Better the Supplier You Know... Sometimes

23/10/2013 15:22 BST | Updated 23/01/2014 23:58 GMT

How shocked should we really be that the Nuclear Decommissioning Authority has apparently turned a blind eye to criticism of the consortium of contractors managing Sellafield's clean-up, only to re-appoint them for another five years? It's probably a case of better the supplier you know.

There is no doubt that the decontamination of the former Sellafield nuclear plant in Cumbria is a massive and highly-complex undertaking. The 17-year contract was awarded to Nuclear Management Partners (NMP), which comprises British company, Amec, French energy firm, Areva and US engineering and construction company, URS, back in 2009. It includes a number of break points at which the Nuclear Decommissioning Authority (NDA) can choose to cancel or modify the contract - the first of which comes in March 2014.

Public reaction to the NDA's decision to re-award the contract to NMP for a further five years has not been good because the consortium had been widely criticised for missing deadlines, over spending on budgets and "incorrect expenses". An audit carried out by the Public Accounts Committee last year found that NMP was behind schedule on 12 out of 14 major projects underway at the Cumbria site.

In defence of the consortium, the NMP's chairman, Tom Zarges, has described the task at Sellafield as 'unprecedented'. He has also claimed that the partners have 'learnt an enormous amount' about the challenges of the site and what needs to be done going forward. This must surely explain the main reason the consortium has retained the contract.

Contractor knowledge and understanding should not be under-estimated on complex or major scale infrastructure projects. From the NDA's perspective the worst case scenario would have been a decision to axe the consortium because the considerable learning curve they had already navigated together would have been lost. It would have been back to square one. It is far better to work with the consortium and refocus their efforts as necessary.

Facing adverse publicity for their decision, it is unclear how successful the NDA would now be in finding new contractors to work with anyway. Other bidders might consider the project a reputational risk as well as being cautious due to its highly-complex nature. This could drive up prices at a time when costs associated with the clean-up have already soared to £70bn and the NDA would find this difficult to stomach.

Another factor which could deter rival bidders is that it is likely that the NDA has itself contributed to the contract's recent failings. The fact that very few modifications have been required by the NDA when re-awarding the contract suggests that a significant chunk of the blame for its under-performance to date might be placed at their own door.

Despite the criticism, the decision to re-award the contract may well turn out to be the right one. We all know what happens when major infrastructure projects are changed and then changed again. The construction of Wembley Stadium faced significant delays and rising costs from a relatively early stage and problems were exacerbated when the contractor responsible for the construction of the arch - Cleveland Bridge & Engineering - withdrew from the contract forcing Multiplex to find a replacement.

Sellafield's clean-up faces many challenges going forward and the NDA and the consortium alike will be hoping that they can put aside any differences and work closely together to improve performance and minimise further delays and cost increases. Their success in doing so will rest on how well their 'intent' in terms of working together to deliver the contract is fully aligned and there is a shared commitment to make it work.

Roy Williams is managing director at Vendigital, a firm of supply chain consultants operating globally and across industry sectors.