The UK’s business secretary Greg Clark has called for an inquiry after a flawed tendering process for decommissioning old nuclear power plants led to a £100m loss.

The government has been forced to pay the figure in a settlement with two US companies for mishandling the way it awarded a £6.1bn nuclear decommissioning deal.Greg Clark

Former National Grid chief Steve Holliday is to lead the inquiry into the procurement process.

The government body tasked with decommissioning old reactors will also terminate the contract it awarded for cleaning up a dozen of the UK’s old nuclear sites nine years early.

In a written statement, Greg Clark, business secretary, said: “This was a defective procurement, with significant financial consequences, and I am determined that the reasons for it should be exposed and understood; that those responsible should properly be held to account; and that it should never happen again.”

The debacle dates back to a 2012-2014 tender process by the Nuclear Decommissioning Authority (NDA) for dismantling 12 sites. They include old reactors at Sizewell in Essex, Dungeness in Kent and Hinkley Point in Somerset, where the UK is building the first new nuclear power station in two decades.

A 14-year deal was awarded to international consortium Cavendish Fluor Partnership in 2014, but the bidders who lost out immediately launched a legal challenge.

On Monday, the Department for Business, Energy and Industrial Strategy said it had settled with US-headquartered engineering companies Energy Solutions and Bechtel, for £85m and £12.5m respectively. Had their litigation cases gone to trial, Clark said the “very substantial costs” had the potential to rise much further.

The government must now commence a new tendering process for the 12 sites, as the deal with Cavendish Fluor Partnership will end early, in September 2019 instead of 2028. Clark said he wanted to stress the deal was “no reflection” on the performance of the consortium, which will continue clean-up work over the next two years.

The contract is being terminated early because the NDA underestimated the scale of the decommissioning required to clean up the Magnox sites, which form part of the UK’s first generation of nuclear power stations.

Meanwhile one of the Cavendish Fluor Partnership (CFP) partners, Brown Babcock International, shares fell in early trading on Monday after the contract with the UK government was axed.

The move will reduce the value of Babcock’s pipeline by around £800m, cutting revenues from 2020-21 by £100m a year.