What went wrong with the UK's nuclear clean-up contract?

22 March 2021

The UK Nuclear Decommissioning Authority suffered from “optimism bias” that skewed procurement policy and led to failures when awarding the Magnox decommissioning contract, according to an inquiry.

The contract to decommission the ageing Magnox sites was originally intended to last 14 years, but ended when unsuccessful firms launched legal challenges.

Steve Holliday, a former CEO of National Grid, was asked in 2017 by then business secretary Greg Clark to begin an enquiry into the contract to clean up 12 UK nuclear sites, which ended up costing the taxpayer £122m.

Tender documentation was criticised for being “unnecessarily complex”, containing 700 scoring requirements, many of which required extensive responses – leading to high risk of human error.

Throughout the procurement process the NDA’s approach was “indicative of a reluctance to entertain bad news”, which led it to underestimate the possibility of legal challenge.

“To my considerable frustration, the finalisation of this report has been delayed by almost two years as the result of an unsuccessful legal challenge to the work of the inquiry by certain former NDA executives,” Holliday wrote in the report.

In July 2016 the High Court found the NDA had wrongly awarded the contract to Cavendish Fluor Partnership, a group headed by UK engineering firm Babcock International.

It was later forced to settle claims with unsuccessful bidders Energy Solutions and Bechtel Management Company.

“There has to be a change in culture in the NDA to ensure full and open dialogue, one that encourages challenge and embraces the delivery of bad news, and moves away from optimism bias,” said Holliday.

He said it would be “overly simplistic” to describe Magnox as a failed procurement exercise, when it fact the situation was caused by multiple failings.

“In many respects, Magnox was a well-run procurement and appeared to have the critical components for successful delivery,” he said.

These included a tried and trusted procurement model and governance structure, as well as a seemingly well-resourced procurement team.

For this reason the NDA and stakeholders were confident in the organisation’s procurement process but in reality there were errors and shortcomings in procurement design and execution.

“There appears to have been a culture that sought to self-justify, and which was inward looking,” the report said.

“In particular the NDA had a belief in its own skills and intellectual ability, and did not recognise or seriously contemplate that it may have any weaknesses, when contracting and managing external advisers.”

Among the specific deficiencies this led to were a tendency to limit the role of external advisors and a failure to welcome strong challenge or bring in people from other industries with different skills and experience.

The report made recommendations including to review the scope of work that the NDA is accountable to deliver and for the NDA “to undertake and implement a root and branch review of its organisational structure, staffing levels, and competency”.

When it comes to future procurement, the NDA was advised to formulate a transparent, but simplified set of competition rules, “which focus on the substance of what it is looking for, rather than on process”.

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