PAC lambastes nuclear decommissioning quango over ‘mismanaged’ contract

28 Feb 18

The Nuclear Decommissioning Authority suffered “untold reputational damage” over its contract with the firm Magnox, according to a scathing report from the Public Accounts Committee.

As well as a “staggeringly inaccurate” understanding of its sites and wasted £100m by awarding the wrong contract, it has also been unable to account for £500m spent on work that might not have been done, the group of MPs found.

The quango NDA’s contract with Magnox to clear nuclear reactor and research sites was one of the highest value contracts let by central government, the report noted.

But it was “appallingly” mismanaged, the PAC said. Firm Magnox is responsible for the clean-up of 12 nuclear sites.

PAC deputy chair, Conservative Geoffrey Clifton-Browne, said: “The Nuclear Decommissioning Authority is entrusted with some of the most important work affecting health and safety matters in the nuclear industry but this sorry affair casts serious doubt on its ability to perform its role effectively. 

“From the design and execution of the procurement process onwards, the handling of the Magnox contract has been an appalling piece of mismanagement and financial waste.”

The report found the NDA “ran an overly complex procurement process”, as a result of which it awarded the Magnox contract to the wrong bidder leading to a court case from an aggrieved rival that cost nearly £100m to settle.

Both the Treasury and the Department for Business, Energy & Industrial Strategy approved what the PAC called “an overly complex and opaque procurement process”, under which more than 700 evaluation criteria were scored.

The NDA could not confirm whether it had complied fully with legal advice, but said its evaluators believed they had the leeway to change bidders' scores against the evaluation criteria.

“The High Court found that evaluators knew that without changing those scores, [bidder] CFP would have been excluded from the competition, but had manipulated the evaluation to avoid that outcome,” the PAC said.

“This resulted in the NDA awarding the contract to the wrong supplier and subsequently losing a court case brought against it by one of the losing bidders, Energy Solutions. These failures occurred despite six internal and external assurance and audit reviews of the process.” 

To make a success of the procurement model the NDA would have needed “a very good grasp of the state of the 12 sites before it let the contract.

Instead, the NDA had a staggeringly inaccurate understanding of the state of its sites”, the report found.

In further errors, the NDA “drastically under-estimated the scale of the work needed to decommission the sites”, with costs being revised upwards so far that the contract had to be abandoned nine years early.

“These failures have caused untold reputational damage to the NDA and raise serious questions about its credibility as a strategic contracting authority,” MPs said.

They found the NDA might have wasted a further £500m by paying its previous contractor for work not done but could not be certain as the NDA itself did not know whether this cost arose from incorrect assumptions about the state of the sites or underperformance by the previous contractor.

Clifton-Browne said: “It is wholly unacceptable that some details of what took place should remain so murky – not least the NDA's inability to fully account for some £500m of taxpayers' money paid to its previous contractor. 

“We expect the NDA to be open with us about what it is doing to address this and other failings identified in our report, such as shortcomings in the skills and expertise of its staff. 

"But central government is also culpable. Having signed off the NDA's needlessly complicated procurement plan, it then failed in its duty to taxpayers as issues emerged and costs grew.”

A Department for Business, Energy and Industrial Strategy spokesperson said: “The business secretary has been clear that the reasons for the failure of the Magnox procurement should be exposed and understood, which is why he commissioned the independent Magnox Inquiry last year.

“We have already taken steps to further strengthen the governance and oversight of the NDA and we look forward to the final recommendations of the Magnox Inquiry when it is completed later this year.”

The department said that a new chair and chief executive had been appointed to the NDA and it had introduced a projects committee to strengthen oversight of major programmes.

An NDA statement said: “We will study the committee’s recommendations and those to come from the [independent] Inquiry, and have already taken significant steps to address the issues arising from the Magnox competition and contract. 

“We are committed to learning from the mistakes made, implement any necessary improvements and continue to focus on the important work of cleaning up the UK’s nuclear legacy.”

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