highway Adminis- tration (FHWA) commissioned the study because it wished to have quantified the economic impact of metallic corrosion, and it asked the authors to recommend preventive strategies to minimize the impact of corrosion on the U.S. economy. The second report summarized here is Corrosion Control, from the Defense Science Board (DSB), which released it in 2004.2 COST OF CORROSION STuDY Corrosion Costs and Preentie Strategies in the United States was written by CC Technologies Laboratories, Inc., from 1999 to 2001 under a cooperative agree- ment with the FHWA and NACE International. The study showed that although technological advances have brought about new ways of corrosion mitigation and better corrosion management techniques, the United States has a long way to go in optimizing corrosion control practices, and it must move toward better corrosion management using preventive strategies in both nontechnical and technical areas. 1 For a copy of the report see http://www.corrosioncost.com/pdf/main.pdf. Accessed October 2008. For further information on the study see http://www.corrosioncost.com/home.html. Accessed Octo- ber 2008. 2 For a copy of the report see http://www.acq.osd.mil/dsb/reports/2004-10-Corrosion_Control.pdf. Accessed October 2008. 7

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assessment c o r ro s i o n e d u c at i o n  of Two obstacles exist to the development of advanced technologies for corrosion control and the implementation of those technologies: one is the general lack of awareness on the part of the public and policy makers of corrosion costs and the potential savings and the other is the widespread misconception that nothing can be done about corrosion. The study points out that change is required in three areas: (1) the policy and management framework for effective corrosion control, (2) the science and tech- nology of corrosion control, and (3) the transfer of technology and implementation of effective corrosion control. The authors believed that a national agenda should be carried out to reduce the economic impact of corrosion. One of the outstanding challenges to achieving this involves spreading the awareness of corrosion and the expertise needed to deal with it, both of which are currently scattered throughout government and industry organizations. Approaches and Results The study employed two approaches to estimate the total cost of corrosion. Approach 1 (corrosion control methods and services) involved estimating the total cost of corrosion to the economy by summing up the cost of corrosion products and services. The corrosion control methods included protective coatings, corrosion- resistant alloys, corrosion inhibitors, polymers, anodic and cathodic protection, and corrosion control and monitoring equipment. Corrosion control services included engineering research and development and education and training. The total cost of corrosion control methods and services was estimated at $121 billion, or 1.38 percent of the $8.79 trillion U.S. gross domestic product (GDP) in 1998. The cost of organic coatings, $107.2 billion, constituted approximately 88 percent of the total cost of corrosion control methods and services. The cost of corrosion control services contributed less than 1.2 percent to the total cost. Past studies have shown that this approach, though admittedly simple, is likely to miss the significant cost of corrosion management, the cost of direct services related to the owner/operator, and capital losses due to corrosion. Approach 2 (industry sector analysis) consisted of first estimating the costs of corrosion in 26 specific industry sectors, each of which had been assigned to one of five broader categories, and then extrapolating them to obtain a nationwide estimate of total corrosion cost. The sectors were selected to represent as broad a cross section of the U.S. economy as possible. All had their specific corrosion problems, and together they constituted approximately 27 percent of the U.S. GDP. The five major sector categories were infrastructure, utilities, transportation, production and manufacturing, and government. Data collection methods for sector-specific analyses differed significantly from sector to sector, with the sources ranging from government reports, publicly available documents, expert opinion,

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aPPendix a  and industry records. Below are the five main categories and the sectors that were assigned to them: • Infrastructure. Highway bridges, gas and liquid transmission pipelines, waterways and ports, hazardous materials storage, airports, and railroads. • Utilities. Gas distribution, drinking water and sewer systems, electrical utili- ties, and telecommunications. • Transportation. Motor vehicles, ships, aircraft, railroad cars, and hazardous materials transportation. • Production and manufacturing. Oil and gas exploration and production; mining; petroleum refining; chemicals; petrochemicals and pharmaceuti- cals; pulp and paper; agriculture; food processing; electronics; and home appliances. • Goernment. Defense and nuclear waste storage. The costs in each of the five categories were discussed next: • Infrastructure. The annual direct cost of corrosion in the infrastructure category was estimated at $22.6 billion and accounted for approximately 16.4 percent of the total cost of the five categories. The most significant contributions in this category were from the industrial sectors of highway bridges ($8.3 billion), gas and liquid transmission pipelines ($7 billion), and hazardous materials storage ($7 billion). Corrosion costs for the airports and railroad sectors were not estimated owing to insufficient information. • Utilities. The annual cost of corrosion in the utilities category was estimated to be $47.9 billion and represented 34.7 percent of the total cost of the five categories. The industrial sector of drinking water and sewer systems was the single largest contributor, with an annual corrosion cost of $36 billion, followed by electrical utilities and gas distribution, which had annual cor- rosion costs of $6.9 billion and $5 billion dollars, respectively. No estimate of corrosion cost was made for the telecommunications sector because there was little information on this rapidly changing industry. • Transportation. The annual cost of corrosion cost in this category was esti- mated at $29.7 billion, which accounted for 21.5 percent of the total cost of the five categories. The transportation category comprised the industrial sectors of motor vehicles, ships, aircraft, railroad cars, and hazardous mate- rial transport. The motor vehicles sector was estimated to have the largest corrosion costs, $23.4 billion. • Production and manufacturing. This category was made up of the sectors that produce goods of crucial importance to the economy. The annual cost of corrosion in this category was estimated at $17.6 billion, which was

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assessment c o r ro s i o n e d u c at i o n 100 of 12.8 percent of the total cost of five categories. The pulp and paper sector had the largest corrosion cost, $6.0 billion, in this category, followed by the petroleum refining sector, with a corrosion cost of $3.7 billion. No estimate of corrosion cost was made for the electronics sector because it is difficult to detect and identify corrosion failures. • Goernment. Defense and nuclear waste storage are the two sectors analyzed in this category. The total annual cost of corrosion in the category was esti- mated to be $20.1 billion, representing approximately 14.6 percent of the total cost of the five categories analyzed. The defense sector, with an annual corrosion cost of $20.0 billion, accounted for 99.5 percent of the total. Since the total cost of $137.9 billion represented only the estimated direct corrosion cost for the analyzed industrial sectors, the total direct cost of corrosion to the U.S. economy was estimated using a nonlinear extrapolation to obtain an estimate for the nation of $276 billion, which was 3.1 percent of the $8.79 trillion U.S. GDP for the year 1998. The indirect corrosion costs, i.e., the costs incurred by those other than the owners and operators, were conservatively estimated to be the same as the direct costs, resulting in a direct plus indirect cost of $512 billion, which was approximately 6.2 percent of the U.S. GDP for 1998. The large indirect costs included (1) lost productivity because of outages, delays, failures, and litiga- tion; (2) taxes and overhead on the cost of corrosion portion of goods and services; and (3) indirect costs of nonowner/operator activities. The difference in the costs estimated by Approach 1 ($121 billion) and Approach 2 ($512 billion) can be attributed to the fact that the former included only corrosion control materials and services. The latter, however, also took into account owner/operator corrosion management costs and indirect costs that were not part of the corrosion services cost. Conclusions and Recommendations of the 2001 Report The nation’s infrastructure is essential to the quality of life, industrial produc- tivity, international competitiveness, and security. Each component of the infra- structure, such as highways, airports, water supply, waste treatment, energy supply, and power generation, is a complex system and a significant investment. Corrosion is a primary cause of damage and poses a great threat to the infrastructure. The study points out that technological advances in the last several decades have given us ways to prevent and manage corrosion. A number of cost-effective corrosion management techniques can significantly enhance the service life of existing sys- tems and avoid the need for new construction and replacements. Preventive strate- gies have been identified in both nontechnical (management and public policy) and technical areas. In nontechnical areas, they include the following:

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aPPendix a 101 • Increase awareness of the significant costs of corrosion and the potential for savings when it can be prevented. • Correct the misconception that nothing can be done about corrosion. • Change policies, regulations, standards, and management practices to increase cost savings through sound corrosion management. • Improve the education and training of staff in the recognition and control of corrosion. Preventive strategies in technical areas include advances in design practices for better corrosion management; in life prediction and performance assessment methods; and in corrosion technology generally through research, development, and implementation. It will be necessary to engage more of the primary stakeholder—government and industry, the general public, and consumers—in this effort and to harness the awareness and expertise that is currently scattered throughout government and industry organizations. The following recommendations were made: • Form a committee on corrosion control and prevention under the National Research Council. The focus of the committee would be to preserve and extend the life of existing infrastructure and equipment. • Develop a national focus on corrosion control and prevention. • Improve policies and corrosion management. • Work for technological advances that would allow reducing the cost of corrosion. • Implement effective corrosion control. DSB REPORT ON CORROSION CONTROL The readiness and safety of weapons systems are among the highest priority challenges for DOD. It is imperative that the materials of which DOD equipment is made be maintained in an acceptable condition so that the equipment can be employed safely as soon as it is required, including in harsh and physically demand- ing environments. The dollar cost of corrosion to DOD has been estimated by the Government Accountability Office (GAO) to be $10 billion to $20 billion per year. At the request of the Acting Under Secretary of Defense for Acquisition, Technology and Logistics and the Deputy Under Secretary of Defense for Logistics and Mate- riel Readiness, the DSB formed a task force to address corrosion control efforts in DOD. The task force made five recommendations, one in each area that represents a barrier to improvement: (1) leadership commitment and policy, (2) design and

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assessment c o r ro s i o n e d u c at i o n 102 of manufacturing practices, (3) maintenance practices, (4) funding and management, and (5) the scientific basis for preventing and mitigating corrosion. Scope and Approach The task force was specifically asked to do these things: • Assess ongoing corrosion control efforts within DOD, with specific atten- tion to: —Duplication of research efforts. —Application of existing and future technology that exists in one area to other areas. —Status of training for operator and maintenance personnel. —Status of maintenance processes. —Incorporation of corrosion control and maintainability in ongoing acqui- sition programs. —Identification of unique environments important to national security but with few commercial applications. • Determine which areas would provide the most significant advances in combat readiness if adequate resources are applied. • Assess best commercial practices and their applicability. Both DOD’s infrastructure (facilities, bases, ports) and its weapons systems (platforms, electronics, munitions) experience corrosion, but only the weapons are directly involved in operational readiness and combat capability. Accordingly, and in line with the terms of reference, the task force directed most of its attention to corrosion problems associated with the weapons systems and equipment. In the absence of accurate corrosion cost data, it is impossible to quantify the potential benefits from serious corrosion management. Nonetheless, the consensus within the task force and among many DOD and industry experts holds that as much as 30 percent of the corrosion costs can be avoided by preventing rather than repair- ing. This is not a near-term target and is heavily dependent on reforms in the design of DOD weapons systems and in the acquisition process. It is likely that a great deal of corrosion prevention and treatment could be funded with the dollars now being used to rework or replace the most badly damaged items. The task force suggested that the cost and readiness impact of corrosion can be reduced if the DOD manages the corrosion challenge better. This, however, requires the removal of certain institutional barriers.

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aPPendix a 10 Results and Recommendations of the 2004 Report The task force’s examination of DOD’s corrosion program revealed several opportunities for both short-term (tactical) and long-term (strategic) improve- ment. Many of them remain unrealized because of the barriers encountered. Leadership Commitment and Policy • The absence of any priority for serious attention to corrosion reflects the leadership’s ignorance of the problem, an ignorance due not to incompe- tence but rather to a lack of accurate and meaningful data. • DOD does not have accurate information on the direct and indirect costs of corrosion prevention, mitigation, and remediation. Consequently, it has no strategy for systemic improvement. • Corrosion costs being unclear, service decision makers lack compelling arguments for resources to reduce life-cycle costs. The problem is that the system incentivizes minimum acquisition cost rather than life-cycle cost. • Decision makers lack effective corrosion standards and test methods to assess corrosion performance. Design and Manufacturing Practices • Since design-phase decisions largely determine future corrosion costs, materials choice, coating selection, and structural aspects are critical. Cor- rosion specialists must participate, and advanced technologies must be considered. • The predictive corrosion models needed for the design of weapons systems do not exist. • There are no adequate maintenance cost accounting systems for estimating return on investment. • Acquisition and design personnel have not been given the training they need to consider minimizing the impact of corrosion on life-cycle costs. • Existing DOD standards and metrics are often advisory rather than mandatory. Recommendation 1: Promulgate and enforce policy emphasizing life-cycle costs over acquisition costs in procurement and provide the incentives and training to assure that corrosion costs are fully considered in design, manufacturing, and maintenance. The total near-term investment cost on the order of $1 million is estimated for implementing this recommendation, primarily to assemble a stand- ing team of corrosion experts to advise decision makers.

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assessment c o r ro s i o n e d u c at i o n 10 of Recommendation 2: Mandate and implement comprehensive and accurate corro- sion data reporting systems across DOD, using standard metrics and definitions. The total cost for implementing this recommendation is estimated at about $5 mil- lion, largely for contract support in the development of standards and metrics. Maintenance Practices • Maintenance needs and current state of corrosion are not well characterized for most nonaviation assets. • It has been shown in industry that the costs of corrosion can be drastically reduced by instituting best practices in engineering and maintenance. • Systematic corrosion control training and awareness are lacking on the part of operators and maintainers. • There are no consistent, comprehensive corrosion control and mainte- nance strategies throughout the services and for all systems, including the infrastructure. Recommendation 3: Fund contract for comprehensive assessment of all DOD weapon system equipment by approximately 30 five-person teams of corrosion experts and use the results to develop and implement a comprehensive corrosion maintenance strategy. The cost for implementing this recommendation is estimated at about $25 million per year and should be continued indefinitely. Funding and Management • Corrosion science and technology (S&T) funding is small, fragmented and generally comes from unrelated research and development accounts such as Small Business Innovative Research (SBIR) and the Strategic Environmental Research and Development Program (SERDP). • Dollars devoted to corrosion prevention during weapon systems research, development, testing, and evaluation (RDT&E) have historically proved insufficient. • No specific corrosion remediation budget exists in service operation and support (O&S) accounts. Recommendation 4: Establish a Corrosion Executive for each service with respon- sibility for oversight and reporting, full authority over corrosion-specific funding, and a strong voice in corrosion-related funding. An investment of $60 million per service is estimated.

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aPPendix a 10 Scientific Basis for Preention and Mitigation of Corrosion • Long-term funding for corrosion S&T that would make the successful application of research more likely is too low by a factor of three or so. • That there is little or no redundancy in corrosion S&T portfolios can be attributed to the diversity of issues and platforms across the various services. • Current S&T portfolios are very technology-oriented and appear to be short on the kind of research that brings a better understanding of the science that underlies corrosion. • Several S&T areas have no dedicated, consistent S&T program in corrosion. • There is adequate communication across the corrosion S&T community, so duplication of efforts is not a problem. Recommendation 5: Refocus and reinvigorate corrosion S&T portfolios; triple the effective funding in this area (+$20 million). It is estimated that an additional $20 million per year would be required. The task force estimated the cost for implementing the above five recom- mendations at approximately $50 million in the first year, assumed to be Fy2005. Once the foundations are laid in the first year, additional investment in preventive design in future years is estimated to be $100 million to $150 million per year but is expected to quickly (within 1 or 2 years) be offset by corresponding and larger reductions in O&S.