Nuclear decommissioning is changing. Despite high barriers to entry, clients insist this specialist world is not a closed shop.
- Perfecting the procurement process
- Supplying Sellafield
- Long-term work available
- The knowledge required
- Challenging environment
The nuclear decommissioning sector never stands still, with the estimated clean-up costs, the technology used and the approach to procurement all liable to constant flux.
The total bill for cleaning up Britain’s 17 nuclear sites has increased in each of the last five years, rising from £45.1bn in 2009 to almost £70bn this year, according to the Nuclear Decommissioning Authority, the public body responsible for the UK’s civil nuclear legacy.
Part of the reason for the cost escalation, as one supplier puts it, is that “nobody can be sure what the waste comprises – nor how to deal with it”.
This can mean an uncertain existence for the supply chain.
Last month, scientists at Sellafield hailed a breakthrough, whereby intermediate-level nuclear waste, previously destined for processing in an expensive new encapsulation plant, will instead be stored much more cheaply with concrete grout inside steel boxes.
The NDA was understandably happy to trumpet these “huge savings to the taxpayer”.
However, there may have been a mixed reception to the news at AMA, the Atkins-Mace-Areva joint venture that was appointed to build the £1bn Silos Direct Encapsulation Plant in April 2014 – which is no longer required.
And in January, Nuclear Management Partners, a consortium of URS, Amec and Areva, was stripped of its £22bn, 17-year contract to run Sellafield, in favour of what the NDA calls “new, simplified management arrangements”.
Both episodes illustrate how priorities can change in the nuclear decommissioning sector as more detail is uncovered about the waste, better disposal methods are devised and clients decide on more efficient ways of working with their supply chain.
Perfecting the procurement process
Next year will see the two biggest clients in the industry – Sellafield Ltd and Magnox – introduce significant changes in their approach to procuring construction suppliers.
Magnox, with an annual budget of over £600m for its 12 nuclear sites, is making the biggest changes.
Historically, the organisation has left it to individual sites to procure construction services – which total about £150m each year – but in a bid to improve efficiency and productivity, it is now centralising its buying functions.
Magnox head of procurement Andrew New describes the approach as “programmisation”.
“Historically, we had 12 different procurement teams, and 12 different project management teams, and we realised there was a lot of duplication of roles across our sites,” he says.
“Also, the procurement decisions haven’t always recognised the differences between specialist engineering – activities like waste handling or ponds – and construction, such as new buildings, refurbishments and modifications, providing temporary works and access, demolition.
“So about a year ago, we started making changes to the business. This is ‘programmisation’, whereby similar categories of work are banded together across all Magnox sites.
“These work programmes are then centrally managed and delivered, allowing a strategic and common approach to be taken to planning and procurement and project management.”
Magnox has begun to see benefits from the approach, according to Mr New.
“We have to challenge ourselves, and all suppliers have to prove to us they will deliver value, otherwise we will go out to the market”
Andrew New, Magnox
“Construction is definitely an area in which we can improve, and the category-led approach to scaffolding and insulation spend is already delivering value through better relationships and shared innovation among Magnox and the supply chain.”
He acknowledges that the change will see a rationalisation of suppliers.
“We have to challenge ourselves, and all suppliers have to prove to us they will deliver value, otherwise we will go out to the market,” Mr New says.
“And we stress that we are open to new suppliers.”
Nuclear Decommissioning Authority annual budget (2015/16)
Magnox sites: £602m
Other sites: £151m
Other costs (e.g. fuel, transport): £402m
Income (eg reprocessing and fuel management services): £1.22bn
More than 70 per cent of Magnox’s construction spend currently goes through frameworks.
“That solution is absolutely right but we need to be open to different approaches and ways to deliver value,” Mr New says.
“We are currently planning the construction of up to five intermediate-level waste storage facilities, with an approximate construction value of £7m each.
“These are steel structures, frame and cladding, with concrete base and large-scale cranage capabilities for moving the waste. The waste is stored in reinforced concrete boxes, each 6 cu m in size.
“We are looking at different procurement options; we could look at design and build, or a lump-sum contract. It depends on what the best value is.”
As with Sellafield, another procurement consideration for Magnox is support for local businesses. “We need to look at our impact on the local economy,” Mr New says. “We need to look at our impact on the local economy,” Mr New says.
“Suppliers will need to build their business case around that – but each site is different, we don’t want generic solutions across all sites. The key is whatever gives us value and supports local SMEs.”
Magnox will complete its restructuring and will be delivering all projects under the programmisation approach from this time next year, Mr New adds.
Sellafield is also looking to tweak its procurement.
Helen Fisher is head of socio-economics at Sellafield Ltd and is behind an event planned for February 2016 that aims to change the way main contractors (referred to as tier two suppliers) manage their supply chains (referred to as tier three and tier four suppliers).
Over two thirds of Sellafield’s near-£2bn annual budget goes out to the supply chain, and Ms Fisher is keen to see more of that spent locally.
“We want our tier two suppliers to open up their doors to more companies further down the supply chain,” she explains.
“Normally, we would encourage them to organise their own meet-the-buyer event. But we want to see more visibility of the contracts available.
“Quite a lot of our tier twos and tier threes have their preferred supplier lists – when they award contracts to tier four companies, we want them to open that up, particularly to local SMEs.”
“We will run masterclasses on the tender process with tier four suppliers, so they know what to do when the expressions of interest come out. We don’t want to just give them the fishing rod, we want to teach them to fish”
Helen Fisher, Sellafield Ltd
The event on 23 February 2016 will focus on four major projects, worth £600m in total.
The biggest is the Box Encapsulation Plant scheme, which was awarded to a Balfour Beatty-Amec-Jacobs joint venture last year and is worth up to £360m. It is currently in the design phase.
The others projects are: the Silo Maintenance Facility, won by a Cavendish-Balfour Beatty joint venture, and worth £162m; the Box Encapsulation Plant Product Store and Direct Import Facility, awarded to M+W Group, valued at £150m; and the Interim Storage Facility, a £35m job awarded to Morgan Sindall-Arup through their £1.1bn infrastructure strategic alliances framework.
“The tier two suppliers will award all their tier three contracts by the end of the year, but all the other contracts are up for grabs,” Ms Fisher explains.
“Tier four suppliers and other SMEs will get visibility of the pipeline before the meet-the-buyer event, and then can come along and pitch for work and get feedback from the tier twos and threes.
“There will be 48 work packages going out between March and September, covering a huge range [of work] from construction to demolition and site clearance.
“Sellafield Ltd will also run masterclasses on the tender process with tier four suppliers, so they know what to do when the expressions of interest come out.
“We don’t want to just give them the fishing rod, we want to teach them to fish.”
Long-term work available
Ms Fisher is keen to stress that Sellafield is not a ‘closed shop’, as some suppliers seem to think, although many firms have been involved with the sector for a long time.
Up to now, the huge bill for cleaning up Britain’s nuclear legacy has attracted plenty of construction companies who see it as a steady, long-term revenue stream.
The nature of the work ranges from the highly technical – identifying and designing novel solutions for the safe decommissioning of nuclear waste – to more routine construction and demolition.
“Nuclear decommissioning is one of those rare jobs that has to be done, in boom or recession, because it is safety-critical – therefore it offers better long-term security than many sectors,” says Steve Hubbard, development director at Mott MacDonald, which provides design services at Sellafield.
At the top of the supply chain, some of construction’s major consulting engineers provide sophisticated design services.
“Nuclear decommissioning is one of those rare jobs that has to be done, in boom or recession, because it is safety-critical – therefore it offers better long-term security than many sectors”
Steve Hubbard, Mott MacDonald
The Axiom joint venture – which comprises Amec, Assystem, Jacobs and Mott MacDonald – was appointed to a 15-year contract with Sellafield Ltd in 2012, to provide multi-disciplinary engineering services, including civil and structural, mechanical and process.
Much of Axiom’s work is specialist, including removal of waste from the storage ponds, where spent fuel has been dumped since the 1950s. “No human being can go near them,” Mr Hubbard says.
Instead, Axiom works with suppliers such as Wolverhampton-based Nuclear Engineering Services to devise robotic machinery, which can remove the waste from the ponds using a hydraulic grab.
Axiom’s contract also encompasses more conventional construction.
Mr Hubbard says this work is roughly a 50:50 split between new build and refurbishment, where the aim is to prolong the life of existing assets.
“The work includes civil, structural and M&E, though as some assets are over 50 years old that can be pretty challenging,” he says.
The knowledge required
The practice of linking up with a nuclear specialist is common among construction companies in the sector.
Keltbray, known for its demolition expertise, has partnered with Doosan Babcock, and is on Magnox’s decommissioning, demolition and asbestos removal framework.
“Doosan actually built some of the stations that are being decommissioned now, so knows the industry inside out,” says Keltbray infrastructure managing director Phillip Price.
“Keltbray brings detailed knowledge of how to deconstruct large structures quickly and effectively – reverse engineering – in high-risk environments.”
Contrary to common belief, Mr Price says there is plenty the decommissioning sector can learn from the wider construction industry about risk management.
“We have worked with Magnox to develop its safety regime,” he says. “The risks are very different on a decommissioning site compared to a generating site – plant moving around, working at height, asbestos.
“We actually took the Magnox construction team to our London Bridge station site, where we work for Costain, and they realised we are good at understanding the risks on complicated major projects.”
The often unique nature of the work in decommissioning means contractors are obliged to learn on the job, and try to improve as they go along.
“We took the Magnox construction team to our London Bridge station site and they realised we are pretty good at understanding the risks on complicated major projects”
Phillip Price, Keltbray
“We decommissioned four boilers at Bradwell and tried to learn lessons from supply chain partners,” Mr Price explains.
“As a result, we completed the fourth boiler house 30 per cent faster and for 10 per cent less cost than the first one.”
Working on nuclear sites can come as a culture shock to firms from outside the sector.
Formwork specialist RMD Kwikform has been a supplier to the nuclear market since the 1980s, when work began on decommissioning of the famous Windscale chimney at Sellafield.
The firm’s equipment is still on the chimney, and will remain so “until they work out how it will be fully decommissioned,” says engineering director Ian Fryer.
“That illustrates how it takes a long time to effect a major operation in a controlled environment like Sellafield,” he says.
“There is a stringent approvals process with many different bodies to sign off each project.
“Additionally, there are tighter controls on products used.
“CE-marked products are usually required – which does not apply broadly to temporary works elsewhere in construction – so we have to get our equipment made in certain locations.”
For site workers, the safety and security protocols are also strict.
“There are several stages of security to go through, and four changes of clothing are required because of the radiation,” Mr Fryer says.
“For meals and toilet breaks, workers must go back through the same number of clothing changes.
“It makes working on live nuclear sites incredibly inefficient – half your capacity is lost through cleansing and screening compared to a normal job.”
For contractors fancying a slice of the decommissioning cake, the barriers to entry are high.
“There are several stages of security to go through, and four changes of clothing are required because of the radiation”
Ian Fryer, RMD Kwikform
Even with the right skillset, experience of the sector, and an understanding of the constantly changing regulations that govern nuclear sites – there are also the geographic locations to consider: the NDA sites are scattered around some of the remotest parts of the UK [see map].
The director of one contractor says: “The geographic isolation can mean a big overhead commitment to work on nuclear sites, particularly at Sellafield.
“And when you’re there, you need some very talented senior management to make it work for you, otherwise it can be very hard – and expensive – to break into their pool of regular suppliers.
“The work pipeline is attractive, but you don’t want to be there at any cost.”
Sellafield’s Ms Fisher is keen to emphasise the opportunity that exists for new entrants, despite the challenging nature of much of the work.
“M+W are a new supplier; they’re now working at Sellafield,” she says by way of example.
“We encourage more suppliers to get involved here, and the meet-the-buyer event is part of that.
“We try to help prospective suppliers to understand our needs.
“Obviously we have exacting standards or safety and security – and some do find that difficult,” she adds.
As to the extent of the work pipeline, for Sellafield, Magnox and all the UK’s nuclear sites, that largely depends on the government.
Around a third of the NDA’s £3.3bn budget is income from activities such as reprocessing and consulting, but the remainder comes from the state.
In last week’s Spending Review, chancellor George Osborne provided “over £11bn” to continue clean-up work, while also saving “over £1bn” by “making efficiencies and savings in the NDA”, including better-value contracts, delaying non-safety-critical projects, and cancelling the aforementioned Silos Direct Encapsulation Plant project at Sellafield.
While the detail of what this means filters down to contractors, it’s clear that there is going to be a huge market in the nuclear decommissioning sector for decades to come – available to those contractors with the ability and appetite to take it on.