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A B C D E F G H I J K L M N O P R S T V W Y

Public Procurement – One hundred million reasons to get it right first time

Public Procurement – One hundred million reasons to get it right first time
Wednesday 5th April 2017

In our last blog we discussed the then ongoing case of Energysolutions EU Limited v the Nuclear Decommissioning Authority. This case was a textbook example of how not to evaluate a public procurement process. The Nuclear Decommissioning Authority (NDA) had followed poor practice and had been found to have manipulated its evaluation process to award the contract to a bidder who should have been disqualified for not satisfying one of the NDA’s own mandatory tender requirements.

The NDA has now admitted its procurement process was defective and has settled the Energysolutions claim in the sum of £76.6m, plus £8.5m in legal costs. A second claimant, and unsuccessful bidder, Bechtel, will receive a reported sum of £12.5m. By failing to conduct a fair, transparent and, above all, compliant public procurement process, the NDA is now facing costs of nearly £100m and will need to undertake a new time-consuming and costly procurement procedure to re-let the contract. If both cases had proceeded to trial, both the potential damages and costs the NDA would have faced could have been significantly higher than the settlement sums. 

Such was the size and cost of the failure that it made it into national news. Greg Clark, Business, Energy and Industrial Strategy Secretary, also announced an independent public inquiry to look at what went wrong with the procurement process: “This was a defective procurement, with significant financial consequences, and I am determined that the reasons for it should be exposed and understood; that those responsible should properly be held to account; and that it should never happen again.”

The NDA has merely acknowledged that it underestimated the scale of the decommissioning required and, as such, the procurement process was flawed.  

The NDA has announced that it will terminate the contract awarded to the successful bidder for the decommissioning work, Cavendish Flour Partnership. The contract will now end prematurely in 2019 instead of 2028. The cost of the re-procurement exercise is, as yet, unknown, however given that the first exercise was undertaken by a competitive dialogue, it is likely the re-procurement will be costly in terms of time and labour.

This case continues to prove a cautionary example of how not to evaluate a public procurement process. Had the NDA followed the correct procedure at the outset, it would not have had to settle these claims or be facing a costly reprocurement exercise. Prevention, or ‘getting it right first time’, would have been a great deal less expensive than the cost of paying damages, legal costs and reprocuring.

For any queries regarding the evaluation process, or public procurement in general, please visit our procurement page or contact Michael Winder.


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