Kenneth Fletcher
WC Monitor
1/31/2014
A new set of documents made public this week provide insight into the U.K. Nuclear Decommissioning Authority’s concerns over the performance of Sellafield contractor Nuclear Management Partners prior to the NDA deciding to grant NMP a five-year contract extension while pushing for improvements in the second term. The NDA decided in October to extend the contract for NMP, composed of URS, Amec and AREVA, after completing a review of the company’s first five years. But NMP and the NDA communicated extensively about performance concerns before the extension. Part of the NDA’s frustration and dissatisfaction at Sellafield included “pace of change feels to slow,” “quality of leadership,” “lack of ownership of the challenge,” “no evidence of supply chain innovation,” and “insufficient delivery of the priorities in high hazard areas,” according to an NDA presentation released under a Freedom of Information request by David Lowry of Nuclear Waste Advisory Associates.
Cost increases and delays in work at the site led to heavy criticism and questions from members of Parliament, activist groups and the U.K. media after the NDA announced its decision to extend the contract. After the decision, NDA CEO John Clarke made clear that improvements were expected in a Nov. 19 letter to URS CEO Martin Koffel released by Lowry. “Our consideration of the optimum way forward at Sellafield at the end of the first contract term has been long, thorough and difficult. The decision itself was closely monitored by the Government and has subsequently been subject to extensive public and Parliamentary scrutiny, which is set to continue for some time,” Clarke wrote.
Clarke added, “Retaining the current contract and current contractor (NMP) does not mean that there will be no change in the second contract term. Quite the opposite. Our organisations have held extensive, detailed discussions over many months to agree the areas where change and improvement are required and what specific actions will be taken by NMP, SL and NDA to bring about those improvements.”
A Change In the Contract Model
During the negotiations, the NDA and the contractor discussed the idea of changing the contract model.”We do not believe that extending to a second term as envisaged in the current contract (creating a new Contract Baseline and continuing with an efficiency driven model) will drive the right behaviors or deliver the outcomes we both seek,” Clarke wrote in an April 8 letter to NMP Chairman Thom Zarges. “Second, we are prepared to continue our discussions (Which seem to be progressing well) about a considerably different contract model, driving more helpful behaviours and hence offering a better value proposition to the NDA, for a next contract term but we are clear that this would be for a single 5 year contract term.”
The NDA decided that a new baseline was not needed, and that instead an accurate update of the site’s performance plan is needed. “It is crucial that we can clearly see where there has been movement in cost and/or dates from the original Plan,” the April 8 letter states, calling for a “clear and honest assessment of the changes.” The letter adds, “We agreed that, however, presented, the extent of change was going to be extremely uncomfortable and difficult to sell, but we had a shared view on how best to take this forward.”
Stakeholder Pressure on NDA’s Mind
The NDA kept in mind high stakeholder pressure as it continued negotiations with NMP on the contract. “We remain open to genuine negotiation in a few areas, however many of the key issues are essential to us, not least as we will need to be able to answer the challenge that we are modifying the contract to pay more for less. As Accounting Officer I have a personal accountability in this area given my clear obligations around value for money,” Clarke wrote in a May 23 letter to Zarges. He explained, “We are looking for a genuinely incentivising contract that enables you to earn good fee for good performance, that significantly reduces the administrative burden for both sides and that helps to reduce potential points of friction.”
After awarding the contract extension, Clarke was questioned at length about the decision by members of Parliament’s Public Accounts Committee in a December hearing (WC Monitor, Vol. 24 No. 47). This week the NDA referred request for comment to Clarke’s previous statements. “We are quite clear now that if we don’t see the changes that we want, we will make more radical changes,” Clarke told WC Monitor in October, noting that a termination for convenience clause that has always been
included in NMP’s contract allows the NDA to hold the contractor accountable. “The work we have gone through during the last year reviewing options has given us clarity on what we could do going forward and we are quite clear that we will if things don’t improve. It’s almost a bit of a stick.”
For its part, NMP also referred request for comment to previous statements. “We have delivered many successes through the first term of our contract (including site record safety performance and over £650m in efficiencies), but there have also been a number of disappointments and areas for improvement,” NMP spokesman Iain Irving said in a statement. “Our job now is to build on our experience of the last five years to safely and reliably deliver our customer’s mission, while further accelerating the pace of change and providing value for money to NDA, Government and the UK taxpayer.”
