Select committee inquiry
The Nuclear Decommissioning Authority’s management of the Magnox contract
Closed
What the inquiry looked at
“In 2017 the NAO reported on the Nuclear Decommissioning Authority’s (NDA) failed 14-year, £6.2bn contract to decommission 12 Magnox nuclear energy sites, following a 2016 High Court ruling that the contract had been wrongly awarded. In March 2017, the NDA decided, based on legal advice, to terminate the 14 year contract it had awarded to the Cavendish Fluor Partnership (CFP) nine years early due to a “significant mismatch” between the work specified in the tendered contract and the work that needed to be done. The failed procurement had cost the taxpayer more than £122 million by the time it was announced that it was to be terminated, with the NDA being sued by one of the other bidders for the failed procurement, and forced to agree legal settlements totalling £97.3 million. In August 2017, the NDA agreed a renegotiated contract with CFP. This covered the five-year period from the start of the Magnox contract in September 2014 to the end of the notice period on 31 August 2019. Now a new NAO report follows up on how the NDA has managed this new contract to decommission the Magnox nuclear sites. It shows the NDA successfully negotiated a revised contract with CFP, avoided further litigation and succeeded in maintaining a working relationship with its supplier that led to the completion of £2.72 billion of decommissioning work before the contract ended in August 2019, reducing the degree of hazard on the Magnox sites. However, the NDA were in a weak bargaining position and in renegotiating the contract, agreed to pay a premium of £20 million to negotiate its early exit from the contract and incentivise a smooth handover of sites without further legal challenge. The NDA now estimates that the cost of putting Magnox sites into a safe state has increased, and billions of pounds of uncertainty remains around the final cost, with current estimates ranging from £6.9 billion to £8.7 billion. The Committee will follow up its 2018 report on the letting of the Magnox contract, which was highly critical of the NDA’s understanding of the state of its nuclear sites and the commercial capability of the NDA’s executive team, with questions to senior officials from the Department for BEIS and the NDA. If you have evidence on these issues, please submit it here by Monday 28 September 2020.”
The committee's words, from the inquiry page on parliament.uk ↗.
What it found
In the committee's words, from the summary of Twenty-Eighth Report - The Nuclear Decommissioning Authority’s management of the Magnox contract ↗
The cost of the long-term liability to decommission the UK’s civil nuclear sites now stands at £132 billion, though by its nature this estimate is inherently uncertain. Even the cost to take the Magnox sites to the care and maintenance stage of the decommissioning process is highly uncertain, with the Nuclear Decommissioning Authority (NDA)
currently estimating that it will cost anything from £6.9 billion to £8.7 billion. The timetable for completing this work is similarly uncertain, with a current estimate of anything from 12 to 15 years. Past experience tells us that these estimates could increase further. Efforts to produce a reliable estimate are made more difficult by the historical legacy of decommissioning being an afterthought when the nuclear industry was established, and poor records of what hazardous materials are on the sites. In this context, the NDA faces a considerable challenge to produce a reliable cost estimate.
However, lack of knowledge about the sites was a significant factor in the failure of the Magnox procurement and original contract, which seriously damaged the NDA’s reputation and has now cost the taxpayer in excess of £140 million, and it continues to be a major barrier to making progress. A further barrier is developing sufficient skills and capacity to decommission sites efficiently. That said, the UK nuclear industry possesses valuable technical skills and new technologies that could be better exploited to the benefit of the UK economy. The NDA also holds substantial assets in terms of land and employment opportunities that could be used to serve local communities.
The Department for Business, Energy & Industrial Strategy recognises that its oversight of the NDA has been weak in the past and we welcome the steps it is taking to provide stronger oversight and improved governance. Implementing the recommendations of the Holliday inquiry into the Magnox contract and the Department’s ‘Tailored Review’
of the role of the NDA will be critical and the publication of these reports cannot come soon enough. We welcome the Department and the NDA’s commitments to improve performance over the next 10 years. We also look forward to reviewing the latest quarterly performance reports which the Department has offered to send us, and note there is an enhanced commercial assurance review to consider all future commercial decisions. We will hold the Department and the NDA to account for their progress in improving the transparency of the nuclear industry and making a success of the new delivery and governance approach.
What the government said
The government responded on 25 March 2021.
Read the government's response ↗ 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 18 September 2020 to 26 October 2021.
- Oral evidence 5 Oct 2020
- Report 27 Nov 2020
- Government response 25 Mar 2021
- Correspondence 3 letters
What it recommended 8 recommendations · 10 conclusions
2The uncertainty affecting the Magnox sites reflects a wider uncertainty about the costs and timetable...
Recommended (the committee's words)
The uncertainty affecting the Magnox sites reflects a wider uncertainty about the costs and timetable of decommissioning the whole civil nuclear estate. According to the NDA’s most recent estimates it will cost the UK taxpayer £132 billion to decommission the UK’s civil nuclear sites and the NDA estimates that the work will not be completed for another 120 years. The largest proportion of this cost is to clean up and decommission the NDA’s largest site at Sellafield, but the cost to decommission the NDA’s Magnox sites is also substantial, as is the liability associated with decommissioning the next family of nuclear power stations, known as the Advanced Gas-Cooled Reactors (AGRs). The money held in the Nuclear Liabilities Fund, which exists to fund the decommissioning of the AGRs specifically, was increased from £9.5 billion by an additional £5.07 billion this year to reflect the latest estimate of the work required. The NDA is consulting publicly about its strategy for cleaning up its nuclear sites. It may be possible to reduce the time it will take to fully decommission the sites of former nuclear power stations from around 85 years to more like 40–45 years. This could significantly reduce the long-term cost of decommissioning the sites as 40% of the overall decommissioning cost can be spent in maintaining, operating and safeguarding the sites while decommissioning activity is taking place. There is also an opportunity to save taxpayers’ money by accelerating the programme to create a deep storage facility, known as the Geological Disposal Facility, to store highly radioactive waste that is currently held 6 The Nuclear Decommissioning Authority’s management of the Magnox contract at interim facilities at Sellafield and the sites of former power stations elsewhere in the UK. The NDA and the Department are consulting the relevant regulators and interested communities to identify a suitable site for such a facility, but were not able to indicate a timeframe in which
3A shortage of the right skills within the Nuclear Decommissioning Authority and across the nuclear...
Recommended (the committee's words)
A shortage of the right skills within the Nuclear Decommissioning Authority and across the nuclear industry remains a significant barrier to progress. In our 2018 report on the failure of the Magnox contract we were highly critical of the lack of skills—particularly commercial skills—in the NDA. There is also a shortage of technical skills in the pipeline. Since then, the NDA has increased its focus on recruiting experienced staff to its own executive team and to the leadership of its subsidiaries which manage the sites on a day to day basis. But recruiting the right skills remains a significant challenge, particularly with the NDA and its subsidiaries competing with the private sector for the same people. It is encouraging that the NDA and the Department are attempting to meet the skills challenge with, for example, the introduction of the nuclear graduate scheme to increase capacity in the sector as a whole. It is also encouraging to hear that 46% of the latest cohort to the scheme were women. The Department says that it has made its own improvements in capacity and capability to oversee the NDA’s activities but, as we often see, salaries in the civil service mean that the Department risks losing skilled staff to private sector organisations in the industry. Recommendation: Within 6 months of publication of this report, the Department and the Nuclear Decommissioning Authority should publish a detailed plan for how they plan to meet the demand for skills across the UK nuclear industry over the next 5–10 years.
4For the new delivery model to work, it will be vital that the Department exercises...
Recommended (the committee's words)
For the new delivery model to work, it will be vital that the Department exercises strong oversight of the Nuclear Decommissioning Authority and implements the findings of forthcoming reviews into the failure of the original Magnox contract and the role of the Authority. Under the previous delivery model of outsourcing the decommissioning of nuclear sites to a ‘parent body organisation’ from the private sector, the Department was a further step removed from exercising oversight of the decommissioning process than it is now. Indeed, the Department The Nuclear Decommissioning Authority’s management of the Magnox contract 7 acknowledges that this led to it missing some of the problems that arose with the Magnox sites and contract. The Department tells us that its relationship with the NDA has changed, with improved oversight of both the NDA’s strategy and progress with its major projects, a dedicated team in the Department looking at the NDA, and a representative of UK Government Investments on the NDA’s own board who reports to the Department’s accounting officer. But we remain concerned about the Department’s capacity to oversee the NDA effectively, and about the number of players from different parts of Government who are involved. Key to learning lessons from the past and establishing appropriate oversight and governance will be implementing the recommendations of the Holliday inquiry into the Magnox contract and the Department’s ‘Tailored Review’ of the role of the NDA. We welcome the Department’s commitment to completing and publishing these reports as a priority, but it is frustrating and concerning that it is taking so long for these important reviews to be published. Recommendations: On publication of the Holliday report and tailored review, the Department and the Nuclear Decommissioning Authority should set out publicly what has been learnt from them and how the reports are being used to inform the development of the new delivery and governance models. In res
5The Nuclear Decommissioning Authority is not doing enough to exploit its various assets, either for...
Recommended (the committee's words)
The Nuclear Decommissioning Authority is not doing enough to exploit its various assets, either for the benefit of local communities or the UK economy as a whole. The UK was the first country to establish a civil nuclear power generation industry and is still a world leader in nuclear decommissioning. It can point to some notable achievements in relation to the decommissioning of the Magnox sites alone, such as the successful defueling of all the Magnox reactors which has reduced the level of radioactivity on the sites by 95%, and the largest clean-up of asbestos waste to have been undertaken in Europe at Chapelcross. Furthermore, the NDA has provided advice and exported skills to other countries, including Japan in relation to the clean-up of Fukushima and the Ukraine in relation to Chernobyl. The NDA receives around £800 million a year in income from its commercial activities. Given the expertise and technologies which the NDA and the UK nuclear industry have developed over the years, there are further opportunities, in fields such as Artificial Intelligence and robotics, with export potential which could benefit the UK economy and provide jobs for people in local communities. The NDA also owns and occupies substantial amounts of land. It is encouraging to hear that around 50 acres of land at Harwell has been released and is currently home to a manufacturing centre for coronavirus vaccine. The NDA’s wider estate contains land which could be exploited for commercial and socially beneficial use and could provide much needed employment in nearby communities. Recommendation: The NDA should develop a strategy for maximising the economic benefits of developing and, where appropriate, exporting its knowledge and assets to alleviate the burden on the taxpayer. These include the skills and experience of the UK nuclear industry, the decommissioning technologies it has 8 The Nuclear Decommissioning Authority’s management of the Magnox contract developed, and the land and oth
6Public accountability is hindered by a lack of transparency about the scale and nature of...
Recommended (the committee's words)
Public accountability is hindered by a lack of transparency about the scale and nature of the challenge of decommissioning and the performance of the NDA. Nuclear decommissioning will cost current and future generations of taxpayers’ substantial sums of money and has a significant impact on the lives of those who live near one of the NDA’s sites. However, little information about, for example, the timescales for completing decommissioning work and returning land to communities is readily available to the public. Greater transparency about progress with decommissioning would improve public accountability, help to stimulate improved performance, and increase the visibility to local communities of the activities and opportunities available on NDA sites. Recommendation: NDA should be more transparent about its current and future plans with the local communities surrounding its 17 sites to strengthen public accountability and make clear the socioeconomic impact of its planned activities. The Nuclear Decommissioning Authority’s management of the Magnox contract 9 1 Understanding and managing the burden of nuclear decommissioning on the taxpayer
1On the basis of a report by the Comptroller and Auditor General, we took evidence...
Concluded (the committee's words)
On the basis of a report by the Comptroller and Auditor General, we took evidence from the Department for Business, Energy and the Industrial Strategy (The Department) and the Nuclear Decommissioning Authority (NDA) on the decommissioning of the UK’s Magnox power stations and other civil nuclear sites.1
7An informed understanding of the sites is important to develop reliable estimates of the potential...
Recommended (the committee's words)
An informed understanding of the sites is important to develop reliable estimates of the potential costs and duration of decommissioning each site and to support decision- making about the most efficient ways to decommission them and the order in which they should be tackled. The NDA considers that reducing the time it will take to fully decommission some of the Magnox sites from around 85 years to something more like 40–45 years could reduce the long-term cost of decommissioning the sites.13 This is because around 40% of the cost to decommission a Magnox site is in maintaining, operating and safeguarding the sites while decommissioning activity is taking place. Accelerating decommissioning work could reduce these costs.14 A public consultation on the length of time it takes to decommission the sites will end in November, and when that is complete the NDA will consider its outcome and, in parallel, look at the impact on the 6 Qq 13, 15 7 Qq 3–4 8 HC Committee of Public Accounts, The Nuclear Decommissioning Authority’s Magnox contract, Session 2017–19, HC 461, 28 February 2018, summary para 3 9 C&AGs report 2020, para 5, 2.9 10 Q 3 11 Qq 3, 4, 55 12 Qq 3, 4, 6, 7, 13, 15 ,16 13 Qq 13, 33 14 Qq 15, 33 The Nuclear Decommissioning Authority’s management of the Magnox contract 11 spend profile.15
8There is also an opportunity to save taxpayers’ money by accelerating the programme to create...
Recommended (the committee's words)
There is also an opportunity to save taxpayers’ money by accelerating the programme to create a deep storage facility, known as the Geological Disposal Facility, to store highly radioactive waste that is currently held at interim facilities at Sellafield and the sites of former power stations elsewhere in the UK. Current international scientific advice is that the best thing to do with this type of waste is to store it underground, and other countries are seeking to take this approach. The NDA told us it was working with the Department, the relevant regulators and interested communities to identify a suitable site for such a facility. In common with most other countries with a nuclear legacy, the Department is following a consent-based process to identify a suitable site, which by its nature means the Department must wait until it has a community that is giving consent. It told us if it is ultimately not possible to run a consent-based process, then there are alternatives available to it, but its clear preference is to go down that path and to give it every chance of success as a first priority. Due to the uncertainties of this process, the Department was unable to indicate a timeframe in which a Geological Disposal Facility might be completed.16 Maximising the potential of assets
9While the cost of decommissioning represents a substantial liability for the UK taxpayer, the NDA...
Recommended (the committee's words)
While the cost of decommissioning represents a substantial liability for the UK taxpayer, the NDA was keen to point out that it also raises substantial income—around £800m a year—through commercial opportunities including the export of advice, skills and technologies to other countries with nuclear sites to decommission. The NDA has provided advice to, for example, Japan in relation to the clean-up at Fukushima, Ukraine in relation to Chernobyl, as well as the US, France and Canada. It told us that the UK was a world leader in nuclear power generation from the 1950s onwards and is now a world leader in decommissioning of civil nuclear sites, providing opportunities for growth in this area that could be exploited further to increase income, particularly when working internationally.17
10The NDA told us about some notable achievements in relation to the decommissioning of the...
Concluded (the committee's words)
The NDA told us about some notable achievements in relation to the decommissioning of the Magnox sites to date: for example, all 26 Magnox reactors have now been defueled, and all the fuel taken to Sellafield for safekeeping, thereby reducing by over 95% the radioactivity on the Magnox sites;18 and in Chapelcross in south-west Scotland, the NDA had overseen the largest asbestos clean-up in Europe, with thousands of tonnes of asbestos cleaned up across turbine halls, heat exchangers, and the whole industrial complex.19 It also told us about new technologies being developed by the UK nuclear industry such as an innovative robot which was developed by a company in the north-west of England. By using the robot to carry out dangerous work to remove hazardous material, exposure for humans had been reduced, which makes it both safer and more efficient because robots can spend almost unlimited time exposed to radiation. The NDA is aiming to fund similar projects in the fields of artificial intelligence and robotics to help make decommissioning work safer, and noted that there has already been interest in the adoption of some of this UK-based technology internationally, including at Fukushima.20 15 Q 74 16 Qq 39–43 17 Qq 71, 49 18 Q6 19 Q7 20 Qq 18, 19 12 The Nuclear Decommissioning Authority’s management of the Magnox contract
11The NDA owns and occupies substantial amounts of land that could be returned to communities...
Concluded (the committee's words)
The NDA owns and occupies substantial amounts of land that could be returned to communities or exploited for commercial or socially beneficial use, and could provide employment in nearby communities. For example, at its Harwell site the NDA said it had been able to excavate and give 50 acres of land back to be used for a new vaccine manufacturing centre. The NDA is also looking at opportunities to use land from its sites for green power generation including with hydrogen plants or solar farms. The NDA is aware of more land which could be returned but faces ongoing challenges with understanding and managing the hazards.21 21 Qq 21, 76, 79 The Nuclear Decommissioning Authority’s management of the Magnox contract 13 2 Meeting the future challenges of nuclear decommissioning Shortages of the right skills
12In our 2018 report on the Magnox contract we identified that lack of commercial capability—including...
Concluded (the committee's words)
In our 2018 report on the Magnox contract we identified that lack of commercial capability—including getting rid of the post of Commercial Director—contributed to the organisation being unable to manage the original Magnox contract effectively.22 The NDA informed us about a number of areas in which it has made improvements since then. It has, for example, strengthened the central executive team with a new commercial director, general counsel, operations director and a risk and assurance director. The NDA has also appointed a new Chief Executive of Magnox Ltd (the NDA’s subsidiary responsible for day to day management of the Magnox sites), who has, in turn, recruited a new executive team. The NDA noted that having all the sites managed in-house helps to break down barriers and improve cooperation between teams and nuclear sites to bring about more standardisation of approach, improved learning and better efficiency. Nevertheless, the NDA admits that further capability is still required in some areas.23
13The Department and the NDA pointed to the increasing importance of developing skills across the...
Concluded (the committee's words)
The Department and the NDA pointed to the increasing importance of developing skills across the industry. The NDA is taking steps to increase training opportunities to further develop technical skills that are in short supply in the UK and which are in high demand from the private sector and from projects to build new nuclear power stations, such as Hinkley Point C. The NDA told us that it has introduced a nuclear graduate scheme involving placements across the industry, which has had over 200 graduates since its introduction and 40 entrants in its most recent cohort, 46% of whom were women. The Department and the NDA stressed the need to improve skills in science, technology, engineering and mathematics (STEM) across the UK more broadly and the Department emphasised the importance of working closely with the Department for Education to ensure the commitments on skills made by government and industry in the 2018 nuclear sector deal are met.24 Departmental oversight and the new delivery model
14The Department acknowledged the improvements which the NDA has made in developing its own skills...
Concluded (the committee's words)
The Department acknowledged the improvements which the NDA has made in developing its own skills and capability.25 The Department also told us that, to improve its capability to oversee the NDA’s activities, it had so far been able to retain high quality staff with relevant experience, despite the challenges of rewarding long service in central government, largely due to their commitment to the mission of making nuclear sites safe.26
15In September 2019, the NDA’s Magnox contract with CFP ended following a two- year run...
Concluded (the committee's words)
In September 2019, the NDA’s Magnox contract with CFP ended following a two- year run off period, and the 12 sites transferred to the NDA under the management of its subsidiary, Magnox Ltd.27 Under the previous model, the NDA essentially outsourced management and oversight of nuclear sites to the private sector. The NDA described 22 PAC’s report, summary para 4 23 Q 44 24 Qq 45, 48 25 Q 48 26 Qq 57, 65 -67, 69 27 C&AG’s Report, para 1.8 14 The Nuclear Decommissioning Authority’s management of the Magnox contract its intention to bring all of its major sites within its control rather than running them through a private sector consortium, with Dounreay in Scotland and the Low Level Waste Repository in west Cumbria being the last two major sites to be transferred to the NDA’s management upon completion of those contracts’ 12 month run-off periods. The NDA set out a number of potential advantages to the change in delivery model, including operating the sites as a family or federation of businesses and sharing lessons between sites more effectively. The NDA also said it intends to apply lessons from its experience of the run-off period from the Magnox contract to the remaining sites.28
16We asked the Department if it believed it now had sufficient oversight and governance arrangements...
Concluded (the committee's words)
We asked the Department if it believed it now had sufficient oversight and governance arrangements in place to oversee what the NDA is doing. The Department admitted that under its previous governance regime it had missed some of the issues that led to the failure of the Magnox contract, but told us that the relationship between the Department and the NDA had since been transformed, with the Department now providing greater scrutiny. Since 2017, the Department has been represented on the NDA’s Board by someone from UK Government Investments (UKGI) who can alert the Department about any emerging issues, and the Permanent Secretary of the Department has access to all NDA board papers and minutes. Since 2016, the Department has also had a dedicated team looking at the NDA which has grown over that period, and which interacts with the NDA in a stronger way than before. The Department receives a quarterly performance report which goes into detail across all the NDA group’s major targets, and holds quarterly meetings with NDA officials which look at both the decommissioning strategy and policy and progress with specific projects, and the CEO of the NDA and Permanent Secretary of the Department meet separately every quarter to discuss progress.29 The NDA also runs an enhanced commercial assurance process which looks at an early stage at commercial decisions that are coming down the track, and the Department is embedded directly into that process.30
17We asked the Department about the progress of the Holliday inquiry into the failure of...
Concluded (the committee's words)
We asked the Department about the progress of the Holliday inquiry into the failure of the Magnox procurement and contract which was launched in 2018, and of the Department’s ‘Tailored Review’ of the role and governance of the NDA. The Department committed to ensuring that these reports are completed and published as a priority, and said it expected the Holliday report to be published imminently and the Tailored Review by the end of the year.31 It said that the delays with the Holliday inquiry had been due to a number of legal challenges related to the inquiry, but that the Department had accepted all the conclusions of the inquiry’s interim report and the most important forward-looking actions recommended in that report had now been taken. The Department also confirmed it would comply with the recommendation of our 2018 report on the Magnox contract to write to us within six months of publication of the Holliday inquiry with progress on the implementation of the inquiry’s recommendations.32 Transparency about the scale and nature of the challenge
18The public is not fully aware of the challenges of nuclear decommissioning and given past...
Concluded (the committee's words)
The public is not fully aware of the challenges of nuclear decommissioning and given past problems in the industry, the public image of the sector requires some improvement.33 28 Qq 89, 90 29 Qq 55 - 57 30 Q 69 31 Qq 53–54, 32 Q 86, PAC report, recommendation 6. 33 Qq 44, 84 The Nuclear Decommissioning Authority’s management of the Magnox contract 15 It can be difficult to find, for example, information about the timescales for completing decommissioning work at specific sites and returning land to communities.34 When asked how it makes sure that where possible nuclear sites, or elements of them, can be reused during the ‘care and maintenance’ phase of decommissioning, the Department said information about developments in and around sites is often contained in broad local industrial strategies and that its own cities and local growth unit looks at which sites have high potential.35 The NDA gave a number of examples of potential projects to repurpose NDA land and property, including for hydrogen production in and around Sellafield, a potential solar farm at Chapelcross in Scotland, and a new technology site at Berkeley in Gloucestershire.36 34 Q 24 35 Qq 77–78 36 Q 76 16 The Nuclear Decommissioning Authority’s management of the Magnox contract
Evidence
Oral evidence sessions 1
- 5 Oct 2020NDA’s management of the Magnox contract3 witnesses, listed belowparliament.uk ↗
Who gave evidence 3 witnesses
- David PeattieGroup Chief Executive Officer, Nuclear Decommissioning Authority
- Kate EllisCommercial Director, Nuclear Decommissioning Authority
- Sarah MunbyPermanent Secretary, Department for Business, Energy and Industrial Strategy
Correspondence 3 letters
- 26 Oct 2021Correspondence from David Peattie, Group Chief Executive Officer, NDA, re PAC outstanding recommendations responses, dated 11 October 2021
- 10 Sep 2021Correspondence from Sarah Munby, Permanent Secretary, Department for Business, Energy & Industrial Strategy, re Government response to the Magnox Inquiry and the BEIS Departmental Review into the NDA, dated 20 July 2021
- 19 May 2021Correspondence from Sarah Healey, Permanent Secretary, Department for Digital, Culture, Media and Sport, re Update on the implementation of Public Accounts Committee recommendations, 4 May 2021