The Nuclear Decommissioning Authority (NDA) is to pay out £12.5 million to settle a dispute over how it awarded a £6.1 billion contract to decommission 12 closed nuclear power stations and separately terminate the contract awarded nearly a decade early.
An independent inquiry, to be chaired by ex National Grid chief executive Steve Holliday, could lead to disciplinary action, the Department for Business, Energy and Industrial Strategy said in a statement.
Business secretary Greg Clark said, “This was a defective procurement, with significant financial consequences, and I am determined that the reasons for it should be exposed and understood; that those responsible should properly be held to account; and that it should never happen again”.
Procurement began in April 2012 for a 14 year contract being awarded in September 2014 to the Cavendish Fluor Partnership (CFP) for the management and decommissioning of 12 redundant Magnox sites. This decision was approved by the then Department for Energy and Climate Change and HM Treasury. But losing bidders Energy Solutions and Bechtel took action against the procurement, saying it was wrongly decided. That was supported by the High Court in its judgment of 29 July 2016.
NDA has withdrawn an appeal against the judgment and although it has not admitted liability it agreed settlement payments with Energy Solutions of £76.5 million, plus £8.5 million of costs, and with Bechtel of $14.8 million, plus costs of around £462,000 – approximately £12.5 million in total. Those costs could have been “substantially higher” if the appeal had proceeded to trail, BEIS said.
Meanwhile, a consolidation process for the contract as awarded has revealed that “there is a significant mismatch between the work that was specified in the contract as tendered in 2012 and awarded in 2014, and the work that actually needs to be done.”
The mismatch would amount to a material change to the specification on which bidders were invited in 2012 to tender, so the NDA Board, headed by a new chair and chief executive, has concluded that it should exercise its right to terminate the contract on two years’ notice.” The contract will be terminated in September 2019, after 5 years rather than 14 years. This termination is made with the agreement of CFP, said BEIS.
Clarke said, an independent Inquiry would examine ” the conduct of the 2012 procurement process and the reasons why the 2014 contract proved unsustainable. These are separate issues but both need to be examined thoroughly by an authoritative and independent expert.”
The statement said the inquiry would be “cradle to grave”, beginning with the NDA’s procurement and ending with the contract termination.
“The Inquiry will also review the conduct of the NDA and of government departments and make any recommendations it sees fit – including what further investigations or proceedings, for example possible disciplinary proceedings, may be required as a result of its findings,” said BEIS.