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The Nuclear Decommissioning Authority’s management of the Magnox contract

Inquiry

In 2017 the NAO reported on the Nuclear Decommissioning Authority’s (NDA) failed 14-year, £6.2bn contract to decommission 12 Magnox nuclear energy sites, following a 2016 High Court ruling that the contract had been wrongly awarded.

In March 2017, the NDA decided, based on legal advice, to terminate the 14 year contract it had awarded to the Cavendish Fluor Partnership (CFP) nine years early due to a “significant mismatch” between the work specified in the tendered contract and the work that needed to be done.

The failed procurement had cost the taxpayer more than £122 million by the time it was announced that it was to be terminated, with the NDA being sued by one of the other bidders for the failed procurement, and forced to agree legal settlements totalling £97.3 million.

In August 2017, the NDA agreed a renegotiated contract with CFP. This covered the five-year period from the start of the Magnox contract in September 2014 to the end of the notice period on 31 August 2019.

Now a new NAO report follows up on how the NDA has managed this new contract to decommission the Magnox nuclear sites. It shows the NDA successfully negotiated a revised contract with CFP, avoided further litigation and succeeded in maintaining a working relationship with its supplier that led to the completion of £2.72 billion of decommissioning work before the contract ended in August 2019, reducing the degree of hazard on the Magnox sites. However, the NDA were in a weak bargaining position and in renegotiating the contract,  agreed to pay  a premium of £20 million to negotiate its early exit from the contract and incentivise a smooth handover of sites without further legal challenge.  

The NDA now estimates that the cost of putting Magnox sites into a safe state has increased, and billions of pounds of uncertainty remains around the final cost, with current estimates ranging from £6.9 billion to £8.7 billion.

The Committee will follow up its 2018 report on the letting of the Magnox contract, which was highly critical of the NDA’s understanding of the state of its nuclear sites and the commercial capability of the NDA’s executive team, with questions to senior officials from the Department for BEIS and the NDA. 

If you have evidence on these issues, please submit it here by Monday 28 September 2020.