REUTERS | Jason Lee

The nuclear option

Many people think that what they do is rather special and that inexperienced or untrained outsiders should not “dabble”.

Although there is always scope for innovation and a need for new players to be able to keep markets competitive, there are times when proper qualifications and experience are important.

The nuclear industry is one of those places where dabbling is not a very good idea.  I am reminded of a line in the film “The Hunt for Red October” where a submarine captain needs to get somewhere very quickly. He asks his engineering officer whether the nuclear reactor that powers the sub can be run at 105% to increase the top speed.  The answer comes back: “possible but not recommended”.

This is something of a problem for the nuclear industry in this country at the moment, as our nuclear expertise is typically found in an ageing workforce. If the current plans for new-build nuclear power stations are to be achieved, we need to train up a whole new generation of engineers and other professionals before those with experience retire.

One set of rules for the whole site?

One issue which directly affects the training and experience requirement is the need to run the whole of a nuclear site in the same way. Obviously, the design, construction and subsequent operation of the “nuclear island” needs to involve special procedures and regimes. However the nuclear island is only one part of the site. Is it really necessary to run the rest of the site in the same way?

An example: the fixed price menu

I recall many years ago working on a project for the construction of a new train. Part of the way through the design process the train operator requested a change for the bar car. The bar car needed to display a menu on the wall. The train operator sent a variation order to the contractor asking that the menu, instead of being fixed directly to the wall, should be printed on a sheet of paper and then put into a perspex case on the wall. The perspex case would have a slot at the top to make it easier for the staff to change the menu. The contractor did the necessary design work and then sent in a bill for many thousands of pounds of engineering time. The increase in construction cost was negligible.

When asked to justify this, the contractor explained that every design change had to be examined from a number of angles. For example:

  • Would this change affect the weight of the carriage and therefore possibly acceleration, top speed or power consumption of the entire train (possibly even prejudicing the ability to achieve the contractually required performance)?
  • Would the variation cause a change in the carriage dimensions that meant that overhead or side clearances for the train would not be met?
  • How would a paper menu and a perspex case behave in a fire?

The same procedure has to be followed for every variation. A small change cannot be dismissed as insignificant:

  • How can you define “small”? How small does it have to be before the effect can be ignored?
  • If the parties agree a large number of “small” variations, the cumulative effect may no longer be small.

Back to a nuclear site

The same issues, such as what a “small” variation might be, apply to nuclear sites.

Although the design of, for example, a car park may seem non-nuclear, it might play an important role in access for emergency services or for evacuation of personnel. It is conceivable that the excavation and drainage works for a car park could impact on the whole site.

Further, there is always the possibility of “scope-creep” – the car park contractor might be asked to supply something which directly affected the nuclear island and, at that point, imposing the special procedures and regimes would be much more difficult.

Running two separate regimes on a single site is not best practice as it creates an opportunity for confusion. It may well be that “satellite” facilities – such as a car park – could be operated under “normal” conditions, but the parties would have to take care throughout the project to ensure that those facilities remain truly outside the nuclear island.

The Construction Act 1996

An interesting twist to this issue concerns what the nuclear industry does not have to do. (By the way, the following also applies to the other excluded industries such as water and conventional power.)

In theory, nuclear sites are not covered by Part II of the Housing Grants, Construction and Regeneration Act 1996 (Construction Act). Well that’s the theory. In fact, the exception in section 105(2) says that the following are not construction operations:

“(c) assembly, installation or demolition of plant or machinery, or erection or demolition of steelwork for the purposes of supporting or providing access to plant or machinery, on a site where the primary activity is—

(i) nuclear processing, power generation …”

That’s quite a narrow exception.  Some works will be covered and some won’t.

Some contracts will be borderline and you might need to refer to the body of case law which looks at how the exceptions work in practice. Although the initial flurry of cases could be said to have “settled down”, there could still be some surprises.

Section 104(5) says:

“Where an agreement relates to construction operations and other matters, this Part applies to it only so far as it relates to construction operations…”

I’ve read some of the cases that look at whether you can deal with section 104(5) by splitting up a contract, either using the traditional “blue pencil” or another legal concept. In general, the problem (or, depending on your point of view, the opportunity) of splitting up a contract is acknowledged but remains what I would euphemistically describe as “available”. That is, it could create or allow a legal argument between the parties.

In the meantime, because of the element of uncertainty, some people might think that it is a good idea to provide for (for example) adjudication to avoid having two dispute resolution systems on the same contract. Alternatively it might be an idea to scope contracts quite carefully to try to fall entirely within (or without) the exceptions.

If it is not a good idea to run two regimes on a single site – nuclear and non-nuclear – then it must also be the case that it is not a good idea to run two contractual regimes on the same project – one Construction Act compliant and one non-Construction Act compliant. There could be some exceptions to this but, again, I suspect that those exceptions would in any event be “stand-alone”, on bespoke terms and perhaps under different commercial arrangements.

Health and safety

Let’s look at this from a different point of view.

Although people think of nuclear sites as involving mainly nuclear risk the fact is that many of the activities on site are the same as in other industries outside the nuclear sector. Nuclear sites are said to have a better overall health and safety record than many other sectors – see, for example, the OECD policy brief on Nuclear Energy (October 2008), which makes this assertion. The policy brief uses 2003 as an example. The worldwide industrial safety accident rate resulting in days off work at nuclear power plants was 0.28 accidents per 100 full-time workers. By comparison, the US national average for industrial plants for the same year was 2.6 accidents per 100 full-time workers.

This might be because the nuclear health and safety regime is enhanced. It might also be that when people are working in a high-risk industry they behave in a different way.

I’m reading a book about evidence-based medicine at the moment. It looks at things like the placebo effect. The author says that the health of people in a clinical trial improves even without a placebo. The mere fact that people are being monitored (in a research context) actually improves their health.

I wonder whether there is a “nuclear” effect over and above the actual enhanced regime. In other words, are projects that are perceived to be inherently dangerous actually good for health and safety performance? Interesting research topic!

Back to the Construction Act and the nuclear sector

Turning back to the Construction Act, it might also be interesting to see why certain industries were “excluded” and what the effect has been.

Most of my clients are in the power and water industries and I routinely advise them to make all of their contracts Construction Act compliant, including those contracts that would otherwise be excluded from the Act.

There are two reasons for this:

  • It is not always easy or convenient to run two contractual regimes because of:
    • the difficulty in being sure which contracts are covered and which are not; and
    • the extra work involved.
  • Most of the Construction Act is simply best practice and there is usually no good reason not to comply.

As for adjudication, I think that (on balance) it has been beneficial, even for purchasers, now that the dispute crystallisation and anti-ambush case law has become established. The fact that adjudication is available may even make people behave in a different way than if the only remedy was the courts or arbitration.

Anecdotal evidence also suggests that there are fewer disputes needing to be resolved by a formal process in industries with a smaller number of players and where the owners are repeat (rather than one-off) purchasers.

There are always exceptions, but I wonder whether we will see the nuclear industry embracing (at least in part) the Construction Act for new-builds for broadly the same reasons as they apply the nuclear regime even to the non-nuclear parts of their sites.

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