Taxpayers in the United Kingdom are on the hook for up to £122 million in costs associated with a botched contract for decommissioning of the nation’s Magnox nuclear facilities, the U.K. National Audit Office said in a blistering report Wednesday.
The government’s Nuclear Decommissioning Authority announced in March that the £6.1 billion cleanup contract awarded in 2014 to Cavendish Fluor Partnership would be terminated nine years early – on Aug. 31, 2019. The agency at the time said the decision was based on the increased scope of the decommissioning necessary at the sites that was not reflected in the contract.
The nation’s High Court, in a lawsuit brought by former Magnox cleanup prime EnergySolutions, had several months earlier ruled NDA had “manipulated” and “fudged” the procurement to ensure Cavendish Fluor remained in the running. That ruling led the U.K. government in March to approve separate settlements with EnergySolutions and Bechtel, which had partnered in a bid on the latest Magnox contract: £85 million for EnergySolutions and £12.5 million for Bechtel.
The National Audit Office noted that the expense for decommissioning the Magnox facilities, 10 nuclear power plants and two research sites that are all now closed, spiked from £3.8 billion at the time of Cavendish Fluor’s successful bid to £6 billion as of this year.
It cited a list of failures on the government’s part in the procurement process, many involving the schedule-busting “consolidation” contractual process intended to address differences between what Cavendish Fluor was told regarding the state of the Magnox sites and the reality it found on the ground. Among the problems:
- Two internal audits and four external assurance evaluations failed to study whether the Magnox bids were in line with public contracting rules.
- Consolidation was due to wrap up by September 2015 but was still ongoing as of March of this year. “Certain formal governance arrangements” for the process were established only a month before the intended deadline.
- The NDA had a faulty comprehensive of the state of the Magnox sites, notably that decommissioning was behind schedule at six of the facilities.
“The NDA’s commercial strategy of using a target-cost contract, predicated on having a good understanding of the scope of work, now appears wholly inappropriate. It is time for the NDA to re-evaluate its commercial strategy and its capability to execute it, supported by expertise in government.” according to the summary of the National Audit Office report.
The taxpayer costs encompassed the over £97 million the government paid to EnergySolutions and Bechtel, along with £13.8 million spent on legal and external advisers.
In a prepared statement, the NDA said it accepted the audit agency’s report and would study options for addressing the findings.
“I would like to apologise for these past mistakes,” NDA CEO David Peattie said in the release. “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.”
The U.K. Department for Business, Energy, and Industrial Strategy (BEIS), which oversees the NDA, noted that an independent inquiry of the procurement is underway. In addition, changes have already been made to enhance the nuclear agency and government oversight, including appointment of a new NDA CEO and board chairman and creation of a new NDA internal governance projects committee.
‘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,” the department said. “The Government will carefully scrutinise the NAO report and ensure that the issues raised are fully addressed as we build on the steps already taken to strengthen further the governance and oversight of the NDA.
