The NFLA welcomes the publication of the Public Accounts Committee (PAC) report on the botched Nuclear Decommissioning Authority (NDA) contract process for cleaning-up Magnox nuclear reactors, which is sharply critical of both the NDA and the UK Government. (1)
During a two year contract procurement process (2012 – 2014) to decommission 10 Magnox nuclear sites and two nuclear research sites, the NDA awarded a 14-year contract to Cavendish Fluor Partnership (CFP). It was then taken to court by Energy Solutions, part of a consortium that bid for the contract but lost, over what it argued was a flawed process. The High Court ruled that the NDA had wrongly decided the outcome of the procurement process, and the NDA had to settle legal claims with Energy Solutions and Bechtel of nearly £100 million.
Parallel to this process, the UK Government, following a NDA recommendation, has also decided to end CFP’s contract nine years early, as it is unable to fulfil all the requirements of the contract.
In its analysis of this sorry process, the PAC conclude:
- The NDA completely failed in both the procurement and management of the contract to clean up the Magnox nuclear reactor sites—one of the highest value and most important contracts let by Government. Not only did this disrupt an important component of vital nuclear decommissioning work, but it also cost the taxpayer upwards of £122 million.
- The NDA ran an overly complex procurement process, resulting in it awarding the contract to the wrong bidder.
- The NDA also drastically underestimated the scale of the work needed to decommission the sites at the time it let the contract. The NDA will now have to spend even more effort and use more public money to find a suitable way of managing these sites after the contract comes to an official end in September 2019.
- These failures have caused untold reputational damage to the NDA and they raise serious questions about its credibility as a strategic contracting authority. Central government must also share the blame. Not only did HM Treasury and the Business, Energy and Infrastructure Strategy (BEIS) Department approve the NDA’s approaches to procurement and contract management, but there are clear failings in BEIS’s subsequent challenge and oversight of the NDA, through UK Government Investments.
NFLA believe the PAC are correct in these highly damaging conclusions, which should not just require major changes in the management and policy processes of the NDA, but require the Government to also review its own failings.
There are wider concerns as well. For example, NDA officials altered the scoring under which the bids were evaluated. Whilst the PAC report does not accuse them of corruption, for the NFLA, the justification for doing this – that it was such a complex scoring system (300 criteria that if not met disqualified the bid), that all bids would otherwise have been excluded – suggests the process was ridiculous in the first place. NFLA question whether the senior NDA officials were competent to conduct such an exercise, and it wants to know how improvements are being made for future contract procurement processes.
A separate Government initiated inquiry led by Steve Holliday is also expected to report on such matters shortly, and NFLA will be keen to see how it understands the government’s failings in oversight of the NDA. NFLA hopes the Holliday review outlines a publicly accessible process that both identifies the failings in government and the measures that need to be taken to ensure a future adequate process is in place when they sign off on contracts. If there are no consequences for government if things go wrong, as in this case, what is the point in them signing such contracts off? NFLA will be writing to Ministers on this point.
As the interim contracting arrangements for managing the Magnox sites ends in September 2019 it also leaves little time for the NDA to be reformed, which has to be a core learning point from this failed procurement process.
NFLA also note a BBC ‘File on Four’ documentary which found evidence that the same type of ‘manipulation’ and ‘bad practice’ had happened with an earlier contract for the Dounreay site. A clear accusation made in the documentary was that the NDA ‘managed’ the contract for a preferred bidder. NFLA have written previously to the Scottish Government raising these concerns and encouraging it to directly discuss this matter with the UK Government. (2) It still remains a matter of concern that the PAC report did not address in any detail.
All in all, this sorry episode suggests the NDA may not be fit for purpose in managing such complex decommissioning contracts and it should be reformed and even potentially reconstituted. As a perfect example of this, and to the alarm of the NFLA, the PAC report notes: “In March 2017, the NDA’s internal audit function reported that there is a possibility that the NDA may have paid its previous contractor for work that was not completed on the sites. The NDA confirmed that it has launched an investigation into whether it may have paid for work that was not undertaken.” (3) If the NDA does not know such basic information then questions have to be asked as to its future in its current role.
NFLA Scotland Forum Convener, Councillor Feargal Dalton said:
“The Public Accounts Committee report on the NDA’s contract procurement process is damning in its criticism of both the NDA’s procedures and the oversight of them from government. NFLA wants to see action and change as a result of this sorry saga, which has cost the public over £122 million. This may not just mean a change in personnel at the very top, but a reconsideration of the NDA in its entirety to consider whether it is fit for purpose, and of government in its oversight function. We also urge the PAC and the Holliday inquiry to more forensically consider the similar Dounreay contract procurement process to find out if it was undertaken in a similarly flawed manner. This process puts the NDA under the microscope and it looks wanting. For a body which receives public funding of £3 billion a year that is deeply troubling.”
Ends – for more information please contact Sean Morris, NFLA Secretary, on 0161 234 3244.
Notes for editors:
(1) House of Commons Public Accounts Committee, The NDA’s Magnox contract, 27th February 2018
(2) NFLA Media Release, November 13th 2018
(3) Paragraph 14 in the PAC report.