Decommissioning Britain’s first generation of atomic reactors is likely to be brought back “in-house” by the UK nuclear clean-up agency after the collapse of a £6.2bn outsourcing contract that exposed “fundamental failures” at the organisation.
Ministers have been considering whether the work, involving 12 Magnox nuclear plants and research sites, should be offered to another private contractor or run directly by the Nuclear Decommissioning Authority.
A final decision has not yet been made but industry figures with knowledge of the process said the most likely outcome was for the NDA to create a new subsidiary to take control of the Magnox clean-up programme.
Such an outcome would bring an end to an embarrassing episode in which Greg Clark, business secretary, in March cancelled a deal with Cavendish Fluor Partnership, a joint venture between UK-based Babcock International and Fluor of the US, at a cost of £122m to British taxpayers.
A report by the National Audit Office last week said the bungling of one of the largest contracts awarded by the UK government raised “serious questions” about the NDA’s “ability to manage large, complex procurements”.
Those criticism were echoed on Thursday in a separate report commissioned by the government. Interim findings revealed a catalogue of human errors and systemic failings that allowed the losing bidders, US groups Energy Solutions and Bechtel, to win a High Court ruling that the procurement was flawed.
Problems included a shortage of experienced staff, poor record-keeping — including the inappropriate shredding of documents — and overly complex criteria that required NDA officials to evaluate bidders on 700 separate criteria.
These weaknesses made it unlikely that ministers would entrust the NDA with another multibillion pound outsourcing competition when the contract with Cavendish comes to an end in 2019 after a 24-month notice period, according to industry figures.
Instead, a Magnox subsidiary would be created along similar lines to Sellafield Ltd, the company responsible for Britain’s largest nuclear site in Cumbria. The NDA took control of Sellafield in 2016 after stripping a US-led private consortium, Nuclear Management Partners, of a £9bn contract.
The failure of two large and strategically important nuclear decommissioning contracts in the space of two years has damaged the NDA’s reputation and highlighted the large financial costs and risks involved in clearing up the UK nuclear legacy.
New leadership was installed in March when David Peattie, a former senior executive at BP, the UK oil group, replaced John Clarke as chief executive, and Tom Smith replaced Stephen Henwood as chairman.
Mr Peattie last week apologised for “past mistakes” and said the agency was making improvements in its governance and capabilities.
The Department for Business, Energy and Industrial Strategy said officials were still “considering options” for how to replace the Magnox contract “within the context of lessons learned and the NDA’s improved understanding of the sites”.
Cost estimates for the Magnox work rose from £3.8bn when the contract was awarded to £6bn because of higher-than-expected volumes of waste and other factors.
People with knowledge of the process said taking Magnox “in-house” would give NDA “more levers” to control costs, in contrast to an outsourced deal which created incentives for the contractor to expand the scope of work.
One nuclear contractor said the NDA was looking at a range of models for Magnox and that, whatever the outcome, it would remain heavily reliant on private companies to do the work.
The Magnox fiasco has shone an unflattering light on the business of nuclear decommissioning and its heavy burden on the public purse. The NDA spent £3.2bn last year, offset by £1bn of commercial income from reprocessing and management of spent fuel and waste.
Spending on nuclear decommissioning is projected to continue at a similar level over the next decade before gradually declining. But it will continue to weigh on UK finances into the next century because of the long timescales involved in cleaning up radioactive materials.
The latest official NDA estimate put the total cost of UK nuclear decommissioning at £164bn over the next 120 years, an increase of £3.4bn from the prior estimate. That dwarfs the estimated £60bn cost of decommissioning North Sea oil and gasfields.
The NDA’s existing work is spread across 17 sites from Dounreay in the far north of Scotland to Dungeness on the south coast of England. But almost three-quarters of total spending, or £120bn, is expected to be swallowed by Sellafield alone.
Sellafield has been at the centre of the UK nuclear industry since starting production of plutonium for weapons in the 1950s. It was subsequently home of the first commercial nuclear plant, known as Calder Hall, and a range of waste storage and reprocessing facilities that make it the largest and most complex nuclear site in Europe.
Some 18,500 people are employed by the NDA and its contractors around the UK, accounting for over a fifth of the total 87,500-strong nuclear workforce.
Those numbers highlight the sizeable footprint of nuclear power — from construction of the new £20bn Hinkley Point power station in Somerset to decommissioning of old facilities — in the UK industrial sector. However, the botched Magnox deal has been seized on by critics who say that any economic benefits are outweighed by the costs and risks associated with cleaning up the radioactive mess.
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