Nuclear Decommissioning Authority: risk reduction at Sellafield Contents

2Governance, assurance and realising socio-economic benefits

Governance and assurance

16.The Department for Business, Energy & Industrial Strategy sponsors the NDA and is accountable for the NDA’s performance across the 17 sites under its care, including how well it is progressing with reducing risk at Sellafield. The Department has delegated its oversight of the NDA to UK Government Investments (UKGI), the government’s centre of expertise in corporate governance and corporate finance. The Department inherited this relationship from the former Department of Energy & Climate Change following the machinery of government changes in July 2016.36

17.UKGI is the main point of day-to-day contact between the government and the NDA.37 UKGI told us that its main role is to support the Departmental team that works with the NDA (the sponsorship team) based on its experience in corporate governance and financial oversight. UKGI told us it advises the Department on board appointments, remuneration and budget setting; helps the NDA navigate the system of central government approval for business cases; and reports to the Department on the NDA’s performance.38 It does not, however, oversee the progress individual major projects or carry out any assurance of the NDA’s business cases or the information reported by the NDA to the Department.

18.Despite being responsible for monitoring the NDA’s performance and key risks against targets, UKGI does not have expertise in major project management.39 The NAO found that stakeholders have said they found the role of UKGI in overseeing the NDA to be unclear.40 We are also concerned that there is no clear or shared understanding of what constitutes value for money in nuclear decommissioning between the NDA, the Department and UK Government Investments. This, combined with a lack of clarity over roles and responsibilities for oversight, makes it challenging for us to hold government to account.41

19.UKGI told us that it tries to minimise overlap with the Department’s work in overseeing the NDA, but it acknowledged that the Department could perform the role that it carries out.42 We asked the Department whether its sponsorship team had the appropriate skills and capacity to effectively oversee the NDA’s work, and in particular whether they had the required expertise in nuclear operations and major project management. The Department told us it had access to support from UKGI, the Infrastructure and Projects Authority and commercial experts within government should it require specialist support. We remain concerned that the Department’s sponsorship team overseeing the work of the NDA does not have sufficient expertise and capacity, especially in nuclear operations.43

20.The Department acknowledged that the governance system that supports and oversees the NDA’s work is complex. The NDA told us that its Chief Executive spends a significant amount of his time coordinating with various government stakeholders, and that the complex structure means the NDA has had to report the same performance information to more than one body, creating inefficiencies.44 The Department accepted that it has been slow to revise this governance structure, and UKGI’s involvement. It attributed this lack of progress in part to ongoing reviews related to the NDA’s failed Magnox contract.45 The Department and the NDA nonetheless agreed that a “tailored review” (an established cross-government process for reviewing the capacity and governance of public sector organisations) could identify ways to simplify the governance of the NDA to support it to deliver its mission more effectively.46

Strengthening assurance

21.In 2017, we examined the NDA’s management of the Magnox contract to manage the decommissioning work on 12 of the NDA’s 17 sites. We concluded that the NDA had a staggeringly inaccurate understanding of the state of its Magnox sites before it let the contract, and that this directly contributed to the early cancellation of the contract.47 We were concerned that the gaps in the NDA’s ability to carry out due diligence of the work completed on its sites extended to Sellafield. The latest NAO report found gaps in the NDA’s assurance of major projects, including relying on Sellafield Limited’s immature and under-resourced assurance team.48

22.The NDA told us that in the last few months it has set up a new sub-committee to its board, tasked with reviewing the performance of major projects. It added that had this sub-committee been in place earlier, some of the issues with major projects could have been identified earlier, and some projects could have been cancelled at an earlier stage, which would have saved taxpayer money. The NDA accepted that it has more work to do strengthen its assurance of performance across its estate before it takes on the direct management of the Magnox sites in 2019. Furthermore, we are concerned that the Department and UKGI do not validate or assure any of the NDA’s performance information. We also found that they do not sufficiently challenge the NDA on important issues, such as on the evidence behind the perceived constraints holding back faster progress at Sellafield.49

Socio-economic benefits

23.The Energy Act 2004 requires the NDA to promote socioeconomic development and to work with local communities. We examined the NDA’s progress in 2013 and found that it was not clear what wider economic benefits had been achieved from the enormous quantity of public money that has been spent at Sellafield. We recommended that the NDA and Sellafield Limited set out what additional value could be created from taxpayers’ investment in Sellafield and set performance targets for contributing to the development of the local, regional and national economies.50 The Department agreed with the Committee’s recommendation,51 and subsequently published its People and Skills Strategy to describe its plans to maximise socio-economic returns.52

24.Last year, the NDA spent £10 million on socioeconomic development activities. However, the NDA accepted that its engagement with schools in the area is limited, despite recognising that education and pathways into developing skills and jobs in the nuclear industry are within its obligations. The NDA also told us that it is trying to encourage local suppliers into its supply chain by, for example, simplifying processes for applying for contracts to work on the site. It asserted that it also supports building nuclear skills through the apprentice programme and through the reskilling of some workers. The NDA acknowledged that it could be doing more to encourage local small enterprises, and that is looking at supporting more local schools.53

25.The NDA and Sellafield Limited have an opportunity to lead and accelerate the development of the UK’s nuclear sector, creating skills, jobs and economic growth, especially related to the nascent new nuclear programme. The NDA accepted that does not yet do enough to maximise the potential socio-economic benefits of its expenditure on nuclear decommissioning.54

36 Q 129, C&AG report, paras 5, 1.2, 1.6–1.7, figure 3

37 C&AG report, para 1.8

38 Qq 120 – 121

39 Q 121

40 C&AG report, para 20

41 Q 52, C&AG report, para14

42 Q 121

43 Qq 22 – 24, 112 – 118

44 Qq 126, 127

45 Qq 128,129

46 Qq 126 – 128

47 Committee of Public Accounts, The Nuclear Decommissioning Authority’s Magnox contract, Twenty-First Report of Session 2017–19, HC 461

48 C&AG report, para 15

49 Q93

50 Committee of Public Accounts, Nuclear Decommissioning Authority: Managing risk at Sellafield, Twenty-fourth Report of Session 2012–13, HC 746

53 Qq 95–98

54 Q 95

Published: 31 October 2018