The National Audit Office (NAO), the UK parliament’s public spending watchdog, today issued a report detailing "fundamental failures" in the way the Nuclear Decommissioning Authority (NDA) managed a £6.2bn ($8.1bn) project to decommission the UK’s first-generation nuclear sites. As a result of these, the UK taxpayer was left more than £122m out of pocket.
The programme involved the decommissioning of Magnox reactors and other nuclear facilities at 10 power stations and two research sites.
The NDA ran a competitive tender for the work, after which it awarded a 14-year contract to the Cavendish Fluor Partnership (CFP) in September 2014. However, two of the losing bidders, Bechtel and Energy Solutions, successfully challenged the decision in the High Court.
After lengthy litigation, the court found in July 2016 that if the NDA had applied its own evaluation criteria CFP would have been ruled out, and in March 2017 the agency agreed to pay the losing bidders £97m. It also had to pay £14m in legal costs and external advisers, and $10m for the time of senior officials, including the chief executive of the Civil Service.
The NAO concluded that the tender did not reflect the reality on the sites.
When CFP began work it found that twice as much work was required than it had been led to expect, resulting in an increase in the estimated cost of the work from $3bn to more than £6bn.
The department must consider whether its governance and oversight arrangements surrounding the NDA are sufficiently clear and effective in providing the scrutiny and assurance it requires to meet the standards expected in managing public money.– Amyas Morse, head of the NAO
Amyas Morse, the head of the NAO, said: "The NDA’s fundamental failures in the Magnox contract procurement raise serious questions about its understanding of procurement regulations, its ability to manage large, complex procurements and why the errors detected by the High Court judgment were not identified earlier.
"In light of these issues, the department must consider whether its governance and oversight arrangements surrounding the NDA are sufficiently clear and effective in providing the scrutiny and assurance it requires to meet the standards expected in managing public money.
The NDA said in response that it accepts the findings of the report and will consider how the findings should be addressed.
"I would like to apologise for these past mistakes," said NDA chief executive David Peattie. "Since taking over earlier this year I have made a number of improvements to the way the NDA operates to provide greater focus, discipline, standardisation and simplification to our work.
"I have also taken steps to bolster our legal and commercial capability by the recruitment of a general counsel and commercial director. I am committed to doing everything to ensure these mistakes will not be repeated.
"We should not overlook the fact that good progress and savings continue to be made elsewhere in our decommissioning and hazard reduction work. However, this does not detract from the regrettable series of events highlighted by the NAO today."
A Business and Energy Department spokesperson said: "The secretary of state has been clear that the reasons for the failure of the Magnox procurement should be exposed and understood, which is why he commissioned the independent Magnox Inquiry earlier this year."
CFP is a joint venture between UK engineer Babcock, which owned 65% of it, and its Texas-based counterpart Fluor. The NAO is an independent agency reporting to the UK parliament and the NDA is a government agency.
Image: Wylfa power station, commissioned in 1971, was the last and biggest of the Magnox sites (Creative Commons)