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Magnox fiasco wasted £122m

11 Oct 17 The National Audit Office has published the results of its investigation into the Nuclear Decommissioning Authority’s Magnox contract fiasco and makes some damning conclusions.

The whole saga raises questions about the ability of the Nuclear Decommissioning Authority (NDA) to manage procurement and abut the government’s oversight of the NDA, the report1 finds.

In March 2017 the NDA was forced to scrap a £6.2bn contract that it had agreed with Cavendish Fluor Partnership for the management and decommissioning of 12 redundant Magnox sites. It was one of the biggest contracts ever tendered by government but procurement process was found to have been flawed. There was found to be a ‘significant mismatch’ between the work specified in the tendered contract and the work that needs to be done.

Energy Solutions, one of the incumbent contractors for the Magnox sites until 2014, unsuccessfully bid for the contract, and subsequently issued legal claims against the NDA for damages. The High Court found that, had the NDA applied its evaluation criteria correctly, Cavendish Fluor Partnership 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 £97.3m. [See our previous report here.]

The National Audit Office estimates that the Magnox contract cost the taxpayer upwards of £122m. As well as the £97.3m compensation paid to Energy Solutions and Bechtel, the NDA also spent £13.8m on legal and external advisers. Of this, £3.2m was spent on the competition and £8.6m was spent on legal fees in the ensuing litigation. The NDA estimates that in-house staff time has cost £10.8m. This excludes the cost of staff time of senior central government officials who were heavily involved in decisions, particularly about the NDA’s settlement and its decision to terminate the contract.

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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 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.”

On 27th March 2017, the secretary of state for business, energy & industrial strategy announced that the government would set up an inquiry into the Magnox contract led by Steve Holliday, the former chief executive of National Grid. This inquiry is on-going.

1.The Nuclear Decommissioning Authority’s Magnox Contract, published by the National Audit Office, 11th October 2017

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