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Select committee inquiry

Nuclear Decommissioning Authority: The Magnox Contract inquiry

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Public Accounts Committee · Opened 3 November 2017 · Closed 3 November 2017

Inquiry on parliament.uk ↗

What the inquiry looked at

“Between 2012 and 2014, the Nuclear Decommissioning Authority (NDA) ran a competition to find a company to decommission two nuclear research sites and 10 Magnox power stations. The contract, worth up to £6.2 billion, is one of the largest tendered by the Government. The contract was awarded to Cavendish Fluor Partnership (CFP). However, in July 2016 the High Court found that the procurement process had wrongly awarded the contract to CFP. The NDA settled legal claims with another bidder for £97.3 million. At the same time as defending these claims, the NDA engaged in a consolidation process with CFP to clarify expectations and scale of work. During this process the estimated cost of decommissioning rose from £3.8 billion to £6.0 billion. The NDA expected some of this additional cost, but did not foresee £500 million of it. In March 2017, the Secretary of State for Business, Energy and Industrial Strategy announced that the NDA had decided to terminate their contract with CFP nine years early, citing a “significant mismatch” between work tendered for, and work that needed doing. The contract between the NDA and CFP will end on 31 August 2019. The NDA is considering how to manage the Magnox sites after this date. Meanwhile, the National Audit Office estimates that overall the contract has cost the taxpayer over £122 million. The Public Accounts Committee will hear from the Department for Business, Energy and Industrial Strategy, the Nuclear Decommissioning Authority and UK Government Investments on how the contract was mistendered, why costs rose so dramatically during consolidation, and how the Magnox sites will be managed from September 2019.”

The committee's words, from the inquiry page on parliament.uk ↗.

What it found

In the committee's words, from the summary of 21st Report - The Nuclear Decommissioning Authority's Magnox contract ↗

The Nuclear Decommissioning Authority (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, and subsequently settling legal claims from a losing consortium to the tune of nearly £100 million. The NDA also drastically under-estimated the scale of the work needed to decommission the sites at the time it let the contract—another failure which ultimately led to the termination of the Magnox contract 9 years early. The NDA will now have to spend even more effort and money to find a suitable way of managing these sites after the contract comes to an official end in September 2019. If it is to be trusted with letting future contracts to clean up nuclear sites, it must have a proper understanding of the state of the sites before committing taxpayer’s money to a contract, and then it must also monitor progress closely.

These failures have caused untold reputational damage to the NDA and raise serious questions about its credibility as a strategic contracting authority. But central government must also share the blame. Not only did HM Treasury and the Department approve the NDA’s approaches to procurement and contract management, but there are clear failings in the Department’s subsequent challenge and oversight of the NDA, through UK Government Investments.

What the government said

No government response is linked to this report.

Read the report ↗ Report an error

How the inquiry ran

Each dot is a dated item listed on this page, from the inquiry's opening on 3 November 2017 to 28 February 2018.

  1. Oral evidence 23 Nov 2017
  2. Report 28 Feb 2018
  3. Correspondence 3 letters

What it recommended

The committee's recommendations are not listed here yet. Read them in 21st Report - The Nuclear Decommissioning Authority's Magnox contract ↗ on parliament.uk.

Evidence

Oral evidence sessions 1

Correspondence 3 letters