Dodgy Decommissioning Deals
The UK Government has been forced to pay out £97m in a settlement with two US companies – Energy Solutions and Bechtel - for mishandling the way it awarded the £6.1bn Magnox nuclear decommissioning contract.
The BBC’s File on Four has been delving in to some of the details of the contract, and what they have discovered suggests what went on was more than just “dramatic levels of incompetence”, as the Labour Party called it, but was, in fact, a deliberate attempt to manipulate the outcome of the tender process.
In 2012 the Nuclear Decommissioning Authority (NDA) put the second stage of the decommissioning process for the ten Magnox sites and two research reactor sites at Harwell and Winfrith out to tender. Up for grabs was a 14 year contract to take these sites to an Interim End State. The contract was expected to be worth £6-7bn. Energy Solutions – the company which did the early decommissioning work at these sites – bid for the contract along with Bechtel. About £20m was spent on putting the bid together with a team of up to 100 people working on it. The final bid included 750 pages of text; a cost estimate of up to 2,000 pages and 11,000 pages of supporting documents.
The bid was scored according to around 700 criteria. In the end the contract went to the Cavendish Fluor Partnership (CFP). But in September the NDA formally gave CFP 2 year’s notice that the contract would end 9 years early. It blamed a significant mismatch between the work outlined in the tender and what actually needed doing.
BBC Reporter Jane Deith continued: “But more serious than that – the NDA rigged the tender. It was only caught because Energy Solutions smelled a rat and took them to Court”.
Ian Bowes, who was working for Energy Solutions until March 2016, told the BBC that the Company identified a series of areas that technically they believed the NDA had got wrong in their evaluation. They also looked at the scoring of CFP and it seemed that Energy Solutions were not getting equal treatment. Documents from the NDA tracked how the scoring had been carried out. Someone had gone back into the computer and changed the scores initially awarded to the Energy Solutions bid.
A High Court Judge agreed with Energy Solutions. He said 22 of the scores awarded to Energy Solutions were wrong. Had the right scores been awarded, the results of the competition would have been reversed. CFP should have been disqualified according to the technical criteria, and the NDA knew that. In the words of the Judge – Justice Peter Fraser – the NDA fudged it in order to keep CFP in the competition.
“By the word fudging I mean choosing an outcome and then manipulating the evaluation to reach that outcome.”
And, he said the NDA limited any permanent record of what it was up to, at one stage telling the evaluators to shred their notes. The NDA had acted unlawfully. It was forced to pay Energy Solutions and Bechtel £97m. Adding other costs such as the £8.5m cost of fighting the case in court, the National Audit Office says brings the total cost to the taxpayer to £122m.
The BBC asked the NDA why it manipulated the tender process. Was it because it was under pressure to select the cheapest bidder? If not, what was the reason? But it didn’t get an answer. Chief Executive, David Peatie, who arrived after the Magnox mess, apologised for past mistakes and said procedures have now changed.
Business Secretary, Greg Clark, has ordered an independent inquiry. Steve Holliday, former boss of the National Grid, is interviewing witnesses and will report next year. But the fallout could be huge because Ministers gave the whole Magnox contract approval. The NDA says the Government should take some share of the blame. Emeritus Professor of Energy Policy, Steve Thomas, says he thinks the NDA feel resentful that the Department of Energy (now the Department for Business Energy and Industrial Strategy – BEIS) has loaded the blame onto them rather than taking some responsibility themselves because the contract was approved by the Treasury and the Department of Energy and Climate Change, but only if it achieved savings of at least 10%. The bidding process and the overly complicated criteria were things they should have looked at.
The House of Commons Public Accounts Committee will look at this at the end of November. Meg Hillier, chair of the committee, says the fiasco rings many alarm bells about how it could have happened with so many people in the NDA and Government looking into this contract.
The Government says it monitors the NDA more closely now. The 10% saving target was meant to secure value for money and the right level of commercial expertise. In 2015 the Government cancelled a contract to clean up Sellafield saying it was too complicated for a private sector contract. It took back control of Sellafield and may do the same with the Magnox sites.
Cavendish is also decommissioning Dounreay as part of a consortium. It won the £1.5bn contract in 2012 beating a bid by Energy Solutions and Amec. The BBC revealed that Energy Solutions believe, just like with the Magnox contract, the scores for the Dounreay bid were “fudged”. Energy Solutions didn’t go to Court at the time because it didn’t want to upset the NDA and ruin its chances of winning the Magnox contract.
People in the NDA confirmed to Energy Solutions that scores had been changed for the purpose of ensuring that it did not win the contract. The Magnox inquiry has spoken to witnesses about the Dounreay contract tendering process. If the inquiry seriously criticises the Dounreay contract it would mean the NDA had mishandled three multi-billion contracts. The NDA didn’t respond to allegations that scores for the Dounreay contract had been manipulated.
The NDA hasn’t decided what to do about the Magnox contract, but the fiasco raises serious questions about the NDA’s capability to handle the complex and dangerous job of safely taking apart ageing nuclear reactors. Steve Thomas says if the contract is to come back in house the NDA would clearly need a major shake-up. One of the serious issues about long delays to decommissioning is that there are lots of things that can go seriously wrong. What’s clear is that our atomic past will still be part of tomorrow’s world.
BBC File on 4, The Nuclear Option - Powering the Future and Cleaning Up the Past, 31st October 2017 http://www.bbc.co.uk/programmes/b09byv6k