3.1 In September 2013 the Nuclear Decommissioning Authority (the Authority) announced that it would continue the contract with Nuclear Management Partners into its second 5-year period. It acknowledged to the Committee of Public Accounts that performance had been worse than expected, and explained that with the Department's agreement it had extended the contract with Nuclear Management Partners because it considered this was the best option available at the time. The Authority told the Committee that in reaching this decision it had explored two alternatives: to re-let the contract; or to dispense with the parent body and operate with Sellafield Limited as a subsidiary of the Authority. In addition, the Authority stated that it could use the 'termination for convenience' clause in the contract at any time.
3.2 In its February 2014 report, the Committee concluded that "(t)he Authority has not demonstrated why, given the lack of risk transferred to (Nuclear Management Partners) this 'parent body' arrangement at Sellafield provides value for money". The Committee recommended that the Authority,
"should set out how it might transfer more of the delivery risk to contractors under its existing arrangements and how it will ensure that its alternative arrangements are viable to enable it to terminate the current contract should performance continue to prove unsatisfactory".
In its response to the Committee's recommendation, the Authority stated that it has "viable alternatives to the current contractor, contract and PBO model. These alternatives will be maintained and developed further during 2014".
3.3 In March 2014 the Authority began a strategic review of the delivery arrangements, because it recognised that the parent body organisation model, while beneficial in the early days, was no longer providing value for money at Sellafield. The stated objective of the review was to:
"identify the business model for the operation of Sellafield Limited that best secures the outcomes of safety, expedited remediation of the high-hazard facilities and value for money (including risk transfer)".
3.4 The Authority's review included:
• clarifying the success requirements;
• research and interviews with stakeholders to identify opportunities for improvement;
• developing hypotheses about the causes of poor performance; and
• reviewing delivery models used on major programmes in the public and private sectors and the nuclear and other sectors.
3.5 After assessing a long-list of ten delivery model options, the Authority reviewed in detail a short-list of three:
• Option 1: retaining the parent body organisation model with Nuclear Management Partners remaining as the parent body, but with steps taken to improve performance;
• Option 2: retaining the parent body organisation model, but holding a competition for a new parent body with a modified contract to help improve performance; and
• Option 3: a 'market-enhanced site licence company', with the Authority taking back ownership of Sellafield Limited from Nuclear Management Partners, and Sellafield Limited contracting with a strategic partner to bring in the required private sector expertise.
3.6 The Authority took steps to gain assurance about the quality of its strategic review. For example, it used a panel of industry experts to provide advice about the options being considered, and in December 2014, the Major Projects Authority carried out a Project Assessment Review of the process. The Major Projects Authority review found that the case for change had broad support and that the Authority had managed its stakeholders well. The Major Projects Authority also stated that additional assurance about the Authority's role in managing the transition could strengthen the process further. The Major Projects Authority and the Major Projects Review Group plan to review, in March 2015, the Authority's approach to invoking the 'termination for convenience' clause in its contract with Nuclear Management Partners, and the readiness of the Authority and Sellafield Limited to proceed with transition, with particular attention to the implementation plans, the risk strategy and the realisation of benefits.