Rarely can a major civils client have experienced such radical change so fast than has British Nuclear Fuels. Now arguably the world's leading operator in the total nuclear cycle, this Cheshire-based public sector company has, since 1998: doubled in size; replaced virtually its entire board of directors; and - in response to a barrage of hard hitting safety investigations - is now restructuring its operations worldwide.
From this enforced self analysis should emerge even more opportunities for the civils contracting chain. The main company division offering construction work, BNFL Engineering, is now centre stage in the restructuring exercise and is revamping procurement routes to produce a more flexible portfolio.
BNFL's main focus is nuclear fuel with most of the 23,000 employees either manufacturing it, producing electricity from it, or reprocessing, storing and disposing of it. The company's engineers design, run or advise on nuclear facilities worldwide, ranging from US waste treatment plants to Russia's stricken Chernobyl station and Britain's eight ageing Magnox reactors.
Created in the early 1970s, publicly owned British Nuclear Fuels is one of only two companies worldwide serving the entire nuclear fuel cycle. Its 23,000 employees work in 15 countries with Sellafield the largest UK operation and the focus of the engineering division's £1M/day spend. This year's £2,064M turnover is up 32%, though a £74M pre-tax profit becomes a £337M loss after allowance for 'exceptional items'. Continuing concern over Sellafield safety has triggered a major company re-analysis and plans to convert by 2002 to a public-private partnership, with 49% floatation, have yet to be confirmed by Government.
Westinghouse, which brought with it control of nearly half the world's nuclear power plants.
This April it further boosted its influence by acquiring the nuclear operations of European multinational ABB.
But it is the home market, dominated by the Sellafield nuclear fuel reprocessing plant, that has triggered BNFL's current soul searching re-analysis.
This remote Cumbrian site - a world centre for the storage, reprocessing and waste management of various fuels - is an organised hotch potch of 1,000 buildings ranging from 1950s concrete storage ponds to cutting edge reprocessing plants.
Far from leakproof, this vast 4km 2nuclear factory is under constant outside scrutiny. But never has this attention been as concentrated as over the last couple of years, since the summer of 1999 when several safety scares culminated in the revelation that quality assurance data for fuel being reprocessed for a prestigious Japanese client had been falsified.
The words 'challenging' and 'turbulent' litter the company's current annual report as the new chairman and chief executive promise a business transformation centring on safety and rebuilding customer confidence.
But also being reassessed are the company's nuclear liabilities - long term risks and costs associated with power plant decommissioning and waste storage.
ciated with power plant decommissioning and waste storage.
Turnover this year is up 32% to more than £2bn and, on paper, a £74M pre-tax profit looks healthy. But discounted 'exceptional items' totalling £411M - including £113M just for sorting out the records falsification mess - convert bottom line profit into a whopping £337M loss. This compares with last year's £218M profit on the same basis.
For several years the 1,000 strong BNFL Engineering had operated as a separate subsidiary company to offer its skills competitively in the lucrative £1.4bn/year world marketplace.
But 'trouble at home' prompted this August's decision to reintegrate the division into the heart of BNFL. 'Our focus has changed from seeking external opportunities to the internal challenge of sorting out Sellafield's problems, ' explains Peter Caldow, group commercial manager heading up the civils procurement route.
Virtually all the division's £360M annual spend is now directed to Sellafield. There are two Magnox plants to be maintained. But the main focus is new construction facilities to house retrieved fuel rods and radioactive waste, currently stored in ageing concrete ponds and silos. Also needed are conditioning plants for waste treatment.
Government's 'suspension' of plans for a vast underground repository in which to entomb the waste means at least five more above-ground stores will be required. Meanwhile other buildings are being decommissioned and demolished.
'We are involved with virtually all the site's 1,000 structures, ' says chief civil engineer John Riding. 'Construction is a major technical challenge as new build can demand nuclear design standards and work must be slotted into an existing brownfield site.'
The procurement of construction is also being reanalysed.
Most is currently offered through a 'partnering alliance' between BNFL and a turnkey contractor. But Caldow wants to widen this route to include a range of packages more tailored to specific work on offer and to open it up to more competition.
In the pipeline
BNFL Engineering's £1.75bn five year spend is devoted 95% to Sellafield, with near half allocated to plant decommissioning plus nuclear waste storage and retrieval.
General Sellafield opportunities include:
Concrete silos and ponds refurbished or decommissioned Construction of waste recovery, conditioning, encapsulation and storage plants Extensive building refurbishment, decommissioning, demolition.
Further afield, access to:
Servicing of eight Magnox power stations Decommissioning Magnox stations: Berkeley, Hunterston A, Trawsfynydd Worldwide nuclear market, dominated by BNFL and worth £1.4bn/year
Previous prime aim of driving down costs by 25% over two years is now secondary to:
Maintaining Sellafield licence to operate Continuing safety improvements Enhancing performance of business support for Sellafield clients.
'It's like watching the Kremlin at work. BNFL is a highly complex structure, paranoid that it remains in control. Yet it must oversee at Sellafield an array of autonomous island states each working to their own agenda.'
This description, from a leading Sellafield contractor, sums up the challenge which many in the supply chain see as pervading much of the civils construction programme.
Contractors talk of a 'collective arrogance' in which BNFL assumes that it is automatically the expert in nuclear design and construction. And they agree, though for different reasons, that the current alliance deals are not really working.
'There is a failure within BNFL to cascade the message down that the company is not necessarily the lead partner, and this creates communications problems, ' says another leading contractor's director. 'It must realise the importance of skills from other disciplines in the team.'
Concerned that projects have been slow to come forward, with annual plans for £1M of work each far from being realised, contractors are surprisingly complimentary about the 'rigorous but fair' partnering procedures which place safety above everything.
They praise the engineering team as individuals for being very open and, in general, they welcome more flexibility and increased competition.
But, they argue, an increased role for BNFL itself must not displace the contractor's design and buildability skills from early discussions.
'That would be regressing to the old days where designs soon became inflexible leaving us little scope for innovation, ' says another long standing contractor.
But if the result of procurement changes is a clearer definition of contract briefs, then they will be welcomed. 'Often it is like nailing jelly to the wall, trying to get a firm understanding of what is needed, ' says one contractor.
Around 80% of BNFL Engineering's £130M/year spend is currently won through negotiated two stage partnering - alliance deals with selected contracting groups providing turnkey design to final fix contracts. Entry to this select alliance list is through a partnering 'competition' where contractors face a barrage of tough questions encompassing safety, quality and technical expertise. Selection procedure includes benchmark scoring and workshops, described by one contractor as akin to a judicial trial.
Once selected, contractors win a five year alliance deal during which specific contracts are negotiated with the most 'appropriate' firm on the list. Most are incentivised target cost style contracts, often let on a design and build basis.
The system works reasonably well, says Peter Caldow, but is 'not the panacea we thought it was two years ago'.
Lead player in the partnership is usually the contractor with BNFL secondary. But, claims Caldow, in matters nuclear it is often better for the expert in that field, BNFL itself, to head up the team.
'There have been grey areas between respective roles, ' he says. 'We need to be more hands on and lead the process to ensure we really do build what we thought we were.'
In future BNFL plans to vary contract forms making them more job specific. Some would be design and build, some constructed only to BNFL's design, with others lump sum or simply a priced bill of quantities.
Competition would be opened up to firms not on the alliance list, with flexibility the key to ensuring contract styles remain focused on the task required.
Formal partnering deals may not always be demanded but, Caldow stresses, several of partnering's constituent parts - especially analysis of safety records - remain sacrosanct.