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Sellafield Product and Residue Store Retreatment Plant: Accounting officer assessment 2020 (HTML)

Updated 12 June 2023

Department for which the accounting officer who made the assessment is responsible:

Department for Business, Energy and Industrial Strategy

Project title:

Sellafield Product and Residue Store Retreatment Plant (SRP)

Main scheme project stage:

Outline Business Case (OBC) approved by BEIS in August 2018 and an addendum to the OBC requesting continuity funding was approved on by BEIS in August 2020. The Project is currently in the Construction phase.

Introduction

It is normal practice for Accounting Officers to scrutinise significant policy proposals or plans to start or vary major projects, and then assess whether they measure up to the standards set out in Managing Public Money. From April 2017, the government has committed to make a summary of the key points from these assessments available to Parliament when an Accounting Officer has agreed an assessment of projects within the Government’s Major Projects Portfolio.

This Accounting Officer Assessment was made of the SRP Project following its Outline Business Case (FBC) approval and progression into the detailed Design phase. I have made the assessment as the Principal Accounting Officer for Business, Energy, and Industrial Strategy, noting that SRP is routinely monitored by the Accounting Officer for the Nuclear Decommissioning Authority, an arms-length body of BEIS.

Background and context

The NDA holds an inventory of around 140 tonnes of civil separated plutonium following the completion of spent fuel reprocessing this year. One of the most complex challenges facing the NDA in dealing with the UK’s nuclear legacy is the management and, ultimately, disposition of the inventory of separated plutonium held in the UK.

Due to the radioactive and fissile nature of the material, plutonium handling and storage requires specialised facilities and effective management arrangements. There are a number of plutonium stores on the Sellafield site. The aim of the NDA is to gradually transfer all plutonium into the most modern facilities such as the Sellafield Product and Residue Store (SPRS) and its planned extensions over the next few decades.

To ensure that the plutonium packages can be safely stored in SPRS, they will be repackaged and, where appropriate, some plutonium will be treated to stabilise it for long-term storage. A major new, specialised facility to repackage materials is required to support this strategy. Known as the Sellafield Product and Residue Store Retreatment Plant (SRP), this facility will repackage, and, where appropriate, re-treat all of the plutonium packages. The plutonium will be packaged in a container suitable for storage for at least 100 years. SRP is being built at Sellafield and is forecasted to start full operations, following completion of active commissioning, in 2029 and will operate until around 2060.

Assessment against the Accounting Officer standards

Regularity

The Energy Act (2004) established the Nuclear Decommissioning Authority (NDA) as a non-departmental public body to lead the clean-up and decommissioning work at 17 UK sites on behalf of HMG. NDA is sponsored and funded by the Department for Business, Energy and Industrial Strategy (BEIS) which approves NDA Strategy and Plans. The NDA implements HMG and the devolved administrations’ policies through its strategies. As a Non-Departmental Public Body, the NDA’s annual spending limits are set by UK Parliament, combining HMG grant with income from commercial activities. The costs of SRP are included within the NDA’s planned expenditure.

Sellafield Ltd is a Licenced Company operating under a Nuclear Site Licence and responsible to NDA for day-to-day operations and the delivery of the NDA Strategy for the Sellafield site.

The SRP project has legal basis, Parliamentary authority, and Treasury authorisation. Its funding is controlled as part of the Sellafield Ltd Annual Site Funding allocation, provided by NDA. It reports on progress through the quarterly Government Major Project Portfolio (GMPP) submission.

Overall assessment: My assessment is that the regularity test is satisfied.

Propriety

The SRP Outline Business Case (OBC) was approved in August 2018 and the addendum for continuity funding was approved in August 2020 following Sellafield and NDA assurance and governance between October 2017 – June 2018 (OBC) and between December 2019 – April 2020 (OBC Addendum).

The SRP Project is subject to considerable scrutiny and challenge through Sellafield Ltd, NDA and BEIS governance and assurance arrangements, which ensure all significant spend and procurements are justified, value for money, and subject to financial and process scrutiny. The Project is designated as a Government Major Project Portfolio (GMPP) project and is subject to regular Infrastructure and Projects Authority assurance reviews.

Overall assessment: My assessment is that the propriety test is satisfied.

Value for money

The SRP provides a safe, secure, value for money long-term solution to the UK’s treatment and interim storage of civil separated plutonium.

The plutonium packages held at Sellafield need to be repackaged to enable their long-term safe and secure storage. An options assessment was carried out which compared the current approach of long-term storage without treatment (option 1), with an option to repurpose existing facilities (option 2) and a new build facility (option 3). From the assessments carried out, the conclusion was that the new build (SRP) was the preferred option (option 3). The only other available option of repurposing existing facilities (option 2) to provide the same capabilities to be housed in SRP, would not be delivered any sooner or more cost-effectively (it would ultimately take a decade longer and ~£0.5 billion more) to realise the desired outcomes, meaning, all of the material retreated, repackaged, and consolidated in SPRS, ensuring ongoing safe and secure storage of plutonium.

Therefore, the value for money assessment, as presented in the SRP OBC in 2018, continues to be robust.

The OBC for the SRP project includes for an allowance for optimism bias based upon the project’s size, scale, complexity, and maturity. The NDA and Sellafield Ltd. have utilised Reference Class Forecasting (RCF) to address HMT’s Green Book optimism bias application. The research and development of the RCF has led NDA to use the RCF P80 position as the basis of their RCF developed optimism bias adjustment. The RCF approach has been based on:

• RCF is a method to develop an appropriate optimism bias adjustment
• Application of RCF techniques collaboratively developed by NDA, Oxford Global Projects (OGP) & Sellafield Ltd. aligned with HMT’s Green Book<
• RCF dataset comparable with other major projects including Sellafield Ltd. corporate history; results align and are supported by internal and external benchmarking inputs

In compiling the OBC and FBC for the SRP Project, 3 primary options were considered and assessed against the NDA Value Framework. These are summarised in the table below.

With respect to the delivery of the SRP Project; the PPP Contract model for Project Delivery is a trailblazer in its structure. The 20-year PPP Delivery Model was approved and deemed value for money by HMT’s Major Projects Review Group (MPRG) in March 2019.The model is an early adopter of the Infrastructure Client Group’s Project 13, which is a key enabler to the Cabinet Office’s Construction Play Book. Following the establishment of the PPP, the model has since been benchmarked by several leading infrastructure clients (MOD, EDF Sizewell C) to inform future capital investment strategies.

The PPP Contract incentivisation model rewards successful project delivery performance and the achievement of outcomes, providing low level returns through the delivery stages, with capped rewards upon successful project completion. The model moves away from the use of punitive damages to drive performance and instead establishes a sustainable collaborative relationship to enable both parties to invest in transforming the project delivery environment at Sellafield.

Overall assessment: My assessment is that the value for money test is satisfied.

Feasibility

The SRP Project is complex given its location, its duty, and because it must deliver the first of a kind nuclear related capability in the UK. However, the process design is based on established and proven technology used for a number of years across the nuclear industry.

As stated, the project has been subject to extensive external, IPA, NDA, and internal Sellafield Ltd assurance. The assurance reviews completed to date have identified supply chain capacity and capability, and resource capacity and capability, as key areas of risk to the successful delivery of the project. Allowance has been made within the financial sanction for the project to address these risks and the PPP delivery model itself is seen as a primary mitigation relating to capacity and capability; however, proactive management of this risk remains key to successful delivery.

The SRP project is currently on track to deliver, with active commissioning for the facility currently forecast to commence in late 2028 at the P50 Confidence Level.

Overall assessment: My assessment is that the feasibility test is satisfied.

Conclusion

As the BEIS Principal Accounting Officer, I have considered this assessment of SRP project. The case received scrutiny and approval by the BEIS Accounting Officer in August 2018, with an addendum to the OBC approved by the BEIS Accounting Officer in August 2020. It has undergone relevant scrutiny within the NDA Group, and I am content to align my approval to this given the information provided to BEIS at these dates.

I have prepared this summary to set out the key points which informed my decision. If any of these factors change materially during the lifetime of this project, I undertake to prepare a revised summary, setting out my assessment of them.

This summary will be published on the government’s website (GOV.UK). Copies will be deposited in the Libraries of the House and sent to the Comptroller and Auditor General and Treasury Officer of Accounts.

Sarah Munby
Permanent Secretary, BEIS
August 2020