Adam Vaughan, energy editor of the British daily newspaper, The Guardian, last month reported on the very expensive consequences of what he characterized as the "flawed tendering process for dismantling old reactors at 12 sites".1 Vaughan quotes my research colleague, Stephen Thomas, emeritus professor of energy policy at the University of Greenwich, as branding the Nuclear Decommissioning Authority's (NDA) handling of the contract as "an immense screw-up."
I fear it is much worse than that. From my detailed experience of a previous failed management contract agreed by the NDA, also placed with a US company-led consortium, Nuclear Management Partners (NMP), which also led to the early cancelling of the contract, there could well be dubious collusion between the NDA and the then responsible government department (energy and climate change, DECC) under a Labour Government, at the expense of the long-fleeced taxpayers.
The investigator appointed by business secretary Greg Clark to look into this scandal, Steve Holliday, needs to revisit this earlier Sellafield scandal to assess why the public procurement lessons – especially the need for candour and transparency ‒ that should have been learned, were not.
Dr Clark's written statement, made on March 27 – under the surprisingly opaque headline "BEIS Non-Departmental Public Bodies" – revealed that the NDA had decided to terminate its contract with Cavendish Fluor Partnership (CFP) for the management and decommissioning of 12 redundant Magnox sites (including two research sites) which, together with the Calder Hall reactor on the Sellafield site, formed the UK's first fleet of nuclear power stations.
The NDA ran a £6.1 billion tender process from April 2012 which resulted in a 14-year contract being awarded in September 2014 to CFP – a joint venture between the British firm Cavendish Nuclear, a subsidiary of Babcock International, and the US company Fluor Inc.
Clark added that "This decision was approved by the then Department for Energy and Climate Change and HM Treasury (Finance ministry)."
CFP started work on the Magnox estate on 1 September 2014, after which, according to Clark's statement, "started a process to ensure that the scope of the contract assumed in the 2012 tender matched the actual status of the decommissioning to be done on each site – a process known as consolidation."
The statement continued:
"It has become clear to the NDA through this consolidation process that there is a significant mismatch between the work that was specified in the contract as tendered in 2012 and awarded in 2014, and the work that actually needs to be done."
"The scale of the additional work is such that the NDA Board considers that it would amount to a material change to the specification on which bidders were invited in 2012 to tender. In the light of this, the NDA Board, headed by a new Chair and Chief Executive, has concluded that it should exercise its right to terminate the contract on two years' notice. The contract will be terminated in September 2019, after 5 years rather than its full term of 14 years. This termination is made with the agreement of CFP."
The NDA is now expected to establish arrangements for a replacement contracting structure to be put in place when the current contract ends, under the NDA's new Chief Executive, David Peattie.
Clark also revealed that the cost to the British taxpayers would be nearly £100 million, saying:
"In addition I can announce today that the NDA has settled outstanding litigation claims against it by Energy Solutions and Bechtel, in relation to the 2014 Magnox contract award.
"The NDA was found by the High Court in its judgment of 29 July 2016 to have wrongly decided the outcome of the procurement process.
"As part of the settlements, NDA has withdrawn its appeal against the judgment. While these settlements were made without admission of liability on either side, it is clear that this 2012 tender process, which was for a value of up to £6.1 billion, was flawed. The NDA has agreed settlement payments with Energy Solutions of £76.5m, plus £8.5m of costs, and with Bechtel of $14.8m, plus costs of around £462,000 – approximately £12.5m in total.
"These are very substantial costs and had the potential to rise much further if the case had proceeded to trial.
"Taxpayers must be able to be confident that public bodies are operating effectively and securing value for money. Where this has not been achieved such bodies should be subject to rigorous scrutiny.
"I am therefore establishing today an independent Inquiry into the conduct of the 2012 procurement process and the reasons why the 2014 contract proved unsustainable. These are separate issues but both need to be examined thoroughly by an authoritative and independent expert. ...
"This was a defective procurement, with significant financial consequences, and I am determined that the reasons for it should be exposed and understood; that those responsible should properly be held to account; and that it should never happen again."
Earlier contracts
The earlier contracts with the US consortium Nuclear Management Partners (NMP) were awarded in a way that ministers and departmental officials demonstrably tried to circumvent Parliamentary oversight. A Parliamentary debate led by Labour MP Paul Flynn held on 19 November 2008 exposed how the Public Accounts Committee (then under a Conservative chairman) effectively colluded in the deal.3
Flynn was denounced by the then energy minister, Mike O'Brien, for traducing ministers with allegations of "some sort of cover-up." Actually, Mr Flynn's allegations turned out to be under-estimations of calumny.
The Public Accounts Committee only later properly probed the procurement scandal in October 2013, using documents I secured from the NDA ‒ via long-running freedom of information applications ‒ comprising a hitherto secret internal KPMG audit of Sellafield's operations.
The full sorry story is told in a January 2015 article in The Ecologist.4
An absurd footnote on the contempt with which these US-led consortia hold the British taxpayers who have funded their so-called management contracts for clean-up and Sellafield remediation comes with the revelation in expenses receipts sent to the NDA by departing NMP executives. A Canadian researcher FOI'd NDA for the expenses claims and obtained the details of how one NMP executive billed £714 for his cat to be transported by taxi cab from Sellafield to Heathrow, en route to the US.
You just could not make it up!
References:
1. 27 March 2017, 'UK nuclear decommissioning debacle costs taxpayer nearly £100m', www.theguardian.com/business/2017/mar/27/uk-nuclear-decommissioning-deba...)
2. Greg Clark (Secretary of State for Business, Energy and Industrial Strategy), 27 March 2017, 'BEIS Non-Departmental Public Bodies: Written statement - HCWS554', www.parliament.uk/business/publications/written-questions-answers-statem...
See also: New Judgment: Nuclear Decommissioning Authority v EnergySolutions EU Ltd (now called ATK Energy EU Ltd) [2017] UKSC 34, UK Supreme Court Blog 11th April 2017, http://ukscblog.com/new-judgment-nuclear-decommissioning-authority-v-ene...
3. www.publications.parliament.uk/pa/cm200708/cmhansrd/cm081119/halltext/81...
4. David Lowry, 19 Jan 2015, 'Sellafield ‒ how the nuclear industry fleeced taxpayers', www.theecologist.org/News/news_analysis/2719912/sellafield_how_the_nucle...