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Nuclear needs early cost control

Despite the Fukushima accident in Japan, the UK’s new nuclear build programme is more or less on track. Mark Weaver, head of energy for property and construction consultant Rider Levett Bucknall talks
about managing costs of new and existing nuclear plants and explains how the changing role of the cost consultant is set to address some of the challenges.

New funding streams are the key catalyst for change in the nuclear power sector. Existing nuclear plants are set to be managed on behalf of the government by external bodies and new build projects will all be developed using private sector investment.

This undoubtedly introduces a new type of financial accountability and culture to the UK nuclear world and the cost consultant role is fundamental to successful cost planning.

Early involvement

Many issues hindering efficient cost control could be avoided by the introduction of the cost consultant at concept stage. The profession has a wide and varied commercial skills base and plays a key role in the efficient set up of any project.

Although practices are changing, many cost consultants are usually appointed once preliminary costs have been calculated by an in-house team, and at a stage when a certain level of project planning has already taken place.

This has been standard over the last couple of decades and sits in stark contrast to other industry sectors where the cost consultant, architect, engineer, planners and other specialist teams, such as mechanical and electrical, work closely together from the start. It was thought that the methodology would save on initial costs whereas now it is widely recognised that it has the reverse effect.

“Better cost control can be implemented when revised changes are released on a more regular basis than at certain stages”

 

The negative impact of a late introduction increases costs. Improving contractual conditions from the beginning as well as establishing a clear working process to enable the project to develop and best evolve is a key role of the cost consultant. This basic groundwork should be what forms the agreed working methodology for the lifetime of the project.

Once on board, the cost consultant revisits the preliminary costs and validates that they are achievable. This external validation is essential for the team which must be assured that the project is feasible. Nobody in the commercial world would agree to costs that they believe are a non- starter. As the nuclear sector now starts to move towards a private sector ethos, and an early introduction of the consultant becomes the norm as in other sectors, revisiting these costs will become a thing of the past.

Unknown elements

The bespoke nature of each individual project always introduces an unavoidable element of the unknown into the project arena as very few plants perform the same function.

Through no fault of their own, clients are often unclear about what they need in a final design and this creates another potential opening for design changes to be made.

This is set to change for new build sites. Their construction will vary, dependent on the reactor used, but the template will be similar and once the first few sites have been developed, subsequent locations should be built quicker as lessons are learned and problems ironed out. A more efficient build time frame is certainly on the cards.

 

“An incomplete cost brief can also lead to complications when the supply chain enters the equation and tenders are issued”

 

Once the nuclear project becomes live, the design of the project continues to evolve and improve and changes increase as a result. Better cost control can be implemented when revised changes are released on a more regular basis rather than at certain stage gates of the project.

A cost team can only provide costs when designs are updated and if the design is released in large sections, the financial impact is less controllable.

An incomplete cost brief can also lead to complications when the supply chain enters the equation and tenders are issued. If incomplete, the brief will not be inclusive of all the facts nor sufficiently detailed to manage and mitigate all the risks. A constantly changing brief to a supplier will result in constantly changing costs, something that could be avoided, especially when the project is in full progress.

Again, it is the early arrival of the cost consultant that helps to consolidate the brief. The team can advise on the commercial reality of the project as well as deliver a more accurate cost. If budget changes have to be made it is also not averse to changing a supplier or product at no detriment to quality.

Olkiluoto 3 Experience

In 2009 Rider Levett Bucknall was appointed as cost consultants to the Olkiluoto 3 (OL3) reactor in Finland, to review and analyse the over run costs of the project.

On completion, OL3 will be the biggest nuclear reactor in the world and will start to pump out electricity in 2012. The excavation site alone is the size of 55 football fields. The property and construction consultants were able to demonstrate that they had the right skills, disciplines and very strict requirements of what was needed to work on this size of project. Not only that, but it understands the very individual culture of working on a nuclear reactor site and has a practiced team which is well versed in the climate.

 

New nuclear build introduces associated works that have not been the norm for an energy provider for many years.

This is a new learning curve for all.

A new station at a new location requires substantial levels of preparation before an operator can even start on site and this is where the practice of introducing the cost consultant and other planning and engineering experts early on will fall into the norm with other industry sectors. Without their input at this stage, the project will not get off the ground - or out of it!

Interrogation of the planning document is an integral part of this process, identifying what infrastructure is required and how much this stage of the project will cost. An accurate analysis of cost data at this stage is a necessity as a financial miscalculation could have very unwanted repercussions for the private sector.

Best value

The cost consultant will work hard alongside the local councils and the government to achieve best value in this area.

Best value also needs to be achieved in negotiations with all the supply chain and it is the cost consultant that will ensure this happens.

The industry is most definitely changing. With an era of new nuclear dawning, late engagement of the cost consultant is fast becoming a thing of the past.

Rider Levett Bucknall has been in discussions with a number of private sector led energy operators about their plans for a number of months. The benefits of welcoming the cost team on board in the initial stages have at long last been recognised.

● Rider Levett Bucknall has more than 25 years experience in working within the nuclear sector. It is currently employed on all major nuclear sites across the UK and working at Olkiluoto, the first third generation nuclear reactor to be built in Western Europe. The firm has also recently opened an office in Mumbai to help maximise the potential of the Indian energy market and was a sponsorship partner for the recent India Nuclear Energy Summit 2011. The event featured prominent industry leaders and government officials who lead discussions relating to India’s current and future energy needs.

 

Spreading the message

Effective communication is vital on nuclear power sites. By Lance Taylor.

One of the major issues facing the cost consultant and many other large public and private organisations right across the globe is one of effective communication. This is a priority for all, especially with 21st century work practices that sees communication to all audiences as a key strength on a very competitive world stage.

With more than 10,000 people working on a nuclear site, achieving effective communication is both a challenge and a skill and one that Rider Levett Bucknall excels at. Often relating to processes and procedures, the messages need to be received and understood by a wide audience and the process embraced by all those on the client side right through to those in the supply chain.

It also includes increased inter-departmental liaison to ensure best value for the job. It has been known for the cost department to work separately from the procurement department as until recently, the benefits of working in unity were not appreciated. Now it is recognised that anything commercial on a project needs to be cemented together so there is one department dealing with the commercial aspect of the project.

● Lance Taylor is Rider Levett Bucknall chief executive

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