The government body responsible for nuclear decommissioning paid out £97.5m to settle a dispute over a contract to dismantle the UK’s first generation of power plants.
The Nuclear Decommissioning Authority (NDA) has agreed to pay the two firms Energy Solutions and Bechtel £85m and £12.5m respectively after the High Court found it had wrongly decided the outcome of a 2012 tender process.
Energy secretary Greg Clark told Parliament these were “very substantial costs and had the potential to rise much further if the case had proceeded to trial”.
In the same announcement Clark said NDA would be ending its contract with the winning joint venture early because of a “significant mismatch” between the scope of the contract and the work that needs to be done.
“The scale of the additional work is such that the NDA board considers that it would amount to a material change to the specification on which bidders were invited in 2012 to tender,” he said.
A former energy secretary described the situation as “a complete mess” and “deeply embarrassing” but said the cost of the legal settlement was “a pinprick compared with the increased cost estimate of cleaning up all of our old nuclear facilities”.
The tender was for a contract worth up to £6.1bn and an independent enquiry has been launched into why it failed.
The 14-year contract was awarded to the Cavendish Fluor Partnership in 2014, but NDA said it would terminate the contract in 2019 after just five years. Clark said this was not a reflection on performance.
“This was a defective procurement, with significant financial consequences, and I am determined that the reasons for it should be exposed and understood,” said Clark.
But Chris Huhne, former energy secretary for the coalition government, said the remit for the enquiry was not broad enough and it needed to look at the total cost of nuclear decommissioning.
“It is a complete mess, it’s deeply embarrassing but it’s actually I’m afraid only the latest in a long line of embarrassments,” Huhne told BBC Radio 4. “We’re not even scraping the surface with the problem that this legal case has exposed.”
Huhne, who was energy secretary between 2010 and 2012 and left the before the contract was awarded, said the cost of decommissioning the UK’s old nuclear fleet had increased £107bn in the last five years to £161bn. “In terms of industrial strategy this makes every other disaster in the post-war period pale into insignificance.”
He said the problem stemmed from how early reactors stations were complex bespoke constructions made without consideration to how they would later be disassembled. “We ordered a whole series of Savile Row suits rather than a bunch of work-a-day Marks & Spencer suits… Every single one of those reactors is different. Even the fuel rods in every single one of those reactors are different – crazy.”
The inquiry into the procurement process will be headed by Steve Holliday, former chief executive of National Grid.
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