Taxpayers and workers will pay the price for gross government incompetence, after the Nuclear Decommissioning Authority (NDA) announced on Monday (March 27) it would axe a multi-billion pound contract awarded to a private company to undertake nuclear clean-up work.
After the high court ruled that the NDA botched the way it awarded the contract in 2014 to international consortium Cavendish Fluor Partnership (CFP), the government has now been forced to pay out £100m to settle the case with the two other companies who bid for the contract but failed.
The high court ruled last year that the government had used favouritism to award the private sector contract to CFP to decommission the 12 Magnox nuclear power sites, located in Berkeley, Gloucestershire; Bradwell, Essex; and Hinkley Point A in Somerset. The judge said the NDA failed to treat bidders equally and “manipulated” rules to allow CFP’s participation in the process.
Unite at the time called on the government to launch an inquiry into how the NDA manages contracts – an inquiry that business secretary Greg Clark confirmed yesterday (March 27) would happen.
A ‘defective procurement’
“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,” Clarke said in a written statement.
The NDA confirmed that the CFP contract will end in 2019 – nearly ten years before it was supposed to end in 2028. This premature ending of the contract will mean that the NDA will be faced with the daunting – and expensive – task of restarting the tendering process in two years’ time, costs of which will again by borne by the taxpayer.
Unite has criticised the bidding process from the beginning and believes that the latest news is yet more evidence that backs the argument for bringing nuclear decommissioning fully back under public control.
“The whole contract process has been deeply flawed from the very start,” Unite national officer Kevin Coyne said in response to today’s news. “This was highlighted by the High Court case which ruled that the NDA had failed to treat all bidders the same when it awarded the 2014 contract to clean up the Magnox reactors.”
“As a result, failed bidders EnergySolutions and Bechtel now stand to be awarded almost £100 million in compensation – a bill that the long-suffering taxpayer will have to pick up.”
Nuclear power expert Dr Paul Dorfman, from University College London’s Energy Institute, told the Daily Telegraph that the entire contract award process is inherently flawed because of the nature of the work.
“They were set up to fail and have failed because the understanding of costs and complexity to nuclear decommissioning is changing all the time,” he said. “Magnox reactors were thrown up in a rush to give electricity too cheap to meter and create plutonium and there was no thought of how they would be decommissioned.
“Each Magnox reactor is bespoke so decommissioning each one is different with its own complexities and challenges. The more we learn about dealing with the ‘back end’ of nuclear power, the more we see how complex and costly it is.”
Indeed, CFP has over the years revised up its cost estimates – last August it was reported the consortium told the NDA that their original estimate had increased by 18 percent to more than £10bn.
This, Coyne told UNITElive, is why private companies involved in nuclear clean-up can be so problematic.
“Our biggest concern about all these private companies is that when they first estimate costs, they often discover something or the other at a later stage that they hadn’t accounted for – and so they subsequently charge more,” he said.
“With a public contract, on the other hand, you’re paying the workers, as it were, and you do whatever there is to do,” Coyne added. “It’s much more cost-effective.”
Coyne added this week that the other big losers after Monday’s news will be the workforce which, he says, faces a reduction in their pension entitlements.
“Unite is currently consulting its 3,000 NDA members on a new pension package which will ‘save’ the Treasury £320m – ironically, the compensation payments of nearly £100m will eat up nearly a third of that sum.
“The workers will have reduced pension entitlements and other benefits because of this financial mess. The government, through its 2016 Enterprise Act, forced through legislation designed to cut the terms and conditions of Magnox employees, including exit payments and changes in their pensions.”
Changes to pensions come after CFP announced in 2015 plans to cut 1,600 jobs. While many job losses had already been planned as the consortium took over the contract, the vast majority came as a shock.
Coyne said on Monday that Unite welcomes “the announcement that business secretary Greg Clark will hold an independent inquiry into the deeply flawed contracting out culture which we called for last summer.
“However, it is clear that the ‘clean up’ contract should be taken back into public control where it should have been in the first place.”