U.K. PRIVATIZATION OF DECOMMISSIONING AND RADIOACTIVE WASTE MANAGEMENT SERVICES

K. F. Collett, S. Beackon
WasteChem Limited

ABSTRACT

The United Kingdom Atomic Energy Authority, UKAEA, was established to undertake nuclear research and development. Fusion R&D apart, the original mission has now been largely completed. Across its sites some 80% of UKAEA's facilities are redundant and in various stages of closure. UKAEA has now turned its attention to discharging its decommissioning liabilities.

Procurement of services through fixed-price competitive tendering dominates UKAEA's contract strategy. To help develop the supply base and thereby increase competition, UKAEA has undertaken a strategy of skill transfer through the divestment of operational teams and associated contracts. This is also seen as the way to secure the best possible long term futures for the staff involved.

BACKGROUND

The UKAEA was created in 1954 by the Atomic Energy Authority Act, which brought together activities that had been carried out within Government since 1946. Its purpose was to lead the development of nuclear technology in the United Kingdom. Legislation since 1965 allowed the UKAEA to expand into non-nuclear areas of work and to become a major business in contract research and development based on its science and engineering skills and resources. In the early 1970s BNFL and the Radiochemical Center (which was later floated as Amersham International plc) became separate entities and the Weapons Groups was transferred to the Ministry of Defense. In 1996 AEA Technology plc was floated to redirect its science and engineering skills to serve new markets in the UK public and private sectors and overseas.

The UKAEA operates on six principal sites (Dounreay, Windscale, Risley, Harwell, Culham and Winfrith). It has approximately 2,100 employees. The UKAEA's balance of activity has changed in recent years in line with the progressive reduction of Government's funding for nuclear research and development programs involving the use of reactors and other active plant. Its focus today is on the efficient and cost effective management of its nuclear decommissioning liabilities. UKAEA is in the public sector. Its prime role is the management and eventual elimination of the decommissioning and other liabilities arising from the Authority's early nuclear work. The Authority's central estimate of the undiscounted cost of these liabilities is about £7.5 billion. This comprises:

• £6.6 billion for decommissioning work on the Authority's own sites; and
• £0.9 billion for fuels and wastes, and for waste management and decommissioning, on BNFL's sites for which UKAEA is financially responsible for the period when these sites were part of UKAEA.

This work is expected to continue until at least the middle of the next century.

UKAEA's core tasks are therefore planning, procurement and contract management.

DIVESTMENTS

Four teams from UKAEA were selected for divestment involving a total of 154 staff at 3 locations (Dounreay, Harwell and Winfrith). The selected teams were:

A59, Winfrith

This is a radwaste management and decommissioning team involved in support, maintenance and day to day operations of the A59 active handling building at Winfrith. The workscope for the divestment included the post operational clean out of caves, waste removal and maintenance. The contract also included provision for the care and maintenance of the waste store in the Dragon reactor. A total of 24 staff were involved in the work.

Engineering Support Group, Dounreay

Currently employs some 95 staff providing close support engineering of nuclear and non nuclear plant within the Fuel Cycle Area at Dounreay. The work contract involves planned and breakdown maintenance of plant in the FCA together with project work in support of the manufacture and reprocessing of nuclear fuel. Associated waste management activities are also included.

Plant Decommissioning Services, Dounreay This a decommissioning team involved in the care, maintenance and operation of plant within the Dounreay Fast Reactor. The workscope involves packaging, monitoring and despatch of waste for disposal and the operation of NaK disposal plants within the reactor building. A total of 19 people are involved in this work.

B459/B393.6, Harwell

This is a decommissioning team of 15 people. The work scope for the contract involves the care and maintenance of the active handling building B459 following Stage I decommissioning. It also requires the decommissioning to the end of Stage II of the metallurgy cells in building 393.6.

The work associated with each of these divestments is contracted to last about 5 years and the value of the contracts is generally between £1M and about £4M per annum.

Dounreay's Engineering Support Group divestment route is via acquisition with the associated contract work. The remaining teams being divested through bidding for the project work to be undertaken by the transferred staff.

OBJECTIVES FOR THE DIVESTMENT PROCESS

UKAEA objectives for the divestment process were as follows:

• To provide an opportunity for private sector contractors to acquire relevant experience and expertise and thus enhance competitiveness in the market for decommissioning and waste management services.
• To lay a firm basis for achieving progressive improvement in value for money by increasing competition for Decommissioning and Radioactive Waste Management Operations (DRAWMOPS) work.
• To enhance the competitiveness of the UK in the international market for these services by establishing a broader based competency amongst UK contractors.
• As far as possible to offer staff a secure future with a new employer on terms and conditions comparable to those available to them as employees of UKAEA.

SELECTION CRITERIA

The objectives for the divestment gave rise to a range of criteria against which the bids received from potential contractors could be assessed:

• Financial soundness. Good financial record with UKAEA. Financial strength to meet commitments? Parent company backing?
• Safety record. Understanding of the safety requirements of the plant, together with adequacy of the proposals on safety management following transfer.
• Objectives of the divestment (outlined earlier).
• Commercial. Fixed price compliance. Competitiveness of day rates. Attractiveness of incentivisation proposals.
• Personnel. Acceptance and experience of Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE). Redundancy protection satisfactory? Details of pension arrangements.
• Project Management. Acceptability of scheduling and resource plan. Mobilization proposals satisfactory?
• Technical insight and innovation. Adequacy of strategies for managing uncertainties and risks? Strength and relevant experience of key managers. Proposals for waste minimisation and control. Evidence of technical back-up in key areas.
• Quality certification to specified standards.

DIVESTMENT PROCESS

The process followed for the award of contracts for the workscopes was standard within UKAEA contract procedure. The process had the following main steps.

• Prequalification
  
  Potential contractors (normally about 20) were sent a detailed letter which outlined the scope of work to be carried out and a profile of the capabilities of the staff involved. Each contractor was invited to prequalify on the basis of:
  
  (i) their understanding of the proposed work scope, interfaces and safety system.
  
  (ii) their relevant experience and management capability.
  
  (iii) their commitment to the project and team together with an outline of their realistic long term plans.
  
  (iv) their understanding of TUPE and its implications.
  
  The information contained in the prequalification enquiry was supplemented and amplified at a Prequalification Conference where all potential contractors were also able to ask questions of the UKAEA and view the facilities.
• Tender Submission
  
  Following prequalification a number of companies (usually between 6 and 9) were selected to receive the Invitation to Tender. This document gave considerably more detail on the work scope, the personnel involved and the safety and other management systems to which the contractor would be expected to operate. Replies to the Invitation to Tender were then considered by a Selection Panel against the criteria listed earlier. On the basis of their assessments the Vendor Group decided upon a shortlist (usually 3) of companies to proceed to the next stage.
• Presentation
  
  Shortlisted companies were invited to make a presentation of their bids for the work to the full Vendor Team. On the basis of these presentations the answers to clarificatory questions, and the content of their response to the ITT, a selection was made of a preferred bidder with a reserve.
• Contract Award
  
  Following the selection of the preferred bidder negotiations then took place with the contractor. Subject to the satisfactory conclusion of the commercial discussions, the award of a Certificate of Comparability from the Government Actuary for the new pension proposals, the completion of the TUPE consultation process with employee unions and the issue of the necessary license instrument by the Regulator, a contract was awarded and the staff transferred.

MAIN ISSUES

The usual issues arising from any decision to award a contract for undertaking technical work were encountered and needed to be overcome. Examples of this were ensuring that potential contractors had an adequate understanding of the technical workscope, and that the mobilisation proposals were realistic.

But the main issues arising from this program extended beyond the normal commercial matters and came about as a consequence of the decision to divest the staff to the contractor as an aid to promoting competition. These revolved around two areas that might at first sight have been regarded as peripheral:

• safety
  
  The activities being divested are covered by licenses issued under the Nuclear Installations Act. Any changes to the operational and safety arrangements which affected those specified in the original license application require prior approval of the regulator (Nuclear Installations Inspectorate). The provision of new safety documentation, its clearance through UKAEA procedures prior to submission to the regulator and subsequent iteration with the NII Inspectors proved time consuming. Usually this process could not begin until the other parts of the divestment were well advanced and in every case it became a critical path item for the successful completion of the divestment.
• personnel
  
  The activities being divested constituted an "undertaking" under the terms of the Transfer of Undertakings (Protection of Employment) Regulations. This piece of legislation placed substantial obligations on the part of both the transferor and the transferee to undertake consultation on the transfer with recognized trade unions or employee representatives. The regulations also place a requirement to agree the terms and conditions applying at the point of the transfer to the new employer and this again gave rise to a process and a series of issues that needed to be programmed prior to completion.

CLIENT PERSPECTIVE

From the client perspective the following have proved to be the critical success factors in achieving a successful conclusion to the exercise:

• initial specification of the workscope. The UKAEA was seeking a fixed price contract for the work to be undertaken. To achieve this the workscope had to be written in sufficient detail and be sufficiently comprehensive to enable potential contractors and the UKAEA to feel confident of achieving this.
• communication with the regulator. The UKAEA is and remains the holder of the nuclear licenses under the Nuclear Installations Act. The activities being divested all involved nuclear operations on licensed sites. As such, they each needed the formal approval of H.M. Nuclear Installations Inspectorate and the issue of a legal amendment to the terms of the licenses. It was vital that the regulator was kept informed, both formally and informally, as the plans for the divestments progressed.
• personnel guarantees. Employees saw the divestments as a "threat". In particular, they were concerned that the TUPE regulations excluded pensions provision and also that there was no guarantee that their new employer would honor the generous redundancy entitlements available within UKAEA. The guarantees that as part of the bidding process the new employer would be required to provide a broadly comparable pension scheme (as assessed by the award of a Comparability Certificate from the Government Actuary) and also a parent company guarantee that the money needed to pay any redundancy entitlements would be made available should it prove necessary, were vital in securing a greater degree of acceptance of the process than would otherwise have been possible.
• openness. There is a potential conflict between the need for openness with employees and their representatives on the process and its implementation on the one hand and the need for commercial confidentiality on the other. This conflict needs to be recognized and managed. It is too easy to make commercial confidentiality an excuse for keeping employees in the dark. This ultimately causes problems.
• communications. The process carries an extremely heavy communications overhead, both on the part of the Vendor Group and on the part of the line management. This needs to be planned for at the outset.

CONTRACTOR PERSPECTIVE

WasteChem Limited has been involved in all four of the identified divestments. For A59 Winfrith Decommissioning and Support Services, and Dounreay's Engineering Support Group, WasteChem was selected as preferred bidder. For Plant Decommissioning Services, Dounreay and B459/B393.6 Harwell, WasteChem was selected as reserve bidder - i.e. second place. In participating in the divestment procurement process a number of lessons have been learned and new challenges met and overcome. Main features of these include:-

• Tender Specification
  
  All the divestment initially entailed bidding against work scopes defined in the Invitation to Tender, the one significant twist to this being Dounreay's Engineering Support Group which the contractor had to also bid to buy, i.e. effectively an acquisition with an associated contract.
  
  For bids to achieve the standards required by both the client and contractor regarding technical and commercial confidence levels, a great deal of resources had to be expended in the pre and post tender submission periods prior to preferred bidder selection.
  
  The amount of technical bidding work pre tender submission was controllable. However, post submission and selection the level of commitment was very much higher than anticipated - by both client and contractor. This was affected by (i) politics and (ii) regulatory impact.
  
  (i) Politics - The first two divestment enquiries A59, Winfrith and PDS, Dounreay were initially issued on a best price/bid wins philosophy. This resulted in optimized programs for the works. However, the program timescale submitted were somewhat shorter than those acceptable to both the client and the staff subject to the transfer. This resulted in modification of the workscope and associated resources to allow longer programs of work and hence provided a degree of additional security to those transferring. Negotiating, developing and finalizing such variation led to protracted and costly tender expenditure.
  
  (ii) Regulator - The U.K.'s Nuclear Installation Inspectorate approval is required for all the divestments. The major interface and involvement lies with the UKAEA. However, indirect and direct involvement with the contractor e.g. safety plan modifications and interviews does impact on the contractor. This also impacts on the timescale to achieve contract award. As with any new activity the NII and their UKAEA counterparts have somewhat felt their ways in achieving positions of comfort. NII's main concern being to firmly establish who is actually in control. However, a more concerning regulatory position is one where the NII use the divestments as a lever to achieve non-associated goals. Refusing to address divestment projects until the license holder undertakes or promises to complete what can be totally unrelated activities. This is completely out of the contractors control.
• Personnel - It has to be appreciated and accepted that the majority of personnel subject to transfer under UKAEA's divestment process are at best wary and often against the process. Moving from the public to private sector may be a move into the unknown for many of the staff and can therefore be disturbing. This backdrop tends to create suspicion of the vendor and contractor. The prime example being contractor's requests for personal details on team members - both prior to and post divestment. Developing and engaging trust between staff and contractor is key in easing the path to divestment and minimizing lost time and therefore costs. Much time also has to be spent convincing the teams that terms and conditions will not be changed without consultation and agreement, and that private sector pensions may actually be as good if not better than their existing Government arrangements.
• Communication - To keep all channels open with the staff to be divested staff, union representatives, the UKAEA client and to a lesser extent the regulator, a great deal of effort is required. Staff need to be kept informed of divestment progress from the contractors perspective, the need to be open and honest being paramount. Co-ordination with the client regarding communication activities either independent or joint initiatives have to be carefully thought through and implemented. Formal and informal meetings with the staff unions require careful attention to both the immediate situation and future working agreements. Such activities require heavy participation from a number of the contractors departments - commercial, personnel, projects, marketing and sales, etc.
• Marketing - One of the selection criteria is the contractors marketing strength. As successfully marketing resources and capabilities takes significant advanced commitment - particularly in the nuclear industry - once selected as 'preferred bidder' it is tempting if not obligatory to market theses resources. Great care has to be taken in promoting yet to be secured capabilities, particularly when divestment timescales are so difficult to predict. However, with agreement marketing should be started early to ensure maximum security for the staff and full return on investment.
• Flexibility - For all the reasons given above flexibility is probably the most crucial attribute to maintain and develop. Only through mutual co-operation and understanding particularly with the client and staff, can the pains of divestment be minimized and success achieved.

CONCLUSIONS

The Divestment process involves completing numerous activities most planned, some unexpected and often unfamiliar to all involved i.e. vendor, staff, contractor, regulator. To minimize both resource expenditure and detrimental effects on personnel morale the post tender period, i.e. contractor selection and contract award should itself be minimized. To achieve this requires:-

1. right first time enquiry specification.
2. bringing the regulator on board
3. openness with the staff to be divested and their representatives
4. careful selection of bid lists through the prequalification process

Divestment has so far proved successful

1. all enquiries received substantial interest from the key nuclear contractors
2. all the preferred bidders have stayed the course, meeting the enquiry requirements
3. the formally divested A59 Winfrith team is operating safely and effectively and developing its market
4. the vendor has been rewarded with competitive bids, reduced liabilities and increased supplier expertise, thereby meeting the objectives set.