Nuclear contracts: what form will they take?

There has been no nuclear new build in the UK for many years. Therefore, for clues about what form future contracts will take, we need to look to organisations that have been operating nuclear facilities in the interim.

For some time, public sector bodies have been using the NEC3 suite of contracts, which are approved by the Office of Government and Commerce. These contracts encourage the use of sound project management principles and help to define legal relationships. The Nuclear Decommissioning Authority (NDA), which is responsible for the decommissioning and clean-up of the UK's historic and future nuclear legacy, has followed suit and many of its Site Licence Companies use the NEC3 standard conditions.

This move by the NDA is not intended to exclude the use of other standard forms, or bespoke contracts, but it has set an example and Sellafield Limited uses the NEC3 form for its construction and engineering projects.

It is likely that NEC3 contracts will be adopted for any UK nuclear new build programme. The NEC3 standard form of building contract, the Engineering and Construction Contract (ECC), is relatively brief compared to other industry forms and while not common in all areas of construction, its focus on proactive management has made it popular with clients. Originally used mainly for civil engineering projects, the ECC has been used for a wide range of projects, from simple structures, through to complex process engineering plants.

However, the ECC would need to be amended for nuclear new build, if only to take into account project specific elements and the types of specific amendments required by the NDA and other nuclear bodies. These could be dealt with in the schedules and could include many of the concepts found in process engineering standard forms, most notably provisions for carrying out tests following completion and performance guarantees.

UK position on procurement and choice of contract

The ECC can be used for either employer-design or contractor-design projects. However, in power projects there is often a tendency to use terms like 'engineer, procure and construct' (EPC), which are more commonly used in process engineering. Utilities awarding future contracts are likely to look for some form of EPC solution. Of course, this one-stop-shop method of procurement - with the contractor carrying the majority of the risk for the project - will come at a price. Whether the utilities see this as a price worth paying may depend on lessons from overseas.

The delayed nuclear new build programme in South Africa planned to use the ECC.

The highest profile project in Europe at the moment is Olkiluoto 3 in Finland. It is being constructed on an EPC basis by a consortium formed by Areva and Siemens. The consortium has had some well-publicised construction problems and Areva may well be reluctant to repeat this approach in the UK.

In France, the favoured procurement route for nuclear new build is more traditional - the design and construction being carried out by separate parties. And at Flamanville in Normandy, EDF, the French utility which will play a major part in the UK new build programme, has adopted the route of appointing three separate contractors - Bouygues, Alstom and Areva - moving further away from single point EPC.

In the US, the latest nuclear new build projects tend to be procured on an EPC basis, though there has been interest in the Engineer Procure (EP) contract, where a nuclear steam supply system vendor is employed by the utility, which also then enters into a separate contract with a construction contractor. Essentially, EP is really a version of traditional contracting, with the utility client supplying sophisticated equipment for installation.

EPC a likely option

It is likely that the decisions on the form and style of contracting for the UK new build will be made very soon.

Based on overseas experience, the most likely option would seem to be EPC. The shift of risk to the contractor is an obvious advantage to the client, but it comes at a cost and it does not necessarily dispense with delay to the project.

There are alternatives, such as those used in France and the US and we will have to wait and see the outcome. As to the actual form, there are probably many bespoke and alternative standard forms available, but the NEC3 suite is a strong contender.