PCA chair joins National Audit Office’s condemnation of “fundamental failure” around nuclear sites’ decommissioning contract

Palace of westminster, london   feb 2007

The chair of the Public Accounts Committee (PAC) has slammed the Nuclear Decommissioning Authority (NDA) after a National Audit Office (NAO) report highlighted “fundamental failures” around the procurement process to award decommissioning work on 12 nuclear facilities in the UK.

Highlighting the deal, known as the ‘Magnox contract’, Meg Hillier, MP and chair of the PAC, said the NDA “broke basic rules of public procurement”, and as a result taxpayers had been hit with a bill for £100m.

“The NDA was badly mistaken about the work it needed to do on its sites when it let this contract and has had to cancel it nine years early. It now has to start again from scratch,” she added.

Hillier said the decommissioning programme was one of the government’s biggest ever contracts and it had gone wrong “on a fundamental level”. Its failure raised serious questions about the NDA’s capability, she added.

The contract is already the subject of a government enquiry launched in March this year.

The NAO said that in July 2016, the High Court found the NDA had wrongly decided the outcome of the procurement process and subsequently agreed to settle claims in March this year. Energy Solutions, one of the incumbent contractors for the Magnox sites until 2014, had unsuccessfully bid for the contract, and subsequently issued legal claims against the NDA for damages.

The High Court found that, had the NDA applied its evaluation criteria correctly, the winning bidder, Cavendish Fluor Partnership, would have been excluded from the competition, the NAO said. The NDA agreed to settle legal claims with Energy Solutions and its consortium partner at the time of the bid, Bechtel, at a cost of £97.3m.

The NAO said a consolidation process – where terms of a contract are aligned with assessing the work required once a project has started – had overrun until March this year, taking into account a six-month extension, due to “the volume and complexity of the changes required to the scope of the contract”. Even then, the process had not been resolved, it added.

The Department for Business, Energy & Industrial Strategy, UK Government Investments (UKGI) and the Treasury “were aware of delays to the consolidation process and the increase in the cost of the contract, but raised no formal concerns to ministers until August 2016”, the NAO said.

“HM Treasury and UKGI told us that they were concerned about the delays in consolidation, but relied on assurances provided by the NDA that a resolution would be achieved,” it added.

The NAO said the Magnox contract cost the taxpayer “upwards of £122m”, with money going to settlement of legal claims with Energy Solution and Bechtel.

In March this year the energy secretary, Greg Clark, announced an inquiry into the contract, led by former National Grid chief executive Steve Holliday.

Amyas Morse, head of the NAO, said: “The NDA’s fundamental failures in the Magnox contract procurement raise serious questions about its understanding of procurement regulations; its ability to manage large, complex procurements; and why the errors detected by the High Court judgement were not identified earlier.

“In light of these issues, the department must consider whether its governance and oversight arrangements surrounding the NDA are sufficiently clear and effective in providing the scrutiny and assurance it requires to meet the standards expected in managing public money.”

Last month the NDA issued Cavendish Fluor Partnership with a two years termination notice, with its contract coming to an end in August 2019. The NDA said it would consider how the the Magnox sites should be managed once the contract with CFP came to an end.