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MPs attack ‘murky’ details of £500M payments to nuclear contractor

Hunterston a 800

The Nuclear Decommissioning Authority (NDA) can not fully account for up to £500M paid to a contractor, according to Parliament’s Public Accounts Committee (PAC).

During an inquiry into the government body’s botched procurement of a 12 site Magnox nuclear decommissioning programme, which resulted in a £100M legal payout, the PAC discovered that the NDA could not account for around £500M of its costs.

More than 100 changes to the contract increased decommissioning costs from £3.8bn in September 2014 to £6bn in March 2017.

But the NDA has admitted that up to £500M of that £2.2bn increase could have been paid to previous contractor Energy Solutions, some of which could have been for work which might not have been not carried out. The NDA is investigating what money was paid for which pieces of work and said it has the power to claw back the money if any overpayments have been made. The PAC said the NDA does not know if the cost was due to its incorrect assumptions about the state of the sites when it let the contract or underperformance by the previous contractor.

PAC deputy chair Geoffrey Clifton-Brown MP said: “It is wholly unacceptable that some details of what took place should remain so murky – not least the NDA’s inability to fully account for some £500M of taxpayers’ money paid to its previous contractor.

“We expect the NDA to be open with us about what it is doing to address this and other failings identified in our report, such as shortcomings in the skills and expertise of its staff.

“But central government is also culpable. Having signed off the NDA’s needlessly complicated procurement plan, it then failed in its duty to taxpayers as issues emerged and costs grew.

“We accept a balance must be struck but oversight structures are there for a reason and, for a significant and critical period, UK Government Investments was simply too hands-off.

“An independent inquiry examining the Magnox contract is under way and both the NDA and central government say they are acting on its interim recommendations.

“Given the scale and implications of the failings set out in our report, we are not prepared simply to take their word for it. In the coming months we expect to be shown concrete evidence of the progress being made.”

In March last year the government terminated its key decommissioning contract with Cavendish Fluor Partnership (CFP) nine years early after it found significantly more work was required at the 12 nuclear sites than previously thought.

CFP, a JV between Babcock International subsidiary Cavendish Nuclear and US firm Fluor, will work on the contract until September 2019.

A “fudged” 2012 procurement process led to a £100M payment in damages to a losing bidder. The PAC said the NDA had “completely failed” in the procurement and management of the major government contract.

The procurement process included more than 700 evaluation criteria which bids were scored against, which the NDA has admitted is more complex than it needed to be.

In its report the PAC claimed the NDA had a “staggeringly inaccurate” understanding of the state of the Magnox sites before it let the contract. Work on more than half of the 12 Magnox sites was behind schedule and the NDA relied on its new contractor, CFP, to decide what extra work was needed. 

The PAC said: “We are concerned about the NDA’s lack of due diligence and apparent disregard for the need to independently assure itself of the state of the sites before committing taxpayer’s money to a contract.”

It added the NDA did not have the capacity to manage the procurement properly as it had got rid of a vital commercial director role. Consequently CFP had more than 300 people to manage changes to the contract after it was let, outweighing the NDA’s own resources.

CFP-owned company Magnox is responsible for decommissioning 12 power stations including Wylfa, Sizewell A and Hinkley Point A.

A spokesperson for the NDA said: “As the Nuclear Decommissioning Authority continues to improve the way it manages the clean-up of the nation’s oldest nuclear sites, we welcome the scrutiny of the Public Accounts Committee and today’s report.

“We will study the Committee’s recommendations and those to come from the Holliday Inquiry, and have already taken significant steps to address the issues arising from the Magnox competition and contract.

“We are committed to learning from the mistakes made, implement any necessary improvements and continue to focus on the important work of cleaning up the UK’s nuclear legacy.”

Fluor and Energy Solutions have been contacted for comment.

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