UK limits Cavendish Fluor contract to 2019

27 March 2017

The Nuclear Decommissioning Authority (NDA) has decided to terminate its contract with Cavendish Fluor Partnership (CFP) for the management and decommissioning of 12 redundant Magnox sites, including two research sites. In a written ministerial statement to the House of Commons today, Energy Secretary Greg Clark said there is a big difference between the contract with CFP and the work that is required. Clark also announced that the NDA had settled outstanding litigation claims against it by Energy Solutions and Bechtel.

CFP is a joint venture between the British firm Cavendish Nuclear, a subsidiary of Babcock International, and the US company Fluor Inc. The sites affected by the contract, together with the Calder Hall reactor on the Sellafield site, formed the UK's first fleet of nuclear power plants. CFP won the 14-year contract in September 2014 in a £6.1 billion ($7.7 billion) tender the NDA started in April 2012. This decision was approved by the then Department for Energy and Climate Change and the Treasury.

"CFP started work on the Magnox estate on 1 September 2014. There then started a process to ensure that the scope of the contract assumed in the 2012 tender matched the actual status of the decommissioning to be done on each site - a process known as consolidation," Clark said. "It has become clear to the NDA through this consolidation process 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 NDA Board has concluded that the scale of the additional work required "would amount to a material change to the specification" on which bidders were invited in 2012 to tender, Clark said. The NDA Board has decided therefore that it should exercise its right to terminate the contract on two-years' notice. The contract will be terminated in September 2019, after five years rather than its full term of 14 years, Clark said, adding that CFP had agreed to this.

"Dealing safely with the UK's nuclear legacy is fundamental and non-negotiable. It is important to emphasise that this termination is no reflection on the performance of Cavendish Nuclear or Fluor, and work on decommissioning at all the sites will continue with the management of CFP for a further two and a half years," Clark said.

During this period, the NDA will establish arrangements for "a replacement contracting structure" to be put in place when the current contract ends. This work will be led by David Peattie, who took over as CEO of the NDA on 1 March.

The decision to terminate the contract requires the consent of the energy secretary, the chief secretary to the Treasury and the accounting officer of the Department for Business, Energy and Industrial Strategy, which Clark heads. "That consent has been given," Clark said. "We have a responsibility to ensure that the NDA's decisions reflect its legal obligations, including under procurement law, that further risks to taxpayers' money are contained and that robust arrangements are put in place to deliver this essential decommissioning program," he added.

Settlements agreed

Clark also told the House of Commons that the NDA had settled outstanding litigation claims against it by Energy Solutions and Bechtel, in relation to the 2014 Magnox contract award. The NDA was found by the High Court in its judgment of 29 July 2016 to have wrongly decided the outcome of the procurement process. As part of the settlements, NDA has withdrawn its appeal against the judgment.

Clark said: "While these settlements were made without admission of liability on either side, it is clear that this 2012 tender process, which was for a value of up to £6.1 billion, was flawed. The NDA has 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."

Clark also said he was establishing today an independent inquiry, led by Steve Holliday, the former CEO of National Grid, "into the conduct of the 2012 procurement process and the reasons why the 2014 contract proved unsustainable".

"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," Clark said.

Researched and written
by World Nuclear News