The Nuclear Decommissioning Authority (NDA) had barely started to recover from the severe mauling it was given in March by the High Court over the Magnox fiasco when along comes another shaming investigation into the same events. If anything the latest scrutiny, from the National Audit Office (NAO), is even more damning about government contract negotiating and management skills than the High Court was.
The story of procurement of the £6 billion contract to clean up the legacy of contamination at the UK’s ten redundant Magnox nuclear power stations is one of ‘fundamental failures’, says the NAO, which have cost the taxpayer some £122 million. It is also a depressingly familiar story to all who are familiar with the UK’s public sector procurement efforts.
To recap, the NDA in March this year admitted that it was to pay out some £97.3 million compensation to companies that lost in the race for the 14-year contract, which now looks like having risen to the £122 million mentioned above.
The Cavendish Fluor Partnership (CFP) was awarded the contract in 2014 after coming in with the lowest bid of £3.8 billion. The High Court ruled that the NDA had failed to run the tender process properly and as a result the work had been awarded to the wrong company. The High Court said the NDA knew it should have excluded CFP for failing to meet bidding criteria; instead it manipulated the process so CFP won and kept scant records because it was ‘acutely aware’ of the possibility of a legal challenge.
The NAO report confirms the extent of faults in the contracting process and says that the NDA’s commercial strategy for dealing with nuclear waste is ‘wholly inappropriate’ and needs to be redrawn. The NDA always expected that the costs would need to be revised once work got under way, but by this year the cost had risen from the original £3.8 billion to £6 billion. A process of ‘trueing-up’ the contract was supposed to be completed by September 2015, but was still under way.
The NAO said some £1.2 billion of the cost increase relates to the NDA’s ‘over-optimistic assumptions about the state of the sites when it tendered the contract’. The authority ‘had a poor understanding of what was happening on its estate’.
The chairman and the chief executive who were in post at the time have since left the company and new senior managers are in place. Apparently, they are as yet undecided whether to take the project in-house or start the tender process all over again.
Government’s procurement reputation is unlikely to be enhanced by news that one of its own departments, the Department for Business, says it has commissioned another ‘independent’ inquiry into the affair. Well we have two of those already, unless the impartiality of the High Court or the NAO is being called into question by the Department for Business.
A third inquiry is unlikely to find any grounds for looking at public sector procurement skills in any better light. The NAO says the fiasco raises urgent questions about the government’s control of the NDA; even more urgent questions are raised and left unanswered about why public sector procurement continues to produce this lengthening list of catastrophes.
Nick Barrett
Editor