Managing the costs of new build nuclear power

The property and construction consultancy Rider Levett Bucknall has more than 25 years experience of working in the nuclear sector and has recently been appointed to lead the cost management team at Olkiluoto 3 in Finland. Deryck Barton, head of nuclear for Rider Levett Bucknall, talks about the problems and solutions of managing costs for both new and existing nuclear plants and explains how the changing role of the cost consultant is set to alleviate some of the challenges.

Deryck Barton, Rider Levett Bucknall, UK

The transfer from a public to private sector focus is undoubtedly introducing a new type of financial accountability and culture to the world of nuclear power. New funding streams are the key catalyst for the change. Existing nuclear plants are set to be managed on behalf of the government by external bodies and new build projects, announced last year, will all be developed using private sector investment.

Cost consultants are playing a key role in this transition. UK cost consultant Rider Levett Bucknall’s long association with the nuclear industry is reflected in its portfolio of activity. It has been engaged on all the main major nuclear sites across the UK including Sellafield, LLWR, Springfields and Magnox, and has supported the UK nuclear cleanup and decommissioning programme across those locations for over 15 years.

It is also currently supporting the major projects and re-kit directorates at Aldermaston and Burghfield on behalf of the Atomic Weapons Establishment (AWE). Rider Levett Bucknall is well versed in supporting tier one clients and delivering a range of services that include cost management, commercial management, project controls and programme management. Other services provided to the nuclear marketplace include process engineering and mapping, lifetime planning and auditing, as well as developing bespoke innovative solutions to specific client needs.

Nuclear power is set to play an increasing role in Europe’s low carbon energy mix

Rider Levett Bucknall has been traditionally focused on all works associated with decommissioning and clean-up sites. This incorporates working across a host of facilities including processing plants, manufacturing facilities, reactor and support buildings, waste storage, rafts, offices and major service diversions. However, serving the new build market is an obvious focus for the team going forward.

Three years ago, nuclear opportunity on a global scale reached new heights for the UK firm who became part of an international alliance. Rider Levett Bucknall is a global property and construction practice with over 2000 people in more than 80 offices across Asia, Oceania, Europe, Middle East, Africa and the Americas.

It was in June 2007, that the then Bucknall Austin in the UK officially became part of this global practice. Having established that a number of its top customers were either international or global, it had been developing options for its future expansion. The timing was perfect when Rider Hunt and Levett & Bailey made the approach in its search for a UK and European partner. The opportunity helped the consultancy to retain its independence and move the business forward to a global footing while retaining its core delivery strategy for regional and national clients.

Artist’s impression of the OLK3 nuclear power plant, Finland Source: TVO

The beneficial outcomes of such an alliance have been evident. Earlier this year, Rider Levett Bucknall was appointed to lead the cost management team at the Olkiluoto 3 (OLK3) nuclear plant in Finland. As is well documented, upon completion OLK3 will be Western Europe’s first Generation III nuclear power station, the biggest nuclear reactor in the world and will start to pump out electricity in 2012. The excavation site alone is the size of 55 football fields.

OLK3 is the first European nuclear project to be secured since the new alliance and another milestone has been recently achieved. In collaboration with its Middle East colleagues, Rider Levett Bucknall has also recently secured a pre-qualification position with the UAE’s nuclear commission.

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NEVER TOO EARLY

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Fundamentally, many of the issues hindering efficient cost control could be avoided by introducing commercial cost consultants at the concept stage. The cost consultant, of course also known as a ‘quantity surveyor’, has a wide and varied commercial skills base and plays a key role in the efficient set up of any project. It can never really be introduced too early. Many cost consultants are appointed once preliminary costs have been calculated by the internal team and at a stage when a certain amount of project planning has already taken place. This has been standard practice over the past couple of decades and sits in stark contrast to other industry sectors where the cost consultant, architect, engineer, planners and other specialist teams, such as mechanical and electrical, work closely together from the start.

The negative impact of a late introduction is immediately obvious. Improving contractual conditions from the beginning, as well as establishing a clear working process to enable the project to develop and best evolve, is a key role of the cost consultant. This basic groundwork should be what forms the agreed working methodology for the lifetime of the project.

Areva’s European Pressurized Reactor/Evolutionary Power Reactor (EPR) Source: Areva

The reasoning behind the late introduction is logical. Existing nuclear sites house a project services department that employs its own skilled team that works on the day to day operation of the plant. The expertise of these teams is also applied to much of the preliminary work required to deliver indicative cost and timing plans on new projects. It has long been the view that using the on site team in the early stages of a project will save on initial costs.

However, lessons have been learned and it has now been widely acknowledged that this starting point rarely bodes well. Along with a more mature and effective supply chain approach to the new nuclear era, the invaluable input that an external specialist can make to such preliminary work is becoming widely recognized, with undisputed cost savings and other benefits delivered as a result.

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PRELIMINARY COSTS

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Once on board, the external team revisits the preliminary costs and confirms that they are achievable. This external validation is essential for the team who must be assured that the project is feasible.

This is a practical step to take. Nobody in the commercial world would agree to costs that they believe are a non-starter. As the nuclear sector now starts to move towards a private sector ethos, and an early introduction of the consultant becomes the norm, as in other sectors, revisiting these costs will become a thing of the past.

The bespoke nature of each existing individual project always introduces an unavoidable element of the unknown into the project arena as very few plants perform the same function. Through no fault of their own, clients are often unclear about what they need in a final design, thus creating another potential opening for design changes to be made.

This is set to change for new build sites. Their construction will vary, dependent on the reactor used, but the template will be similar and once the first few sites have been developed, subsequent locations should be built quicker as lessons are learned and problems ironed out. A more efficient time-frame build is certainly on the cards. Once the nuclear project becomes live, the design of the project continues to evolve and improve and changes increase as a result. Better cost control can be implemented when revised changes are released on a more regular basis rather than at certain stage gates of the project. A cost team can only provide costs when designs are updated and if the design is released in large sections, the financial impact is less controllable for the project.

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NEED FOR COMPLETE COST BRIEF

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An incomplete cost brief can also lead to complications when the supply chain enters the equation and tenders are issued. If incomplete, the brief will not include all the facts and neither will it be sufficiently detailed to manage and mitigate all the risks. As in most areas of life and work, a constantly changing brief to a supplier will result in constantly changing costs, something that could be avoided, especially when the project is in full progress.

Once again, it is the early arrival of the cost consultant that helps to consolidate the brief. The team can advise on the commercial reality of the project as well as deliver a more accurate cost. If budget changes have to be made it is also not averse to changing a supplier or product at no detriment to quality.

There are other issues facing the cost consultants and many other large public and private organizations right across the globe. Effective communication channels are a priority for all major concerns, especially with 21st century work practices that see communication to all its audiences as a key strength on a very competitive world stage. With more than 10 000 people working on a nuclear site, this type of effective communication is a challenge that takes some doing to engage everybody across the whole site effectively. Often relating to processes and procedures, the messages need to be received and understood by a wide audience. This should embrace all those on the client side right through to those in the supply chain.

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CO-OPERATION, CO-OPERATION, CO-OPERATION

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It also includes increased inter-departmental liaison to ensure best value for the job. It has been known for the cost department to work separately from the procurement department as, 25 years ago, the benefits of working together were not appreciated. Now it is recognized that anything commercial on a project needs to be cemented together so there is one department dealing with the commercial aspect of the project. New nuclear builds introduce associated works that have not been the norm for an energy provider for many years. This is a new learning curve for all.

A new station at a new location requires substantial levels of preparation before an operator can even start on site and this is where the practice of introducing the cost consultant and other planning and engineering experts early on will fall into the norm with other industry sectors. Without their input at this stage, the project will not get off the ground ” or out of it!

Interrogation of the planning document is an integral part of this process, identifying what infrastructure is required and how much this stage of the project will cost. An accurate analysis of cost data at this stage is a necessity, as a financial miscalculation could have very unwanted repercussions for the private sector. The cost consultant will work hard alongside the local councils and the government to achieve best value in this area.

Best value also needs to be achieved in negotiations with all the supply chain and it is the cost consultant that will ensure this happens. The industry is most definitely changing. With a new era of nuclear power dawning, late engagement of the cost consultant is fast becoming a thing of the past. Rider Levett Bucknall is already in discussions with private sector led energy operators about their future plans. The benefits of welcoming the cost team on board in the initial stages have at long last been recognized.

Rider Levett Bucknall is participating in Nuclear Power Europe ” part of POWER-GEN Europe. Managing partner Mark Weaver will be a member of the panel discussion, ‘The Viability of Nuclear Power ” Politics, Economics and the Environment’, on Wednesday 9 June in Amsterdam.

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Case Studies

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Sellafield Limited ” MOX Plant

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Rider Levett Bucknall provides a number of services including project control, planning and cost engineering support, life cycle baseline (LCBL) and near term work plan (NTWP) development, along with programme management.

A à‚£200 million ($309 millon) programme of works was carried out under a framework agreement. Rider Levett Bucknall introduced the initial cost engineering and quantity surveying and latterly, planned for the project management team to control the design, build and commissioning phase of the project into an operational state.

Upon the introduction of the Nuclear Decommissioning Authority (NDA), Rider Levett Bucknall was requested to lead and produce the first LCBL and NTWP for this project as part of the total Sellafield site submission.

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Atomic weapons establishment (AWE)

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Rider Levett Bucknall provides a range of commercial services for AWE, including due diligence reporting on new site management contracts, establishing and delivering control systems, project process mapping, gate systems, and capital work programmes.

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Springfield Works

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Rider Levett Bucknall has played a key role at Springfield Fuels Ltd. for over 20 years. The experienced nuclear team has provided cost and commercial management, project controls, programme management and added value services, including process engineering, database management and risk management. Major projects include Line 4 Hex Plant, Oxide Fuel Complex, Line 3 Hex Plant, as well as research and development facilities.

Rider Levett Bucknall continues to work alongside Springfield Fuels on its on-going operational and plant refurbishment and commissioning programme.

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UKAEA

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Rider Levett Bucknall provides quantity surveying, and contract and procurement support on various sites within the UK. Projects include decommissioning and waste retrieval.

British Nuclear Group

Rider Levett Bucknall has been engaged by the British Nuclear Group to design, develop and implement a database to record and manage all of their built assets. The British Nuclear Group site at Sellafield in Cumbria contains more than 900 buildings, plus associated plant and infrastructure. Historically, there had been no single source of data by which to monitor these assets.

Rider Levett Bucknall proposed a database solution that was first released for general use in early 2003 and continues to work with British Nuclear Fuels to continually improve and develop the system.

Rider Levett Bucknall is acting as cost consultants for the 1600 MW Olkilouto 3 nuclear plant being built by a consortium of Areva and Siemens Source: TVO

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