Morning Briefing - October 12, 2017
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October 12, 2017

U.K. Audit Office Lashes Management of Magnox Decommissioning Contract

By ExchangeMonitor

Taxpayers in the United Kingdom are on the hook for up to £122 million in costs associated with a botched contract for decommissioning of the nation’s Magnox nuclear facilities, the U.K. National Audit Office said in a blistering report Wednesday.

The U.K. Nuclear Decommissioning Authority announced in March that it would terminate the contract awarded in 2014 to Cavendish Fluor Partnership nine years early – on Aug. 31, 2019. The agency at the time said the decision was based on the increased scope of the decommissioning work necessary at the facilities.

The nation’s High Court, in a lawsuit brought by losing bidder and former Magnox cleanup prime EnergySolutions, had several months earlier said NDA badly mishandled the procurement.

The audit agency noted that the expense for decommissioning the 12 Magnox facilities spiked from £3.8 billion at the time of Cavendish Fluor’s successful bid in 2014 to £6 billion as of this year. It cited a list of failures on the government’s part in the process, many involving the schedule-busting “consolidation” process intended to address differences between what the contractor was told regarding the state of the Magnox sites and the reality it found when its people arrived.

“In addition to the failed procurement, the NDA faced serious problems after it awarded the contract to CFP. It is clear that the NDA had a poor understanding of what was happening on its estate: six sites were behind schedule at the time the NDA let the contract, and the NDA’s assumptions about the work needed on the sites have proven to be inaccurate,” according to the summary of the National Audit Office report. “The NDA’s commercial strategy of using a target-cost contract, predicated on having a good understanding of the scope of work, now appears wholly inappropriate. It is time for the NDA to re-evaluate its commercial strategy and its capability to execute it, supported by expertise in government.”

The taxpayer costs encompassed £97.3 million the government paid to bid partners EnergySolutions and Bechtel after they separately sued over the procurement, along with £13.8 million spent on legal and external
advisers.

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