As the new build programme develops, procurement processes and contacts will become a key factor for all supply chain companies to consider. See below an expert briefing on EDF Energy’s procurement practices, written by Burges Salmon LLP. Meanwhile the Get Involved section of this site contains up to date links to major developers procurement portals.  

West Somerset District Council has approved preparatory works at Hinkley Point C in North Somerset. The preparatory works follow the publication of the White Paper on Electricity Market Reform on 12th July 2011 and ratification of the National Policy Statement for Nuclear by Parliament on 18th July 2011.
 

NUCLEAR NEW BUILD

This article considers the characteristics of the procurement strategy being adopted by EDF and those of the other procurement strategies being discussed and considered by the industry and by the other developers planning to develop NPPs in the UK. Given that the capital cost of an NPP is such a critical factor in the business case for a NPP compared with conventional power plants, choosing the right strategy and ensuring successful delivery is key to success. 

There are two main strategies under consideration: the EPC ("engineer procure and construct") or 'Turnkey' model, and the A/E ("Architect Engineer") or EPCM ("engineer procure construct and manage") model, referred to in the remainder of this article as "Turnkey" and "A/E" respectively.

The A/E model has been adopted by EDF with EDF performing the A/E role itself with support from Amec,specialists in managing the delivery of complex infrastructure projects. The A/E develops the technical requirements for the plant, divides the works and services up into individual packages and co-ordinates and manages the various members of the supply chain to meet the quality, budgetary and time constraints of the project. The contracts for the various works packages are entered into by the developer rather than the A/E, however. Through its extensive nuclear new build programme in France, EDF has developed a highly sophisticated and experienced in-house team which allows it to assumethe pivotal A/E role itself. The attraction of this model is the tremendous flexibility it affords the developer as to how the project is delivered (particularly important when it comes to NPPs, where the safety and quality standards are sacrosanct), and the avoidance of a substantial risk premium that an EPC/Turnkey contractor would charge to take on whole-project delivery risk.

Although the precise risk allocation between developer and contractor will vary from project to project, in broad terms, a Turnkey strategy seeks to transfer the risk of delivering the NPP to one provider who itself assembles and manages the supply chain with a view to achieving the developer's performance requirements within time and budget. This level of risk transfer is particularly attractive to providers of project finance who like to see a third party holding the key project delivery risks rather than the borrower. 

Other advantages to the developer include: the availability of whole-plant technical warranties (e.g.availability guarantees and power output guarantees); the transfer of the risk of cost and time overruns; and the reduced level of input required from the developer, although the developer will still need to develop sufficient internal resource to meet the 'intelligent customer' requirement which is a standard condition of all nuclear site licences. 

Article provided by Burges Salmon LLP, for further information, please contact Steven James, Senior Associate, on 0117 307 6947 or email him at This e-mail address is being protected from spambots. You need JavaScript enabled to view it

• Tier 1, as part of the owner’s team – A/E, PM, specialists and supply chain secondments
• Tier 1, as part of an EPC team or A/E - PM
• Tier 2, main suppliers  & contractors – Main items and main construction – Designers
• Tier 3 and 4 – Subcontractors & component suppliers – 3rd party checkers/verifiers – Approved suppliers