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Viewpoint: value versus efficiency

More for less in nuclear decommissioning, says Burges Salmon partner William Gard.

The Nuclear Decommissioning Authority (NDA) expects to spend £2.8bn across its 19 sites during the course of 2010/2011. With a long way to go before the clean-up of Britain’s nuclear legacy is complete, the nuclear decommissioning market should continue to be of great interest to the construction industry. Understanding the likely procurement structures is a prerequisite to getting involved.

However, the NDA will not be immune to greater financial scrutiny over the next few years. It must continue to encourage the supply chain to deliver value for money in order for it to meet its duty to cost effectively decommission and clean up its sites.

This challenge is not made any easier by competition for the appropriate skills from the likes of nuclear new build, offshore wind and rail. So adopting Antony Oliver’s theme, “achieving more for less”, how will the NDA and industry achieve this?

The first set of management and operation (M&O) contracts the NDA entered into with its site licence companies (SLCs) allowed the SLCs to be paid the costs they reasonably incurred in carrying out decommissioning and clean-up activities based on a pre-agreed annual plan and budget. This was a pragmatic approach given the degree of uncertainty over the state of the sites and the scale of the work involved.

“Obtaining more for less will require a holistic rather than a piecemeal approach.”

William Gard

In order to promote competition for these M&O contracts, private sector companies were allowed to compete for the right to own the SLCs. These private sector companies (known as parent body organisations or PBOs) were expected to inject greater expertise and innovation into the SLCs to evolve ever more efficient ways of achieving the NDA’s objectives. A number of these competitions have now been run, PBOs appointed and revised M&O contracts entered into. The next PBO competition to be run will be for the Dounreay site.

It was understood from the outset that a “cost reimbursable” model was unsustainable for the duration of the decommissioning programme, an observation also made by the National Audit Office in early 2008. But how do you go about making the cultural shift from relatively cosy “cost reimbursable” contracting? The answer is: not without the joint efforts of all concerned.

Obtaining more for less will require a holistic rather than a piecemeal approach. The NDA and private sector have to be able to commit to longer term plans and the financial liabilities that come with them. Balancing the availability of public funds with the need to release the full capability of the PBOs will be a central conundrum. It will depend on many factors, not least the balance to be struck between maintaining flexibility and the benefits of using the most cost effective means of decommissioning and cleaning up our nuclear installations.

However, given greater certainty over workflows the private sector must be proactive in identifying opportunities to provide better value for money if it is to succeed in this market. Cost plus has its place, but does little to encourage efficiency and well managed projects.

  • William Gard is a partner at the law firm, Burges Salmon, and a chartered civil engineer.

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