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It is possibly Whitehall’s biggest blunder. it certainly involves one of the biggest contracts ever let by government. And you will have shelled out hundreds of millions of pounds for very little in return.
The subject is the decommissioning of 10 nuclear power stations and two research centres – now all past their sell by date – and all leaving the taxpayer with an almighty bill to detoxify them and make them safe.
The total bill to do this was meant to be £3.8 billion but it turned out to do it properly would cost £6.2 billion- making it possibly one of the biggest contracts ever let by Whitehall.
And what a mess Whitehall civil servants and their ministers made of it. The whole sorry story was revealed in a report by Parliament’s financial watchdog, the National Audit Office, this month.
. The £6.2 billion contract was approved by the Treasury because it promised to save taxpayers £904m by loading risks on the contractors. Instead it has only saved £255m and this has been partly wiped out by a botched tendering procurement which ended up with a rival consortia being able to sue the government for damages.
The company that won – an American led consortium Cavendish Fluor Partnership (CFP) based in Texas- was awarded the contract illegally.
We know this because its rivals Energy Solutions which includes Bechtel successfully sued the government in the High Court last year and the High Court ruled that Fluor should have been disqualified because the final contract was nothing like the one put out to tender.The Business, Energy and Industrial Strategy ministry has just settled the bill with Energy Solutions by agreeing to pay then £97.3m in compensation.
But the real bill was even more. The NAO found that the full cost amounted to £122m. It spent £13.8 million on legal and external advisers. Of this, £3.2 million was spent on the competition and £8.6 million was spent on legal fees in the ensuing litigation. The NDA estimates that in-house staff time has cost £10.8 million. This excludes the cost of staff time of senior central government officials who were heavily involved in decisions, particularly about the National Decommissioning Authority’s settlement and its decision to terminate the contract.
One reason for this debacle is believe or not is that officials did not know the state of some of the decommissioned power stations so had to revise its estimates as more problems came to light- changing the terms of the winning bidder’s contract.
Amyas Morse, head of the National Audit Office: “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 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.”
There is now an inquiry going on under Steve Holliday, former chief executive of the National Grid. Its terms of reference include whether disciplinary action should be taken against the civil servants who made such a botched job and cost us even more money. It could mean heads should roll.
And it leaves the government another big problem because the contract with the present consortium has had to be terminated in 2019 – nine years before it is due to end.
And the axe is due to fall just as Brexit comes in – leaving more unfinished business just when Britain may well leave Euratom. What a mess.
I have written about this in Tribune. The full NAO report is here.