MPs hit out at spiralling costs and poor performance in contract to clean up Sellafield

Will Green is news editor of Supply Management
10 February 2014

11 February 2014 | Will Green

MPs have criticised the decision to extend a contract to manage Sellafield against a backdrop of massive cost overruns and poor performance.

The Public Accounts Select Committee (PAC) said the Nuclear Decommissioning Authority (NDA) renewed a contract with Nuclear Management Partners Ltd (NMP) even though costs had risen to “astonishing levels”.

In a report the PAC said NWP did not meet its savings target for five years after it won the decommissioning and reprocessing contract in 2008, though it earned £230 million over the period, and yet the contract was extended in October 2013 for a further five years.

The report cited an example of a storage silo project where the cost nearly doubled from £387 million in March 2012 to £729 million September 2013, while the delivery date on another silo project had been put back six years to 2023.

PAC chairwoman and Labour MP Margaret Hodge said: “We are not confident that taxpayers’ interests are being protected in the contractual relationships between the private companies involved in managing and operating the Sellafield site.”

Sellafield Ltd is the licensed operator of the site, which it manages under a contract with the NDA, which reimburses its costs of around £1.6 billion a year, according to the PAC.

In 2008 the NDA appointed NMP, a consortium of private sector firms, as a “parent body organisation” of Sellafield Ltd to improve performance, and the consortium earns dividends based on performance improvements.

Hodge said: “We have seen big delays and huge cost overruns on a number of major projects on the Sellafield site. But despite this the consortium NMP had its contract to clean up the UK’s largest and most hazardous site extended for five more years. Re-competing the contract was rejected as an option.

“Cleaning up the nuclear waste on this hazardous site is estimated to cost more than £70 billion in cash terms. What’s worse is that the cost is likely to continue to rise.

“The authority must monitor progress and terminate the contract if NMP’s performance does not improve quickly. We want the National Audit Office to review the authority’s approach and report back to us on performance at Sellafield one year into the extended contract.”

John Clarke, chief executive officer at the NDA, said: “Both NMP and the NDA now have a much better understanding of the issues and complexities that exist at the site and the challenges that lie ahead. While progress has been made on a number of fronts we will require significant improvements during the next contract period. We have had extensive discussions with NMP and made clear where these improvements must be made. 

"We will continue to monitor performance closely and remain focused on achieving our goal of safe, effective, value for money decommissioning at Sellafield – as we are seeing elsewhere across our portfolio of sites.”

NMP chairman Tom Zarges said: “The challenges at Sellafield are unprecedented, with complexities exceeding any other operational or decommissioning nuclear site in the world, therefore demanding extraordinary technology and skills. The first term of our contract has been characterised by many successes but also a number of disappointments and areas for improvement.

“Our job now is to build on our experience of the last five years to safely and reliably deliver our customer’s mission, while further accelerating the pace of change and providing value for money to the NDA, government and the UK taxpayer”.

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