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Get funding right for nuke clean-up

AGENDA - COMMENT

THE DECOMMISSIONING of the country's ageing nuclear facilities presents a formidable challenge for Government and contractors alike.

The Nuclear Decommissioning Authority has spelt out how it will tackle this £56 billion operation in its newly published draft strategy.

In an industry renowned for escalating costs it is not surprising that the body's chief concern is controlling costs.

Normally this could fr ighten off most contractors, worried that the client might be tempted to load all the risk on their shoulders.

But the authority has avoided the temptation to take this potentially disastrous route.

In fact, its approach is one that more Government bodies would do well to take.

Instead of embarking on big risk and reward contracts, it plans to go down the cost-reimbursable and incentivised contract route, setting aside a 4.4 per cent average profit margin for contractors.

In this regard the clean-up body has done its homework and learned from the more advanced US decommissioning industry.

This approach not only opens the way for innovative cost-saving solutions but provides the sort of guarantees that drive away the temptation to cut corners in critical areas such as safety and the environment.

The clean-up body must also be applauded for its policy of encouraging management contractors to use local subcontractors where possible, particularly in a sector that has strong international players.

Unfortunately the same cannot be said for its approach to funding. This remains a big concern for the industry.

The authority's strategy document suggests that it is look ing for substantial contractor f inance in lieu of later payment.

If past exper ience is any thing to go by, dogmatically demanding this will delay all contract negotiations, as any contractor involved in the first big hospital PFI project knows too well.

This sor t of hybr id PFI may look at tractive to a cash-strapped client but it brings added expense, which the authority has not counted on. Trying to resolve this when the programme is under way will only complicate the negotiations.

With the first £1.3 billion clean-up job at Drigg in Cumbria due to start next Apr il, time is pressing to sor t this out.