Kenneth Fletcher
WC Monitor
2/14/2014
Questioning the U.K. Nuclear Decommissioning Authority’s decision last fall to extend for five years URS-led Nuclear Management Partners’ contract at Sellafield, the British Parliament’s Public Accounts Committee released a report this week calling for termination of the contract if NMP does not improve performance. The PAC was highly critical of NMP in an initial January 2013 report on Sellafield, and grilled the NDA at a hearing last December on the decision to extend (WC Monitor, Vol. 24 No. 47). “NMP has not provided the clear leadership, strong management and improved capabilities needed to deliver the performance required at the site. Despite this, the Nuclear Decommissioning Authority (the Authority) extended NMP’s contract for a further five year term,” the new report states. “The justification for doing this is highly questionable, particularly given a highly critical assessment of NMP’s performance by [independent auditor] KPMG. The Authority must monitor NMP’s activities closely and terminate the contract should performance not improve.”
In response to the report, the NDA says it is in the process of implementing change. “We have made good progress towards implementing the recommendations laid down by the PAC following its original report into Sellafield last year and will now focus on achieving the aims of the six recommendations set out in this latest report,” NDA Chief Executive John Clarke said in a statement this week. “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. Whilst 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.”
But this week, URS CEO Martin Koffell downplayed the significance of the PAC report. “There were strong voices in Britain that wanted to renationalize that site, or take it back into government,” he said in a Feb. 13 call with investors. “Those voices still exist in Parliament, fed by unions and other voices and they will not go away. And certain parts of the British media are in that camp. This is political and media noise that will go on and on. It was in the news before we got the contract some years ago and we will live with that. In a considerable way it has created a certain brand recognition that was out of reach for us in United Kingdom. We are now well known.”
Committee Requests National Audit Office Review
In October the NDA decided on the five-year extension after completing a review of the first five years of NMP’s contract, which could run up to 17 years in total. NMP, composed of URS, Amec and AREVA, has managed the site since 2008 as owner of the site license company Sellafield, Ltd. But criticism of the company grew last year among reports of cost overruns and schedule delays. The PAC is looking to continue strict oversight of the site to ensure changes take place, and included six recommendations in its latest report, which notes delays and overruns. “For example, the estimated cost of the ‘Magnox swarf storage silos retrievals’ project increased from £387 million in March 2012 to £729 million in September 2013. In the 18 months since we last considered progress the estimated delivery date of the ‘Pile fuel cladding silo’ project had been put back by six years from August 2017 to January 2023,” the report states. It recommends, “The Authority should set out how, and when, it will review what progress NMP is making in improving performance at the site. The National Audit Office should review the Authority’s approach and report back to us on performance at Sellafield one year into the extended contract.” The NAO previously released a critical report on Sellafield in late 2012.
The report also questions the use of the parent-body organization model, in which NMP manages Sellafield Limited. “The Authority has not demonstrated why, given the lack of risk transferred to NMP, this ‘parent body’ arrangement at Sellafield provides value for money,” the report states, recommending: “The Authority should set out how it might transfer more of the delivery risk to contractors under its existing arrangements and how it will ensure that its alternative arrangements are viable to enable it to terminate the current contract should performance continue to prove unsatisfactory.”
Though the NDA considered eliminating the parent body and taking the management back in house to provide simpler lines of accountability, Clarke said in October that it would be a radical change that “has the risk of interrupting progress that is being made on the site.” The NDA also considered changing NMP’s contract to allow the NDA to target specific areas, it decided not to partly due to limitations under public procurement regulations.
Report Questions NMP Leadership
Citing a high turnover of executives, the PAC also questioned NMP’s management skills. “NMP has not provided the leadership and strong contract management skills that are critical for the success of the major projects at Sellafield and the running of such a large and complicated site,” the report states. It recommends: “The Authority should monitor, and challenge where appropriate, the use made of NMP-appointed executives and experts and the terms on which they are employed. NMP should publicly report its costs, progress and the value it has brought to the site.” Last May NMP brought in Tony Price as its new Executive Director, moving previous Executive Director Todd Wright to Chairman of the Board of Sellafield Limited.
The PAC has also been highly critical of the NDA’s failure to immediately release a report on Sellafield it commissioned by independent auditor KPMG. “The Authority unduly restricted the information it made available to the public on performance at Sellafield. The Authority’s redactions of information in the KPMG report on performance at Sellafield released under Freedom of Information legislation appeared to go well beyond the stated reasons of commercial confidentiality and data protection,” the report states. It recommends: “The Authority should revisit its approach to disclosing information to ensure that it does not use grounds such as commercial confidentiality inappropriately to withhold information on performance on its sites and by its contractors.”
NMP Reviewing Recommendations
For its part, NMP says it is currently reviewing the recommendations with the NDA and Sellafield Ltd. “The first term of our contract has been characterised by many successes but also a number of disappointments and areas for improvement,” NMP Chairman Tom Zarges said in a statement. “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.”
