It had been on the cards for a while but now it is official. The scale of the problems within the Sellafield nuclear waste clean up operation has led to the contract being ripped up and existing providers Nuclear Management Partners (NMP) being relieved of their duties.
The NMP consortium, comprising of the UK’s Amec, France’s Areva and America’s URS, has had their 17 year contract ended after just 6 years.
Over that short period both the National Audit Office (NAO) and Public Accounts Committee (PAC) have been damning in their criticism of NMP’s failings. So much so that it had been a real surprise when the 2014 break clause in the NMP contract was not triggered having been awarded a five year extension in 2013 despite an already significant catalogue of failings.
A £110bn mistake
The cost of cleaning up and decommissioning Sellafield had been estimated at £79bn over the next 120 years. However this has now been revised upwards by the Nuclear Decommissioning Authority (NDA) to £110bn over the next 120 years. This then was no small task for the NMP.
In return for fulfilling the contract NMP were paid fees worth up to £30m per year and yet with the cancellation, they will be paid less than £500,000 in termination fees for the notice period of the contract.
DECC announced that as a replacement for NMP they would be taking back control of the project and placing it under the direction of the NDA, a transition which is expected to take 15 months. DECC said:
“This will deliver more effective progress in decommissioning the biggest and most complex nuclear site in Europe and provide the best outcome for the public”
In the pre-break clause discussions of 2013 the NDA had considered terminating the agreement but on balance has decided that the “risk-benefit analysis” was in favour of an extension for NMP. This was met with surprise in almost every quarter.
“Poor”
The catalogue of issues was as extensive as it was serious with the NMP having been criticised by the NAO and the PAC for failing to prevent cost over-runs. Just two out of the 14 biggest projects at the site were on schedule and the NAO described NMP’s overall record was “poor” amid controversy over the expenses of senior executives in the consortium.
Yet the timing of the announcement to prematurely end the deal was surprising given that of late performance had improved and that the NMP had hit 96% of targets set by the NDA over the last year.
Whilst alluding to the rubber stamping of the decision to extend the contract in 2013 Davey claimed that the decommissioning process needed to be taken back into state hands as the project was “too complicated” to be run by the private sector
That relative difficulty however is contractual rather than operational as Davey explained that the “huge uncertainties” of the project made it “very difficult” to draw up suitable contracts to outline the management required in each circumstance that may be uncovered in what is a hugely complex site.
Surprise
Looking further back Davey added that both he and the NDA were surprised that the “private sector management model” had even been complicated at Sellafield.
In a twist that will surprise no energy market watcher, the original contract with NMP had been set up under the last Labour government in which Ed Miliband was energy secretary. Good old Ed seemingly makes a habit of messing in things he doesn’t understand. And he certainly doesn’t understand energy.
Davey said:
“When I looked at the structure that was in place, that was inherited from the last government, I had concerns about the model and it was the model I [had] wanted to change in the long term”
In his announcement, Davey made clear that Sellafield Ltd would become a subsidiary of the NDA in a move that would “guard the public purse”.
However, underlining the operational value of private sector involvement (but not overall management of the project), Davey emphasised that opportunities would still be available but as appointees to the NDA as “strategic partners to improve commercial capability and help manage capital projects” which would deliver “better value for money” rather than as project leaders. Davey said:
“In future, the private sector will be retained as suppliers of Sellafield Ltd rather than as owners of the site. Sellafield Ltd will remain a publicly funded company owned by the NDA.
“The continued safe and secure operation of the Sellafield site will remain the overriding focus during the transition and under the new structure.”
“U-Turn”
However Tom Greatrex, Labour’s Shadow Energy Minister, jumped on the opportunity to accuse the Government of:
“A frantic U- turn, an abandonment of the extension of a contract and the reversal of a decision that should probably never have been taken in the first place”.
Clearly forgetting his own party’s almost total culpability in the original costly and nonsensical decision.
DECC responded:
“Ed Davey has been very clear that he’s wanted to see more effective progress in decommissioning the biggest and most complex nuclear site in Europe, providing the best outcome for the taxpayer. The NDA and government have been working with industry experts on alternative options.”
Jamie Reed, the Labour MP for Sellafield, added:
“It’s the right decision: both inevitable and overdue. I urged the government not to renew the NMP contract last year and common sense, operational sense and business sense has now prevailed. The site will move on from this and improve. This decision is in the best interests of the industry, the site workforce and my constituents.”
A sentiment echoed by Gary Smith, National Officer of the GMB union, who said:
“The termination of the NMP contract is welcome. We could not limp on any further.
“We said the contract should not have been extended in 2013. We understand the Tories overruled the NDA. The government needs to be held to account.
“Hundreds of millions of pounds of taxpayers’ money have been squandered as NMP has simply failed to deliver time and time again. They have been big on promises but not on delivery.
“NMP and the Tories have failed the local community the workforce and the taxpayer. While NMP have now gone, which is great, the minister responsible for extending the contact in 2013 must be held to account.”
Oh the delights of partisanship.
And to add a piquant of bitterness to the already lopsided recipe Smith helpfully proffered:
“(The) NDA and government should not take the support of GMB members for granted. There is a real possibility that members will refuse to co-operate with the NDA or any incoming contractor.
“Our members have been at the sharp end of NMP’s mismanagement and we are sick to the back teeth of government’s failure to put a coherent strategy for the future of Sellafield on the table.”
And not a Miliband quote in sight, another example of the magnificent ineptitude of UK energy policy.
Only Her Majesty’s Opposition could berate someone making right their own mistake, no wonder coherent energy policy is a continual stranger to these shores.