Examination of Witnesses (Questions 84-99)
NUCLEAR DECOMMISSIONING
AUTHORITY
16 MARCH 2005
Q84 Chairman: Good morning, Sir Anthony.
Perhaps you could introduce your colleagues and then we will get
started.
Sir Anthony Cleaver: Thank you,
Chairman. First of all, on my left I have Dr Ian Roxburgh who
is the Chief Executive of the NDA, and on my right is David Hayes
who was in the LMU and is now our Director of Strategy and Environment.
Perhaps I might make just a very few introductory comments. First
of all, it is very nice to see one of our Godparents taking such
an interest while we are still in the womb. As I said in the submission
that we made, I think so far we have made very good progress and
we are confident about our ability to go live on 1 April. The
biggest concern I had when I first arrived was would we have the
ability to recruit a strong enough team at the top in time and
I am delighted to say we have been able to do that, in particular
with reference to areas of special concern like safety and the
environment which I think we have covered very well. We have had
the opportunity to consult on our first annual plan, we had a
very good response to that and that is now on its way to the Secretary
of State for her approval prior to 1 April. I think we have our
basic infrastructure in place and we have the contractual mechanisms
there. In summary, we recognise that we still have a huge amount
to do, but we believe we are well placed to begin as planned on
1 April.
Q85 Chairman: One of the areas that there
had been some concern about was the production of registers and
inventories of nuclear liabilities, radioactive waste materials
and that sort of thing. You have inherited the inventories from
BNFL and UKAEA. You have to take what they say on trust. Have
you gone through it with a fine toothcomb? What has been the due
diligence in this most sensitive of areas?
Sir Anthony Cleaver: There is
around two years of history already in this context in that the
LMU was already putting together that register of liabilities
and so on, but they have been incorporated in essence into the
life cycle baselines and so we have a basis which in general terms
is agreed between us and the site licensees. At the moment we
feel that it will take us some time to examine some of those areas
in more detail. As you have heard already this morning, there
is a long history in this industry and there are some elements
on some sites where clarification is still needed in order to
be able to be absolutely confident of what is there, but overall
we are fairly confident with the position we have.
Q86 Mr Hoyle: I want to move on to the
monitoring and performance of the United Kingdom Atomic Energy
Authority and British Nuclear Fuels on a site by site basis and
allowing them to get used to the new ways of working and what
you are expecting from them. In simple terms, the M&O contracts
are based on reimbursement and it is all about them following
this agreed practice. You get additional fees and reimbursement
and satisfactory agreements of the objectives that you have all
agreed to and that all sounds very good. There are sweeteners
along the way. That does not tell us what happens when they get
it wrong. What are the penalties?
Dr Roxburgh: The penalties come
in two kinds. Firstly, we pay them to do the work, but we also
pay them performance based incentives for achieving particular
milestones having done the work. Clearly if they do not get to
those milestones they do not earn their performance based incentives,
in other words their fee which in effect is their profit. The
second element, of course, is the one of reputation. These companies
are looking to be favoured by the NDA as being competent people
to bid for this work when we put it to the market and clearly
if they have failed to deliver in the interim that must be a significant
impediment to their progress.
Q87 Mr Hoyle: So in reality there are
no penalties. What you do is you withhold the money until they
get it right, is it?
Dr Roxburgh: We can close these
contracts for convenience. In other words, if the performance
was that appalling we could actually bring the contract forward
and compete these sites earlier.
Q88 Mr Hoyle: So there are no penalties
that you can enforce by reducing the amount of money that will
be given when they reach that objective because of the timescale?
Dr Roxburgh: Yes. If they do not
get to the PBI point in the time and at the right cost then they
do not earn the profit.
Q89 Mr Hoyle: In most cases when you
have a contract there are penalties that companies have to pay
for not reaching it. What you are saying is that it will come
out of their profits because they have taken longer.
Dr Roxburgh: Yes.
Q90 Mr Hoyle: So there is no claw back
if they do not reach it?
Dr Roxburgh: Yes. If they exceed
the allowable costs that we set out for each site then we look
to their parent companies to pick up that disallowable element,
so any cost overruns over and above what we call the site funding
limit come out of the company's own pocket.
Q91 Mr Hoyle: I agree. I am just saying
there are no penalties built in. What you are saying is it will
come out of the profits somewhere along the line. Have you formed
a view as to how future M&O contracts will be structured?
Do you accept the argument that to rely wholly on site-specific
contracts will unnecessarily fragment the decommissioning and
clean-up effort and not be cost effective for very small sites?
Sir Anthony Cleaver: I think this
is an issue which you have already exercised with the incumbents
earlier this morning. Clearly the situation is that we start with
the number of sites that are individually licensed by the NII.
In that case they have given one licence to the UK Atomic Energy
Authority. As we go forward one of the things that we want to
consult on and determine the best approach to is what combination
of sites will make most sense. At one extreme the smaller sites
where there is less to be done are probably not going to be very
attractive for people to come in and compete and if competition
is the main driver to achieve innovation, which is what we believe
and is part of our fundamental philosophy, then it is important
to us that we do not end up with sites where there is no competition.
Obviously that would tend to suggest that in some cases it will
be appropriate to put several sites together to form a package.
At the other end of the scale, as you have heard, nearly two-thirds
of the overall nuclear civil liability lies at Sellafield and
if it were possible to find a way of splitting that so that one
was able to award more than one contract obviously that would
be an attractive proposition in terms of the best value for money
way forward. However, we are very conscious that our paramount
requirement is safety. We cannot trade off anything in terms of
safety. Consequently, if we were able to do that it would only
be as a result of extensive discussion with the regulators and
their satisfaction that to do so would not in any way impact on
the safety on the site. That is going to be a very complex issue.
Perhaps it would help if I expanded more generally because in
this and a number of other areas we have a major opportunity,
which is that we are asked from the beginning to be open and transparent
which in a sense is easy for a new organisation. We do not have
a history, we have not had any problems in the past so to speak
and we intend to live up fully to that promise. That being the
case, we are also intending to put out our strategic plan over
the next few months. We have the opportunity in that plan to ask
questions such as what do the community, our whole range of stakeholders
and what do potential contractors think would be the most appropriate
way to compete sites or combinations of sites. We have this opportunity
over this next two year period really to get ourselves into a
situation where everybody understands the way in which they can
proceed and why those decisions have been taken.
Q92 Sir Robert Smith: One of the other
things that differentiate the sites is that Sellafield has a four
year contract and other sites have two or three. Is that explained
by the complexity of the Sellafield site?
Sir Anthony Cleaver: Yes. I think
it was simply a view that it may well take longer to understand
both what is there and the optimum way of competing it and we
wanted them to understand that we would recognise that if it transpired.
Q93 Sir Robert Smith: One of the things
I raised earlier with UKAEA was the socio-economic responsibilities
that the NDA has and that is being passed on to its contractors.
There was a question mark over whether any additional funding
will follow that responsibility. Is that something you can answer
yet?
Sir Anthony Cleaver: It is not
something I can answer yet in the sense that we have not had the
chance to look at the socio-economic plans from each of the sites,
to discuss them with the stakeholders and then to determine where
we think more may be needed. We have the option given to us to
spend more money in that area. It will have to come out of our
overall budget and, therefore, £1 million spent there is
£1 million not spent directly on decommissioning. Given that
it is part of our remit, I think we will want to understand best
practice and see where there are opportunities perhaps to transfer
what has happened in one area to another. Perhaps I could focus
specifically on the two major sites. There are areas where I think
what has been happening in Caithness has some lessons for West
Cumbria and there are areas where what is happening in West Cumbria
has some lessons for Caithness. What we will seek to do is to
understand the approaches that have been taken. In West Cumbria,
for example, there is a West Cumbria Strategic Forum which does
enable people to take a holistic view of all the areas that impact
that community. The NDA can only really act in a sense as a catalyst,
but in a number of cases we can provide an impetus which other
parts of society can pick up.
Q94 Sir Robert Smith: Are you affected
by this concern people have that you do not have this 10 year
horizon that was envisaged when you were first dreamt of?
Sir Anthony Cleaver: Having worked
for organisations that had 10 year plans and never seen them come
to fruition as stated in year one, I do not think I am going to
worry too much about that. The way in which we are operating is
that for each of the sites we are creating a Life Cycle Baseline
in agreement with the site licence company. That effectively takes
the site right through to end of life, so in a number of these
cases it is significantly more than 10 years. Our role then is
to pull together all these Life Cycle Baselines and from that
to determine what needs to be done year by year. We will then
be focusing primarily on the first three years because that is
where one has a degree of certainty. If we saw that at some particular
point six or seven years out it looked very likely that there
would be a huge discontinuity then obviously we would have to
alert government to that and say that we see this on the horizon.
The most likely areas of discontinuity are perhaps ultimately
in terms of employment when a major operational facility comes
to an end. Whenever that is there is liable to be a major discontinuity
that one needs to deal with. The other major advantage we have
in this socio-economic area is that we are able in general to
look some years ahead. It ought not to be like a car plant closing.
We ought to be able to plan and do rather better for the communities
and that is where we see our prime socio-economic responsibility
lying.
Q95 Chairman: The figure for next year
for skills development is £100,000, which does not seem to
amount to very much. Is that because other people will be doing
the work? Is that a low priority of yours? What is the position?
Sir Anthony Cleaver: I think that
is just an initial sum put in there so that there is something
there for that. Again, we are encouraging the site licence companies
to continue the work that they are doing in this area. For example,
we have already been approached about the apprenticeship schemes
that are already in operation and said that we would expect those
to continue. Most of the funding in that context will come through
the contract. We also have had a lot of discussions about skills
and the skills requirements in the future and I would ask Ian
to comment on that.
Dr Roxburgh: We have made links
with Cogent, the Learning and Skills Council. I have spoken with
the Vice Chancellors of Manchester, Lancaster and UCLAM. This
goes back to the conversation you were having earlier about how
we accommodate the skills going forward. There is tremendous unanimity
of purpose there. As Sir Anthony said earlier on, we see our role
as being a catalyst in that but working principally through the
Highlands & Islands Enterprise Council and the North-West
Development Agency and we are keeping in regular touch with them.
I am much encouraged that all of our thinking seems to be going
in the same way.
Q96 Mr Evans: I want to go back to something
you said earlier, Sir Anthony, which was that you were open and
transparent and you had no history, but that has not stopped Greenpeace
having a go at you because they already think that there has been
a lack of consultation and that some of the proposals are done
deals. Do you think they are being fair?
Sir Anthony Cleaver: Obviously
not in the sense that we would not have done things that way had
we believed there was any unfairness in it. We are a very new
organisation. I came on board the day after the Energy Act and
we have built the organisation from there. We have had extensive
consultation on the annual plan. We had something like 52 responses
to that plan. Inevitably our first annual plan was largely the
product of BNFL and UKAEA and they were saying, "This is
the way that we expect to be able to operate in the next year,"
and we have been responding and putting that into the Near Term
Workplan form. As we go forward we will continue to consult very
widely and we will include Greenpeace and any of their colleagues
in that consultation. I think the challenge is to distinguish
between consultation and necessarily agreeing on everything. I
do not suppose it will be possible to get all the stakeholders
in total unanimity on every area, but I think we do have a responsibility
to make sure that everybody sees all our intentions in good time,
has the opportunity to comment and point out any concerns they
have and we have a responsibility to respond to that.
Q97 Mr Evans: So your door is always
open to Greenpeace and you have not made your minds up yet?
Sir Anthony Cleaver: No. We have
not made our minds up yet on any of the major issues. It would
have been inappropriate to do so.
Q98 Chairman: On the R&D issue, it
has been suggested that £20 million is a fairly small amount.
This is a wee bit like the question of skills development in some
respects. Do you envisage increasing the research budget or do
you still think that is the responsibility of potential contractors
or site managers?
Sir Anthony Cleaver: I think I
see it as both in a sense. There will be areas where the site
licence companies will have the skills and it would be appropriate
that they do the research directly relevant to the things that
they are doing. We have to be conscious that our remit is decommissioning
and it is research and development which is relevant to our remit
that we are empowered to fund. Where we see any gaps in research,
where we can see something that would be beneficial to our mission
that is not being covered through the site companies, then we
are empowered to fund that and we expect to do so, and it is part
of our specific responsibility.
Q99 Chairman: So the tramlines on which
you are travelling financially are sufficiently flexible to enable
you to do that?
Sir Anthony Cleaver: We believe
in the basis on which the NDA was set up, that there are huge
opportunities to make significant cost savings over time and we
expect them to have the freedom to use some of those savings in
ways that can help with R&D, for example.
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