Nuclear Management Partners (Sellafield)

Tom Greatrex Excerpts

Tuesday 13th January 2015 Commons Chamber

[Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)]

(Urgent Question): To ask the Secretary of State for Energy and Climate Change if he will make a statement on Nuclear Management Partners and Sellafield.

[The Secretary of State for Energy and Climate Change (Mr Edward Davey)]

I thank the hon. Member for Rutherglen and Hamilton West (Tom Greatrex) for his question.

As I have informed the House today through a written ministerial statement, the Nuclear Decommissioning Authority has today announced a change to its commercial model at Sellafield, its largest and most complex site.

Dealing safely with the UK’s nuclear legacy is a key priority of my Department. It is important for the communities involved and for the future of nuclear power in this country. We work closely with the Nuclear Decommissioning Authority and its contractors to ensure that decommissioning is undertaken as effectively as possible, but as we are guardians of the public purse, we must also make sure that clean-up is done in a way that delivers the best value for money.

Over the past year, the NDA has been conducting a thorough review of its business model in the unique context of Sellafield to consider what contractual model might best deliver improved performance and value for money. In April last year, we endorsed the Nuclear Decommissioning Authority’s decision to roll the current parent body organisation contract—PBO—forward into the second term to ensure that the progress made in the first five-year term could be built on. The complexity and technical uncertainties at Sellafield are unique and need a management structure best suited to meeting the specific challenges faced by the site. Sellafield is the most complex industrial site in Europe. It is home to some of the oldest nuclear facilities in the world—the legacy ponds and silos that were constructed in the 1940s and ’50s—as well as the UK’s plutonium stockpile.

Because of these unique challenges, Sellafield is less well suited to the transfer of full site-wide responsibility to the private sector via a PBO structure. The NDA has now recommended to Government that management arrangements are simplified. In future, the private sector will be retained as suppliers of Sellafield Ltd rather than as owners of the site. Sellafield Ltd will remain a publicly funded company owned by the NDA. The team will be appointed and governed by a newly constituted board of the site licence company. The new model will, in due course, see a strategic partner appointed by Sellafield Ltd to strengthen the programme management and commercial capability at the site, as well as playing a key role in managing capital projects and contracts. This approach is recognised as best practice in other major projects such as Crossrail and the Olympics.

The NDA and Sellafield Ltd will manage the transition to the new arrangements, which is expected to take about 15 months to complete. This will be done in close co-operation with work force representatives, Nuclear Management Partners, the supply chain, the regulators, and the local community. The continued safe and secure operation of the Sellafield site will remain the overriding focus during the transition, and it will remain so under the new structure. This new structure is the best way to ensure that safety and value for money are pursued in tandem.

[Tom Greatrex]

I thank the Secretary of State for his answer. He will appreciate that this an issue of very serious concern for the 10,000 dedicated, professional and highly valued workers employed at Sellafield and for all of us who, as taxpayers, have just seen a £20 billion public procurement decision partly reversed. I want to ask him a few specific questions on the details of his decision and his statement.

In 2013, just 15 months ago, the right hon. Member for Sevenoaks (Michael Fallon), then a Minister in the Secretary of State’s Department, allowed the Nuclear Decommissioning Authority to continue into a five-year contract extension for Nuclear Management Partners. This was despite a National Audit Office report from November 2012 that concluded that the contract led to

“poor project design and delivery by Sellafield Limited and weaknesses in the”

Nuclear Decommissioning

“Authority’s oversight.”

Why was that advice ignored, and why is this decision now being made today? Is it because, in reality, the situation was getting worse and not better?

The Secretary of State has suggested that in 2013, at the review point, the Government accepted the problems with the NMP contract but did not have an alternative solution prepared. What is the point of a review point if one is unable to consider other options? Will he illuminate for the House what termination fees apply to the cancellation of this contract and whether those fees could have been recovered at any stage? What assessment has his Department made of the risk of legal action from NMP to recover further funds?

Last year, it was revealed under a freedom of information request that in September 2013 KPMG completed a 277-page internal review of the contract for the NDA that was highly critical. To quote the Public Accounts Committee, it found that

“there was a mis-alignment between the objectives of NMP and the…Authority’s commitment to deliver value for money for the taxpayer, and…potential conflicts of interest associated with contracting by Sellafield Limited with NMP’s affiliate companies.”

Will the Secretary of State confirm how much was spent on that advice from KPMG by the NDA, which reports to him—advice that was then ignored and, it seems, is now being adopted?

In February last year, the PAC reported that even after the contract was extended with NMP, it

“has not provided the clear leadership, strong management and improved capabilities needed to deliver the performance required at the site.”

Fifteen months on from having overseen that contract extension, why have the Government come to the conclusion that it was the wrong decision? Will the right hon. Gentleman describe the immediate arrangements for the 10,000 people employed at Sellafield, and tell us what impact today’s decision will have on the running of other sites? Will this create the need for a review of the Nuclear Decommissioning Authority’s other operations, where similar contracts that might give poor value for the taxpayer could still be in place?

Can the Secretary of State clarify why this announcement was extensively trailed in the press last night and this morning, rather than being made in the first instance before the House today? Is it not the case that what we have seen today is a frantic U- turn, an abandonment of the extension of a contract and the reversal of a decision that should probably never have been taken in the first place? Does the Secretary of State not appreciate that such casual disregard for the evidence and conclusions of the National Audit Office and the Public Accounts Committee has resulted in wasted time and public money and may risk a loss of confidence in the important decommissioning work at Sellafield? Does he acknowledge that insufficient care and due regard were taken by the Ministers in his Department who have ultimate responsibility for these matters? Does this not eloquently make the case against part-time, part-time energy Ministers and is it not now time that the Secretary of State got a grip, stopped playing stupid inter-coalition games and got his dysfunctional and misfiring Department into shape?

[Mr Davey]

The hon. Gentleman was doing quite well until his peroration. I will explain why it was a big political mistake for him to go down that route, but first I shall answer his specific questions, because they were important. He began by praising the staff, and I agree that they deserve huge praise because they are tackling one of the most difficult and dangerous jobs in Britain today. I can confirm that their terms and conditions are not affected by this at all. There will be full discussion with work force representatives. At this point, I should like to pay tribute to the hon. Member for Copeland (Mr Reed), who has worked assiduously on this issue.

The hon. Member for Rutherglen and Hamilton West asked why we allowed the contract continuation in 2013, given the findings in the National Audit Office’s report of weaknesses in it. The Nuclear Decommissioning Authority recommended that the contract be continued, and we had to endorse that recommendation. It was not a question of approving it; we endorsed it. At that time, when I looked at the structure that we had inherited from the last Government, I was concerned about the model. It was the model that I started asking questions about, and it is the model that has been reviewed. I have already explained a little about the review process; it is the model that we feel needs changing for the long term.

The hon. Gentleman asked why there was no alternative solution. The contract renewal process looked at the performance, which had not been good enough, but it is worth putting on record the fact that the performance of Nuclear Management Partners since the contract renewal has improved significantly, so this decision has not been taken on account of the performance of NMP. If we look at its performance over the past year, we can see that it has delivered on things that no one has delivered on for years. For example, the sludge-packing plant, which is needed to take out the toxic sludge from B30—a pond that has been there for decades—has now been commissioned and is ready for operation. That is a big achievement and I pay tribute to NMP for that. The decision has not been taken on account of performance; it has been taken because Ministers and the NDA questioned the model that we inherited from the last Government. We then put in place a proper review of that model.

The hon. Gentleman asked about the termination fees, and I can tell him that they are very low. The mechanisms under the current contract allow for termination and appropriate fee awards of less than 1% of the annual fee, and those mechanisms will be adhered to. Of course, during the transition, NMP will earn the fees that it would normally earn under the existing contract while it is still carrying out the work, but the termination fee is very small.

The hon. Gentleman also asked about the cost to the NDA of the KPMG report. I do not have that figure with me but I would be happy to write to him about that. He also mentioned the parent body organisation model that we are getting rid of at Sellafield, and asked whether we should get rid of it elsewhere. Our argument is that we should not. Let me explain why Sellafield is different.

At other nuclear power plants that are being decommissioned, such as Dounreay, the PBO model is working well. At Dounreay and other decommissioning sites, it is easy to specify the performance, the activities and the outcomes that are required. Those requirements are more certain and clear, and therefore easier to contract for. At Sellafield, because it is so complicated and because of the huge uncertainties about some of the materials that they are trying to clear up, it is very difficult to do that. Those huge uncertainties make the risks of contracting much more difficult, which is why the PBO structure needs to go there but not elsewhere.

The hon. Gentleman asked why the announcement was trailed in the press. I am afraid that it was not, and I am pleased that it was not, but there was some sort of leak. I do not know where that came from. He then suggested that this was a frantic U-turn, which is complete rubbish. We have been working on the issue carefully and diligently for some time. The NDA set up a review of the model, which I think was required. It made recommendations to officials who looked at them and made recommendations to Ministers and we have been looking at them for some time. Indeed, I asked questions when I got the initial recommendations to ensure that during the transition any risks were properly mitigated and I was not prepared to take the decision until I saw a proper risk mitigation plan for the transfer.

Ministers have been involved in the process, and given that the hon. Gentleman made a political point at the end of his peroration, let me make a political point back to him. These contracts and this model were drawn up under the previous Labour Government. The contract came into effect when the Leader of the Opposition was doing my job, so the hon. Gentleman should be addressing his questions about the model and the contract to the Leader of the Opposition, his own party leader. Once again, we have had to clear up the mess left by the Labour party.