"Government needs firmer grip on Sellafield nuclear challenges" says PAC report

- NDA has not systematically reviewed why major projects keep running into difficulties

- Despite some progress, expected cost overruns stand at nearly £1 billion

- BEIS still to make decision on future of plutonium stockpile

Please find attached the embargoed Report noted above.

REPORT SUMMARY

The Nuclear Decommissioning Authority (NDA) and Sellafield Limited have recently met significant milestones with reducing risk at the high hazard facilities at Sellafield, the NDA’s largest and most hazardous site.

The NDA and Sellafield Limited have also made progress with reducing delays and expected cost overruns with 14 major projects at Sellafield, which have a combined lifetime cost estimate of £6 billion.

While we recognise that there has been progress since this Committee last reported, there is still a long way to go and the NDA cannot afford to be complacent.

Most major projects at Sellafield are still significantly delayed, with expected combined cost overruns of £913 million. The NDA has not systematically reviewed why these projects keep running into difficulties, or analysed properly the constraints it says prevent them from making faster progress. 

Until this work is completed, we remain sceptical about its long-term strategy to decommission Sellafield.

Also, despite this Committee’s recommendation nearly five years ago, the Department for Business, Energy & Industrial Strategy has still not decided what to do with the plutonium stockpile currently stored at Sellafield.

Given the scale and unique challenges at Sellafield, the NDA must have a firm grip of the work that takes place on the site.

We saw that this was not the case with the NDA’s recently failed contract to decommission its Magnox sites, and we are no more convinced of its current ability to monitor and challenge progress at Sellafield. 

At the same time, the Department for Business, Energy & Industrial Strategy must be more streamlined and effective in its oversight of the NDA’s performance if it is to hold it properly to account.

COMMENT FROM PAC DEPUTY CHAIR SIR GEOFFREY CLIFTON-BROWN MP

“This report is critical of the Nuclear Decommissioning Authority’s performance. The Government’s oversight of the NDA’s performance could and should be much better, particularly on projects at Sellafield that cost a considerable amount of public money.

“This report follows the Committee’s earlier report into the NDA’s Magnox contract. The NDA failed in both the procurement and management of this contract and cost the taxpayer £122 million.

“In short, BEIS needs to seriously get a grip on its oversight of nuclear decommissioning in this country.”

CONCLUSIONS AND RECOMMENDATIONS

The NDA has recently made progress with reducing risk at Sellafield, but most major projects are still delayed and are expected to cost more than originally planned. It is still difficult to assess overall progress objectively. Since 2015, the NDA has made progress with retrieving waste from Sellafield’s most hazardous legacy facilities, the four legacy ponds and silos. For example, it recently began retrieving waste from one of the ponds for the first time in decades, and it expects to complete retrieval work on one of the silos six years earlier than planned. But the NDA cannot convincingly explain how these improvements are possible when the work on all four legacy ponds and silos has been behind schedule in at least three of the last six years. In terms of major projects, the NDA has made progress in reducing overall delays and cost overruns since we last examined this in 2015. However, the NDA still expects major projects to cost over £900 million more than originally budgeted, and delays of over 13 years. In 2015, the NDA agreed that it needed to set out clearer performance information – what it calls ‘mission reporting’ - that would enable more effective external scrutiny. However, more than three years on, the NDA has not completed this work. Neither the Department nor UKGI sufficiently challenge the NDA to explain cost escalations and delays, nor do they review performance over the medium term (a 3 to 5 year time horizon). Given the long timescales involved, this would provide a reasonable assessment of progress. 

Recommendation: Within three months, the NDA should write to the Committee explaining its plan for completing its work on mission reporting and the Department should commit to publishing a comprehensive assessment of the NDA’s performance every 3 years.

The NDA and Sellafield Limited have not analysed the constraints they say prevent faster risk reduction at Sellafield.  The NDA considers that three factors constrain its ability to make faster progress at Sellafield: the complexity of the work, the physical congestion of the site, and workforce productivity. Sellafield Limited is developing a new masterplan for the site that it says takes into account site congestion. However, the NDA and Sellafield Limited acknowledge that they have not analysed these perceived constraints to understand how they affect the pace of, and options for, decommissioning.  Without rigorously testing these constraints, they are not best placed to set the right strategy for decommissioning the site and be sure that they are working to reduce risk as quickly as possible.

Recommendation: The NDA should, with Sellafield Limited, analyse the impact these perceived constraints have on further progress at the site. It should write to the Committee within six months and explain how it is going to use this new understanding in preparation for the next spending review, the upcoming revision of the Sellafield performance plan and the NDA’s new strategy.

The NDA has not identified the lessons from project cancellations and past mistakes. The NDA has cancelled three projects since 2012 after spending £586 million of taxpayers’ money on them. Two of the projects, the silo direct encapsulation project and the box transfer facility were cancelled after the NDA projected a combined cost increase of £2.1 billion and a combined delay of nine years. It told us it decided to cancel these projects because it found more cost-effective ways to reduce risk faster. Sellafield Limited and the NDA told us that the Office for Nuclear Regulation supported their work to find innovative, more cost-effective and faster ways of completing work. For example, the NDA cancelled a project to design highly active liquor storage tanks after it says the regulator agreed to it using two tanks, previously kept empty to provide reserve capacity, in place of building new tanks. However, the NDA has not yet demonstrated that these new approaches will generate savings to the taxpayer. Without evaluating these cancelled projects, we remain sceptical of the NDA’s claims that it is getting better at learning the lessons from the past. 

Recommendation: The NDA should write to the Committee within three months to explain how it will evaluate whether its new approach will generate savings to the taxpayer, and how it is learning the lessons from past mistakes.

Given the complexity, cost and long-term nature of the work at the site, the NDA’s and the Department’s assurance is not providing appropriate oversight of, and challenge to, Sellafield Limited’s performance. We are concerned, particularly after the recent failure of the NDA’s Magnox contract, that the NDA’s oversight of the work performed at its sites is not fit for purpose. It is vital that the NDA has a clear understanding of how well individual projects and programmes are progressing at Sellafield. The NDA acknowledges it has more to do to strengthen its understanding of the work taking place at the site, and strengthen the team responsible for assuring the performance information it receives from Sellafield Limited. The NDA has set up a new sub-committee to its board, tasked with reviewing the performance of major projects. The NDA considers that, had the new structure been in place earlier, some of the problems with major projects could have been identified earlier, and some projects could have been cancelled at an earlier stage. The Department and UKGI do not validate the information they receive from the NDA or sufficiently challenge its plans to reduce highest risks at Sellafield. For example, neither UKGI nor the Department have challenged the NDA to provide evidence of the perceived constraints standing in the way of faster progress at Sellafield.

Recommendation: The NDA and the Department should write to us to set out clearly how assurance and oversight will be strengthened. They should do this within 6 months of the publication of the government’s independent inquiry into the failed Magnox contract.

Central government’s oversight of the NDA is not holding the NDA to account effectively. The Department does not currently have sufficient expertise and capacity in nuclear operations and we are unconvinced of its current capabilities to oversee major projects. UKGI told us its role was to support the Department’s sponsorship team by maintaining oversight of the NDA’s performance. We were not convinced that UKGI, an unnecessary layer, has the right skillset to enable to it to perform this task effectively, or why this function cannot be performed by a better resourced sponsorship team within the Department. The complex system for oversight of the NDA has the potential to hinder the very progress that it is meant to support at Sellafield and cause inefficiencies. For example, the NDA’s Chief Executive spends a significant amount of his time coordinating with various government stakeholders and regulators, and reports the same information to more than one body. The Department and the NDA agree that a ‘tailored review’ will identify better ways to oversee and govern the NDA.

Recommendation: Once the tailored review is complete, the Department should write to the Committee setting out the findings and recommendations of the review, and its plan for implementing them. In particular, in conjunction with the Cabinet Office they should consider whether UKGI is playing any useful role. In its response to us, the Department must set out in detail how it intends to solve the problem. In particular, in conjunction with the Cabinet Office they should consider whether UKGI is playing any useful role.

We are not convinced that the NDA is achieving the wider economic benefits that would help justify the vast amounts of public investment at Sellafield. In 2013 we reported that it was not clear what wider economic benefits had been achieved from the enormous sums of public money spent at Sellafield. We still think the NDA does not yet generate all the local, regional and sectoral socio-economic benefits which it could. The NDA has limited engagement with schools in the area, even though it recognises that education and developing pathways into skills and jobs in the nuclear industry is within their obligations under the Energy Act 2004. The NDA told us that it recognises it could be doing more to support small businesses, and that it has plans to extend its involvement with schools. And with the nascent new nuclear programme in the UK, the NDA and Sellafield Limited have an opportunity to lead and accelerate the development of the country’s nuclear sector, maximising the impact on skills, jobs and economic growth.

Recommendation: The NDA should, within 12 months, strengthen and publish its socio-economic strategy, outlining the opportunities for the wider economy and how it will realise those opportunities.

The NDA’s programme to deal with the plutonium stockpile in the near term is late and its costs are increasing. The Department is no closer to understanding what to do with plutonium in the long term. Sellafield is home to 40% of the world’s global stock of plutonium. The Department is responsible for setting the government’s policy for dealing with plutonium in the long term. In 2014, we reported that the Department did not have a strategy in place for how to deal with the plutonium stored at Sellafield. The Department has still not decided between the two options available to it: readying the plutonium stockpile for long-term storage in a geological disposal facility (that has yet to be constructed); or reusing it as fuel in new nuclear power stations. In the meantime, the NDA is responsible for ensuring that the plutonium currently at Sellafield is stored safely and securely. It has a programme in place to do so, which consists of projects to repackage plutonium canisters for long-term storage until the Department decides what to do with them. However, the NDA has recently discovered that some of the plutonium canisters have been decaying faster than expected. This concerning development is made worse by the fact that the NDA’s project to repackage these canisters is at least two years late and expected to cost over £1.5 billion, £1 billion more than it first expected. The NDA told us that it has put in place a series of contingency arrangements to manage these decaying canisters. But these are short-term fixes for a long-term problem and the Department has yet to set out clearly what its strategy is and the associated costs to the taxpayer.  

Recommendation: Within six months, the Department should write to the Committee, setting out its plan for deciding on the long-term use of plutonium. The NDA should also write to the Committee explaining fully its contingency arrangements to manage plutonium at the site, and the reasons behind cost escalations and delays.