Fundamental failures in awarding a £6.2 billion deal to decommission the UK’s ageing fleet of Magnox nuclear power stations cost the taxpayer £122 million, an official report has found.
The National Audit Office said the saga raised “serious questions” about the Nuclear Decommissioning Authority’s (NDA) understanding of procurement regulations.
The NDA ran a competitive procurement exercise for decommissioning services at 12 nuclear sites, resulting in the award of a 14-year contract for up to £6.2 billion, but the High Court found it had wrongly decided the outcome of the process.
The NDA agreed to settle claims in March 2017, the same month as the Government set up an inquiry into the Magnox contract.
Energy Solutions unsuccessfully bid for the contract, and later issued legal claims against the NDA for damages.
The High Court found that, had the NDA applied its evaluation criteria correctly, the winning bidder, Cavendish Fluor Partnership (CFP), would have been excluded from the competition.
The NDA agreed to settle legal claims with Energy Solutions and its consortium partner at the time of the bid, Bechtel, at a cost of £97.3 million.
It also spent £13.8 million on legal and external advisers, while in-house staff time cost £10.8 million.
Amyas Morse, head of the National Audit Office, said: “The NDA’s fundamental failures in the Magnox contract procurement raise serious questions about its understanding of procurement regulations; its ability to manage large, complex procurements; and why the errors detected by the High Court judgement were not identified earlier.
“In light of these issues, the Department (for Business) must consider whether its governance and oversight arrangements surrounding the NDA are sufficiently clear and effective in providing the scrutiny and assurance it requires to meet the standards expected in managing public money.”
A Business and Energy Department spokesman said: “The Secretary of State has been clear that the reasons for the failure of the Magnox procurement should be exposed and understood, which is why he commissioned the independent Magnox Inquiry earlier this year.
“The Government will carefully scrutinise the NAO report and ensure that the issues raised are fully addressed as we build on the steps already taken to strengthen further the governance and oversight of the NDA.”
The NDA said it accepted the findings and will now consider how they should be addressed.
Chief executive David Peattie said: “I would like to apologise for these past mistakes. Since taking over earlier this year I have made a number of improvements to the way the NDA operates to provide greater focus, discipline, standardisation and simplification to our work.
“I have also taken steps to bolster our legal and commercial capability by the recruitment of a general counsel and commercial director.
“I am committed to doing everything to ensure these mistakes will not be repeated.
“We should not overlook the fact that good progress and savings continue to be made elsewhere in our decommissioning and hazard reduction work.
“However, this does not detract from the regrettable series of events highlighted by the NAO today.”
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