The Nuclear Decommissioning Authority

Last Updated: 10 December 2011

Contracts for the procurement of goods and services currently account for more than 95% of the NDA's annual expenditure, reflecting the NDA strategic role of delivering its remit through others.  In addition to our contracts with the PBOs and SLCs, we contract with the supply chain in our own right.  The wide variation in contracting requirements for the NDA necessitates a diverse range of contract types, from procuring office stationery to multi-billion pound PBO contracts.

The NDA is has a duty under the Energy Act 2004 to promote effective competition for contracts, and as a Contracting Authority the NDA is subject to the UK Public Contracts Regulations which incorporate EU Procurement Directives. The NDA also has obligations through its Management Statement and Financial Memorandum to "ensure that an effective system of programme and project management and contract management is maintained" and is required to follow UK Government (in particular OGC) best practice in application of contract governance and lifecycle management.

 Contracting and Incentivisation Strategy February 2011 (1Mb)

Objective

To secure and manage effective and efficient procurement contracts which are affordable, provide value for money and deliver the NDA's mission through appropriate incentivisation.

Scope and Boundaries

The scope covers the contracts (including incentivisation and contract management) for:-

• Parent Body Organisations (PBOs) and Site Licence Companies (SLCs);
• NDA Internal Procurement (NDA direct procurement);
• Other advisory procurement roles;

and incorporates those objectives relating to the SLC Supply Chain as set out in the Supply Chain Development Strategy.

Strategy Interfaces

The Contracting and Incentivisation Strategy is an Enabling Strategy within the NDA's Strategy Management System (SMS) and is fundamental to delivering the requirements and obligations of the NDA through its supply base.  This strategy interfaces directly with all SMS Driving Strategies and requires that the commercial aspects are identified and analysed thus ensuring that the Driving Strategy and this Contracting and Incentivisation Strategy are fully consistent.

Key interfaces with the other enabling strategies include:

• Health, Safety, Security, Safeguards, Environment and Quality (HSSSEQ), because the maintenance of high standards of health, safety, security, safeguards and protection of the environment and the public are strategic priorities for the NDA.  
• Competition, because a critical deliverable in the competition process is a robust and effective contract.
• Supply Chain Development, because SLC Supply Chain flowdowns need to be incorporated into the appropriate contracts.
• Funding, because contracts need to be affordable, offer value for money to the Tax Payer and be appropriately flexible to meet NDA's and other parties funding levels.
• Business Optimisation, because contracts need to support and maximise profits from the revenue operations.

Credible Options

The wide variation in contracting requirements for the NDA necessitates a diverse range of contract types.  UK Government guidelines in the application of contract development, governance and lifecycle management recommend a strategy which is not based on a single solution (one size fits all), but a framework of policies and standards to implement the most effective contract appropriate to each circumstance.

Our strategy provides this framework of policies and principles to select the most suitable contract, outlines objectives in the development and enhancement of the contract and defines the appropriate level of contract management during its life cycle.

Current Position

For any new requirement, the initial assessment considers whether the task can be delivered using our own in-house resources, external suppliers or a combination of the two.  Where we have identified a requirement to procure goods or services, we will select the appropriate contracting model, such as several individual contracts, a single integrated contract or a bespoke model.  If the procurement is for goods or services which are common across the wider NDA estate and/or UK government, then we will collaborate with these parties to share servives and deliver savings.

To assist selection of the appropriate contract, we categorise procurements into four groupings based on assessed value and risk.

 

Strategic Critical (typically high value, high risk contracts) These require complex, innovative and bespoke contracts with intensive lifecycle contract management. 

Strategic Security (typically low value, high risk contracts) May require innovative and bespoke contracts with robust lifecycle contract management. 

Tactical Profit (typically high value, low risk contracts) Generally utilises standard contracts and appropriate contract management.

Tactical Acquisition (typically low value, low risk contracts) Utilises simple contracts to deliver lowest price fit-for-purpose deliverables.

 As value and risk increase, securing affordable best value solutions for the UK taxpayer throughout the whole life cycle becomes increasingly important.

Following selection and implementation of the most appropriate contract, the NDA is committed to delivery of its mission as effectively as possible through:

a) Embedded commercial expertise and governance in the NDA procurement and contracting functions in order to ensure application of best practice and appropriate controls; b) Appropriate application of contract lifecycle management from the start of early discussions through to contract closure in order to ensure that short and long term goals are met and moderated against estate-wide objectives;

c) Continued development and enhancement of any NDA contract, where the following objectives and principles must be considered and applied where appropriate:

• Transfer commercial and performance risk to the supplier where it represents Value for Money.  This allows the supplier to take on greater responsibilities and risks, but will require  additional reward as an incentivisation;
• Incentivise delivery of outputs and performance.  This means contracting for key deliverables (the 'what') which allows the supplier wider scope to find more effective and efficient solutions for delivery (the 'how');
• Incentivise long term SLC thinking, planning and delivery through letting of longer duration contracts (subject to compliance with procurement legislation) or incentivise multi-year performance for existing annualised contracts. This will allow the supplier to address longer term perspectives and avoid short-term solutions;
• Develop appropriate incentivisation and pricing models for each contract.  Each product or service has differing levels of certainty of scope and different market conditions; 
• Incentivise cross-supplier working.  Ensure that the NDA harnesses the collaborative benefits of suppliers working together without creating undue integration risk on the NDA;
• Focus on delivery through strategic partnering.  Develop the appropriate relationship with the supplier to underpin and support the contract;
• Incentivise innovation and transfer of best practice.  Incentivise knowledge transfer and sharing from parent companies, across the NDA estate and wider supply chain.

The strategy is mature and seeks to build on existing contracts whilst providing a platform for continuous improvement, has been consulted on with stakeholders and is continuing to be implemented across our estate.  

The current strategy will continue to be implemented and monitored.

The current strategy is at Stage D in the SMS.