Nuclear Decommissioning Authority: Managing risk at Sellafield - Public Accounts Committee Contents

Conclusions and recommendations

1.  The lifetime plan for Sellafield may be more credible than previous plans but it is still not clear that it is sufficiently robust. The plan has not been sufficiently tested against benchmarks and there are a number of uncertainties yet to be resolved, for example regarding the character of the waste in the legacy ponds and silos, which have a potentially significant impact on costs and schedules. Under current plans the design and build of a geological disposal facility for long term storage of hazardous waste is expected to take another 27 years to 2040. It seems implausible that this critical project cannot be expedited. The Authority should develop and apply benchmarks to assess the robustness of the lifetime plan and challenge existing assumptions on costs and timescales for critical projects; and rigorously examine the timetable for the geological disposal facility.

2.  Basic project management failings continue to cause delays and cost increases to critical risk reduction projects and programmes. The Authority has missed regulatory targets but expects to start retrieving waste from the 'legacy' cooling ponds and storage silos in 2015. To help ensure there is no further slippage to timetables and costs are kept under control, the Authority should invite the Major Projects Authority to review the most critical and largest projects, and should report publicly on the progress of key risk reduction programmes against plans and budgets.

3.  Because of the uncertainty and delivery challenges at Sellafield, taxpayers currently bear almost all of the financial risk of cost increases and delays. The use of cost reimbursement contracts for Sellafield Limited and its subcontractors means the financial risks are borne by the taxpayer. This contracting approach may be the best option where costs are very uncertain. However, as project and programme plans firm up and the lifetime plan becomes more robust, it should be possible to move away from cost reimbursement contracts. The Authority should determine how and when it will have achieved sufficient certainty to expect Sellafield Limited to transfer risk down the supply chain on individual projects and then to reconsider its contracting approach for the site as a whole.

4.  The level of 'savings' achieved at Sellafield is central to the Authority's decisions on contract renewal and the performance fee paid out each year, but such savings figures can be overstated. Nuclear Management Partners claim to have achieved efficiency savings worth almost £700 million. The Authority is verifying these savings but National Audit Office reports have shown that, across government, claimed savings figures are often overstated. The National Audit Office should review the basis on which savings have been assessed and provide assurance to the Committee that the level of savings achieved at Sellafield has been measured and reported accurately.

5.  The Authority has not been able to demonstrate what value it is getting for the payments made to Sellafield Limited. In 2011-12, the Authority paid out £54 million in fees, £17 million for 'reachback' staff and £11 million for executive staff seconded from Nuclear Management Partners. Sellafield Limited also awarded contracts to Nuclear Management Partners' constituent companies worth some £54 million in 2011-12. That means, in effect, that those who let contracts awarded their own constituent companies contracts, which raises concerns about fair competition and value. The Authority should ensure all payments are linked to the value delivered and that payments are not made where companies have failed to deliver. It should also routinely provide assurance on the operation of its controls over payments for Nuclear Management Partners' constituent companies.

6.  It is not clear what wider economic benefits have been achieved from the enormous quantity of public money spent at Sellafield. The Department for Business, Innovation and Skills, the Department of Energy and Climate Change, the Authority and Sellafield Limited all provide support for the development of the nuclear supply chain. In addition, the £1 billion spent annually by Sellafield Limited on procurement ought to help create jobs, build skills and drive sustainable economic growth in the region and the UK. The Authority and Sellafield Limited should set out what added value can be achieved from taxpayers' investment in Sellafield, clarify their roles in delivering this and set performance targets for contributing to the development of the regional and national economy and workforce.

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© Parliamentary copyright 2013
Prepared 4 February 2013