UK to change way Sellafield is managed

13 January 2015

The UK government is changing the way the nuclear site at Sellafield in northwest England is managed, following recommendations from the Nuclear Decommissioning Authority (NDA).

The decision means that private consortium Nuclear Management Partners (NMP) will lose its GBP9 billion ($13.6 billion) contract as the site's Parent Body Organisation (PBO). NMP is a joint venture between Amec Foster Wheeler, Areva and URS - respectively, British, French and US engineering companies. AECOM Technology Corporation, the US engineering design firm, completed its acquisition of URS Corporation last October.

In response, Sellafield Limited - the Site Licence Company which operates the site under the ownership of the PBO - said that its clean up mission and strategy remain unchanged "at the day-to-day operational level".

The Sellafield complex from the air (Image: Sellafield Ltd)

"As the enduring entity on the Sellafield site, the 10,000 nuclear professionals who make up our workforce remain dedicated and committed to safely and quickly managing the clean-up of the UK's nuclear legacy," it said.

The government agreed last year with the Public Accounts Committee's conclusion that it was a priority to consider what contractual model might best deliver improved performance and value for money at Sellafield. In the meantime, it endorsed the NDA's decision to roll the current PBO contract forward into the second term, from 1 April 2014, to ensure that the progress made in the first five-year term could be built upon.

Announcing the change today, Energy and Climate Change Secretary Ed Davey said Sellafield Ltd continues to make progress and is currently on track to deliver against its key performance measures and milestones in 2014/15. But Sellafield's "complexity and technical uncertainties presented significantly greater challenges than other NDA sites". As such, Sellafield is "less well suited" to the transfer of full site-wide responsibility to the private sector via a PBO structure.

Sellafield Ltd will now become a subsidiary of the NDA and be led by a team appointed and governed by a newly-constituted board of the site licence company.

"The new model will, in due course, see a strategic partner appointed by Sellafield Ltd, to strengthen the program management and commercial capability at the site, as well as playing a key role in managing capital projects and contracts," Davey added.

The NDA and Sellafield Ltd will manage the transition to the new arrangements, a process Davey said is expected to take around 15 months to complete.

"We recognise the achievements of the site in the last six years and thank NMP for their support in stewarding Sellafield through a crucial phase of delivery and planning. We anticipate their constructive and supportive position on this change," he added.

Commenting on Davey's statement, Keith Parker, chief executive of the Nuclear Industry Association (NIA), said that the NIA understands the desire to simplify the management arrangements at Sellafield and will support this process. "The UK's nuclear sector has world class businesses, and is fulfilling decommissioning operations across the country. The industry has the expertise and capability to deliver the safe and secure operation of the Sellafield site," Parker said.

NMP's progress

Iain Irving, NMP general manager, said the company was "surprised and naturally disappointed" at the government's decision, "especially in light of the considerable progress" made at Sellafield since NMP was awarded the PBO contract in 2008. The NDA "has made it very clear that it is its contractual model that it is being revised and NMP's performance on site is not the reason for today's announcement," Irving added.

NMP has achieved "extensive progress" since the NDA extended its contract to lead Sellafield Ltd in October 2013, Irving said. The last 12 months have seen some of the site's highest levels of performance, he said, whilst, over the last two years the site's best overall safety records have been achieved. NMP has also achieved savings to the UK taxpayer of more than GBP650 million ($984 million) and has invested around GBP23 million ($35 million) from its fee in West Cumbria, "making a real difference to the local community".

NMP will be working closely with the NDA "to determine the way forward and ensure that the significant progress and momentum that has been built on site during the last eight years continues over the coming year and beyond," he said.

According to the Department of Energy and Climate Change (DECC), which Davey leads, Sellafield accounts for 60% of the NDA’s GBP3 billion ($4.55 billion) annual budget. The NDA last June increased its estimate of the total cost of work to clean up the Sellafield site from GBP67.5 billion ($102 billion) to GBP79.1 billion ($120 billion).

The Public Accounts Committee said in a report issued last February that there had been significant delays and cost overruns on a number of major projects at the site. For example, the estimated cost of the 'Magnox swarf storage silos retrievals' project increased from GBP387 million ($587 million) in March 2012 to GBP729 million ($1.12 billion) in September 2013.

According to the committee's report, the NDA recognised that performance at Sellafield has been worse than expected but justified extending the contract with NMP on the grounds that it had been the best option available and that it could use a clause in the contract to terminate it at any time if poor performance persisted.

The NDA "has not demonstrated why, given the lack of risk transferred to NMP, this 'parent body' arrangement at Sellafield provides value for money. NMP is likely to earn some GBP230 million [$349 million] over the first five years of the contract but because of uncertainties regarding the scope of the plans for the site it had not been possible to agree a contract that transferred risk to a parent body organisation and that as a result the contract was on the basis of cost-reimbursement," it said.

DECC said in a statement today that the existing PBO model continues to work well elsewhere in the NDA's estate where the challenges are better understood and suitable contracts have been developed. A target cost contract at Dounreay is being delivered in line with all key milestones, whilst additional scope has been added that will see the site reach fuel free status decades sooner than assumed and deliver GBP1 billion ($1.5 billion) of savings to the UK taxpayer, DECC said.

A similar contract recently let for the 12 sites in the Magnox/Research Sites Restoration Limited competition has potential savings of more than GBP1 billion  ($1.5 billion)to be delivered as all sites are progressively decommissioned. And DECC is now in the second five-year term of a cost reimbursable contract for the management of Low Level Waste arising from the NDA's estate and beyond, with 85% of waste now being diverted from the repository at a saving of GBP2 billion ($3 billion), it said.

The Sellafield site's nuclear facilities include those connected with the Magnox reprocessing program, the Sellafield mixed-oxide fuel plant, the Thermal Oxide Reprocessing Plant, and nuclear waste treatment plants. It is also home to redundant facilities from defence work in the 1950s, which included making plutonium for nuclear weapons.

Researched and written
by World Nuclear News