£6bn nuclear decommissioning deal aborted as government settles claims with £100m

The energy secretary Greg Clark has disclosed government's out of court settlement with losing bidders of the 'flawed' tender process for a £6bn decommissioning contract, which will end nine years early in 2019. In a statement to the House of Commons, Clark said the Nuclear Decommissioning Authority (NDA) had withdrawn its appeal against a High Court ruling last year that it wrongly awarded the contract to Cavendish Flour, a joint venture between Cavendish Nuclear – a subsidiary of Babcock International – and the US Fluor Corporation.

Admitting no liability, the NDA has agreed settlement payments of £85m with Energy Solutions and £12.5m with Bechtel, to prevent costs from increasing further had the cases proceeded to court.

Clark also announced that an inquiry is being launched to investigate the 2012 tender process, to be led by the former chief executive of National Grid, Steve Holliday. This will take a 'cradle to grave' approach, looking at all stages of the contract procurement, award and operation since up to the decision to terminate the deal.

Cavendish Flour was awarded a 14-year contract worth £6.1 billion in September 2014, for decommissioning 10 redundant Magnox nuclear reactors and two research sites, which, with the Calder Hall reactor at Sellafield, formed the UK's first generation of nuclear plants. According to Clark, a 'consolidation' process then revealed a big disparity between the amount of work included in the tender and that which actually needs to be done. This is the reason given for termination of Cavendish Fluor's contract in two years' time.

The Holliday inquiry will look at at the conduct of the NDA and government departments, Clark said. Award of the NDA contract with Cavendish Fluor was approved by the then Department for Energy and Climate Change and the Treasury. The termination of the contract is no reflection on the performance of Cavendish Nuclear or Fluor, Clark said. Decommissioning work at the 12 Magnox sites will continue for the next two and a half years, during which time a new contract structure will be put in place for tendering the remaining work, led by the NDA's new chief executive David Peattie.

"This was a defective procurement, with significant financial consequences, and I am determined that the reasons for it should be exposed and understood; that those responsible should properly be held to account; and that it should never happen again," Clark said.