EnergySolutions EU Ltd v Nuclear Decommissioning Authority

JurisdictionEngland & Wales
JudgeMr Justice Fraser,The Honourable Mr Justice Fraser
Judgment Date29 July 2016
Neutral Citation[2016] EWHC 1988 (TCC)
CourtQueen's Bench Division (Technology and Construction Court)
Docket NumberCase No: HT-2014-000053, HT-2014-000094, HT-2015-000163
Date29 July 2016

[2016] EWHC 1988 (TCC)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

TECHNOLOGY AND CONSTRUCTION COURT

Royal Courts of Justice

Rolls Buildings, London, EC4A 1NL

Before:

The Honourable Mr Justice Fraser

Case No: HT-2014-000053, HT-2014-000094, HT-2015-000163

Between:
Energysolutions EU Limited
Claimant
and
Nuclear Decommissioning Authority
Defendant

John Howell QC, Andrew Hunter QC and Ewan West (instructed by Freshfields Bruckhaus Deringer LLP) for the Claimant

Nigel Giffin QC, Joseph Barrett and Rupert Paines (instructed by Burges Salmon LLP) for the Defendant, together with Mark Hapgood QC for 25 and 26 July 2016

Hearing dates: 16–19, 23–26, and 30 November 2015, 1–3, 7–10, and 16 December 2015, 26–27 January 2016, 23 March 2016, 14, 25 and 26 July 2016

JUDGMENT No.2 (LIABILITY)

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

Mr Justice Fraser Mr Justice Fraser
1

These proceedings concern the procurement of a very sizeable contract for the decommissioning of 12 different Magnox nuclear facilities in the United Kingdom. The proceedings consist of three claims, each commenced by the entity that was then called Energy Solutions EU Limited (now called Atk Energy EU Limited) as Claimant ("Energy Solutions") against the Nuclear Decommissioning Authority ("NDA"). All three claims concern the same procurement exercise, and have been case-managed and tried together. The NDA is an Executive Non-Departmental Public Body established under the Energy Act 2004, responsible to the Department of Energy and Climate Change. It is tasked with overseeing the clean-up and decommissioning of a number of the United Kingdom's civil public sector nuclear sites, installations and facilities. The NDA has responsibility for 17 different sites, and the associated civil nuclear assets and liabilities that were formerly owned by the United Kingdom Atomic Energy Authority and British Nuclear Fuels Ltd ("BNFL"). All three of the claims issued by Energy Solutions arise out of the same public procurement competition, namely one undertaken by the NDA for the award of a contract central to the decommissioning of 12 of these former nuclear sites. The contract the subject of the procurement was called a Transition Agreement. Assuming certain conditions precedent were complied with, a successful tenderer who was awarded the Transition Agreement would then be awarded another contract called the Parent Body Agreement (or "PBA") about six months after award of the Transition Agreement. The 12 sites in question are the ten nuclear power stations that are called "Magnox" power stations, namely Berkeley, Bradwell, Chapelcross, Dungeness A, Hinkley Point A, Hunterston A, Oldbury, Sizewell A, Trawsfynydd and Wylfa, together with two other sites. These latter two sites, namely those at Harwell and Winfrith, are (or were) nuclear research sites, and not power stations, although one of the reactors at Winfrith did produce some electricity which was supplied to the National Grid for a time. The two research sites both had nuclear reactors. Magnox is the name for a particular type of nuclear reactor which was designed in the UK; these nuclear power plants were built in the 1960s and 1970s. Some of the Magnox reactors were exported abroad but are not relevant for the purposes of these proceedings. Magnox reactors are older nuclear technology and are no longer used in the United Kingdom, although one of the nuclear reactors at Wylfa in Anglesey was operational at the time of the procurement. The other sites were no longer operational by then. The term "Magnox" is taken from the magnesium-aluminium alloy used to clad the fuel rods used by the reactor. Magnox is also the name used for various entities that were previously responsible for the Magnox sites, which is explained further below.

2

The Contents of this judgment, which is in a number of different parts, are as follows below. There are also five appendices, Appendix 1 being a glossary. Appendix 2 is a graphic. Confidential Appendix 3 contains judgment narrative and findings on the allegations that concern the successful bidder, CFP, and hence material already protected by an existing confidentiality order. This Appendix falls within the wider of the two Confidentiality Rings, namely that which currently includes not only the legal representatives acting for Energy Solutions, but also Mr Bowes and Mr Board, the two employees (now former employees) of Energy Solutions permitted to see certain parts of the CFP bid documents. Appendix 4 contains a summary of the scores that were awarded by the NDA in the evaluation, together with a summary of the adjusted scores for some of the Requirements as a result of findings within this judgment. Confidential Appendix 5 contains salary and bonus details for some of the Energy Solutions' witnesses. These details only became relevant during the NDA's application to dismiss the whole claim at the very end of the trial, in the circumstances explained in Part V of the judgment. The application itself is dealt with in Part XI of the judgment. I do not consider that this judgment needs to make available publicly these personal salary details, which is why they appear in an appendix. Neither Appendix 3 nor Appendix 5 will be made available on www.bailii.org.

Table of Contents

I Introduction

I

Introduction

3

II

Agreed Issues

25

III

Confidentiality

28

IV

The Procurement Competition and the SORR

31

V

The Revelations of July 2016

58

VI

The Factual Evidence and the Witnesses

63

VII

The AWARD system

162

VIII

The role of Burges Salmon

190

IX

The Regulations and the Legal Principles

235

X

Evaluation of the Tender Submissions

331

A.

Introduction

332

B.

RSS Evaluation Issues

339

B1

Critical Assets and Key Critical Assets – Nodes 411, 412, 414, 408, 405, 410

339

B2

Assumptions to bound scope and cost – Nodes 405, 410, 408

484

B3

Common Support Functions and Services – Node 409

553

B4

Nominated Staff Appointment – Node 303

636

B5

Cost Contingency – Nodes 110, 112, 113

725

B6

Portfolio/Programme/Project Management – Node 307

753

B7

Supply Chain Management – Node 306

802

B8

Other Winfrith Issues – Node 408

816

C.

CFP Threshold Issues

849

C1

Principles

849

C2

Supply Chain Management – Node 306

903

C3

Nominated Staff Appointment – Node 303

903

C4

Overall Scope Summary – Node 401

903

C5

Alternative Strategies Costs – Nodes 116, 117 and 118

903

C6

Chapelcross (Sample Project 1) – Node 410

903

D.

CFP Non-Threshold Evaluation Issues

903

D1

Cost Underpinning – Node 106

903

D2

Sample Project 3 Preparing the fuel storage ponds at the Sizewell A Site for the Sizewell A Interim State – Node 112

903

D3

Portfolio/Programme/Project Management – Node 307

903

D4

Spent Fuel and Nuclear Materials Management – Node 405

903

D5

Asset Management – Node 406

903

D6

Sample Project 2 Preparing the reactor building complex for both reactors at the Dungeness Site for the Dungeness Site Interim State – Node 411

903

XI

The NDA's Application to dismiss the claim

904

XII

Summary of Findings

941

XIII

Conclusion

943

Appendix 1

Glossary

Appendix 2

Graphic: Fences at Winfrith

Appendix 3

Confidential: CFP bid

Appendix 4

Corrected Scores Summary of Findings

Appendix 5

Confidential: Salaries and Bonus Arrangements

3

This Introduction is intended as a high level summary. In broad outline terms, the Claimant was part of a consortium with another company, Bechtel Management Company Ltd ("Bechtel"), which submitted a tender to the NDA for the Transition Agreement. Initially there had been a third member involved with Bechtel and Energy Solutions, URS International Holdings (UK) Ltd, as well. URS withdrew from the procurement prior to the submission of the tender, and following this withdrawal Bechtel and Energy Solutions formed a consortium called Reactor Site Solutions ("RSS") for the purposes of the procurement.

4

That consortium was unsuccessful in the procurement process. The purpose of the procurement was for the NDA to award a contract to the successful tenderer, who would then become what was known as the parent body organisation ("PBO") for two separate Site Licence Companies ("SLCs"). The intention was for the PBO to acquire the two then-existing SLCs by way of transfer of shares in those companies to the PBO. The two SLCs in existence at the time of the procurement were called Magnox Ltd ("Magnox") and Research Sites Restoration Ltd ("RSRL"). Energy Solutions was the incumbent PBO at the time of the procurement for Magnox, which as the name suggests, was the SLC for, and managed and operated, the ten Magnox power stations (but not the two research sites). Energy Solutions had become the incumbent PBO for Magnox by means of the commercial acquisition of a subsidiary of BNFL in 2007. RSRL managed and operated the two research sites of Harwell and Winfrith. The two research sites were, at the time of the procurement, essentially under separate control, and contained within a separate SLC, from the ten Magnox sites.

5

The then-existing PBO for RSRL was UKAEA Ltd ("UKAEA"). Part of the outcome of the procurement process was to be that the 12 sites would all come together under a single PBO. Energy Solutions was unsuccessful in becoming that PBO. Due to the nature of the subject matter, there are a great number of abbreviations...

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