Magnox scandal poses ‘valuable lessons’ for the government

The government has accepted virtually every single recommendation of the inquiry into the failed Magnox nuclear decommissioning contract and subsequent litigation, according to a response published on Tuesday.

Although the Nuclear Decommissioning Authority (NDA) will remain at arms-length of government, its relationship to Whitehall, “will be considered and refined in light of the recommendations” of the inquiry, which was published in March.

“This separation of decision making on nuclear decommissioning from everyday government control remains important, but it is appreciated that the high levels of public spending associated with nuclear decommissioning will always demand some level of government scrutiny. For that reason we will be taking a stronger interest in NDA target setting as well as introducing a new process for evaluating the performance of the NDA chair,” says the response, made jointly on Tuesday by the Department for Business, Energy and Industrial Strategy (BEIS), the Cabinet Office and UK Government Investments.

Magnox was a technology deployed at 12 nuclear sites across the UK, including the first commercial-scale atomic energy plant in the world, Calder Hall at Sellafield. The reactors ran on unenriched uranium with graphite moderators and employed CO2 as a coolant. The last, Wylfa in Anglesey, was shut down at the end of 2015.

The Nuclear Decommissioning Authority (NDA) opened a competition to decommission the sites in 2012, putting the value of the contract at around £6.2bn. It related to all but five of the facilities under its ownership. The contract was won two years later by the Cavendish Fluor Partnership, which began work in September 2014 under a 14-year contract.

But in the words of the subsequent inquiry, “Subsequently, it became clear to the NDA that there was a significant mismatch” between the work specified in the contract, “and the work that actually needed to be done”. The organisation therefore decided to terminate it in 2017, effective from September 2019, bringing decommissioning in-house as wholly-owned subsidiaries.

In parallel, rival bidders launched legal proceedings, claiming that the contract had been determined wrongly. These were settled in 2017, £85m going to Energy Solutions and £12.5m for Bechtel.

The National Audit Office quickly blasted the failings, noting that they had cost the country £122m or more. The contract was supposed to generate cash savings. The Commons’ Public Accounts Committee also took a dim view of the affair.

The subsequent inquiry took four years to reach its conclusions, publishing its report in March. All but two of the 59 recommendations have been accepted in full and no less than 36 have been implemented already.

Among the agreed actions, BEIS will reconsider the scope of work for which the NDA is accountable, given the size and resources of the organisation, “in comparison with industrial companies that are directly managing such complex and expensive programmes”. A “root and branch review” of the NDA’s organisational structure, staffing and competencies is also being carried out, and external financial, technical and legal expertise will be called on where needed.

BEIS’ own review of the Magnox scandal has also been published, making 23 recommendations to the NDA and government as a whole. It also mentions that the NDA is developing its own net zero roadmap.

It says that the department and the NDA should “facilitate more frequent and more direct conversations on matters of strategy and policy implementation,” led by the chair. “This would allow on the one hand the secretary of state and junior ministers to share their priorities, insights, and expectations of the NDA, referencing their wider policy and delivery vision as appropriate, and on the other give the NDA a forum to explain both their progress and surface any challenges they wish to bring to ministers’ attention,” says the paper.

A clearer and more transparent mechanism is also needed to identify top-level risks to BEIS’ Performance and Risk Committee.

“Both reviews to which these are the responses contain valuable lessons for the NDA and government. We take these recommendations very seriously and have considered them with great care. The government and the NDA will prioritise the implementation of the commitments within these responses as we continue to deliver against the UK’s critical nuclear decommissioning challenges,” said a government statement.

In its own response, the NDA said under it had “fundamentally changed its operating model” since 2017, and redesigned internal governance arrangements, “transforming how it manages its operating companies to find more effective and efficient ways of providing nuclear clean-up and decommissioning on behalf of the tax payer”. In addition, a new group general counsel and company secretary and commercial director have been appointed, plus “more than 40 commercial and procurement specialists. This injection of capacity and capability has made significant improvements in the NDA’s commercial and contracting practices,” says the NDA.

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