The UK government on 27 March announced an independent inquiry into the conduct of a 2012 procurement process run by the Nuclear Decommissioning Authority (NDA) that resulted in a 14-year £6.1bn ($7.6bn) management and decommissioning contract being awarded in September 2014 to the Cavendish Fluor Partnership.
The contract was for the management and decommissioning of 12 redundant Magnox nuclear sites, including two research sites, and the Calder Hall reactor on the Sellafield site, which were the UK’s first nuclear power stations. Cavendish Fluor is a joint venture between the UK firm Cavendish Nuclear, a subsidiary of Babcock International, and the US company Fluor Inc. Cavendish Nuclear is the majority shareholder in Cavendish Fluor Partnership, with a 65% stake.
After the result of the procurement was announced, the other bidders US-based engineering companies EnergySolutions and Bechtel, launched a legal challenge. NDA was found by the High Court in July 2016 to have wrongly decided the outcome of the procurement process.
The UK’s Department for Business, Energy and Industrial Strategy said NDA has settled outstanding litigation claims against it by EnergySolutions and Bechtel. “As part of the settlements, NDA has withdrawn its appeal against the judgment.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…was flawed. The NDA has agreed settlement payments with EnergySolutions 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.
NDA said it would exercise its right to terminate the contract with the Cavendish Fluor Partnership on two years’ notice, which means it will be terminated at the end of August 2019, after five rather than 14 years. Energy secretary Greg Clark said it has become clear to NDA 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 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,” a statement said. Announcing the independent inquiry, Clark said it will review the conduct of NDA and of government departments and make any recommendations it sees fit.
NDA was established in 2004 to deliver the decommissioning and clean-up of the UK’s civil nuclear legacy. Babcock International has agreed to end the NDA contract, which will remove £800m from Babcock's order book and reduce its annual revenue by £100m from financial year 2020/2021. Before it expires, the NDA will arrange for a replacement contract to start when the current one ends, Clark said. The inquiry into the procurement process is being led by the former National Grid CEO Steve Holliday. The inquiry will look at how the mistakes were made and by whom, how the litigation was handled, and the relationship between the NDA and government departments.
Unions expressed concern at possible job losses as a result of the early termination of the contract. Mike Clancy, general secretary of Prospect, said: “The public, and our members, will want reassurance that the termination process and uncertainty over the future of decommissioning will not lead to standards deteriorating or the loss of UK expertise.” The Unite union said the financial mess involved in awarding the contract showed the clean-up project should be taken into public ownership.
Photo: Map showing locations of the sites covered under the 2014 contract, with estimated dates for the sites to enter care and maintenance as of September 2014
