How do they get away with it?
Discussion
I was just reading an article on potential budgets for Sizewell C and it included some detail on the current development for Hinkley Point C.
Apparently the original budget was £18bn and in 2007 the CEO of edf promised it would be producing electricity by Christmas 2017. However the current budget (not final figure!) is £46bn and no electricity is expected before 2031!
How is it possible to be so wrong on cost and budget? I can’t recall whether there was open bidding and other interested parties for building the reactor and whether edf got the go ahead because their budget/timetable was better but if they were we should be suing them (but of course won’t because it would cause diplomatic problems with the French).
In any normal world, having a final figure exceeding budget by almost two and half times and being at least 14 years late would not be acceptable. Well as least I would love to get my clients to cough up that much for delivering massively late!
Why are allowing foreign countries to be involved in the building of such nationally important assets? If it it going to be done incompetently and over budget we could easily do that ourselves!
Apparently the original budget was £18bn and in 2007 the CEO of edf promised it would be producing electricity by Christmas 2017. However the current budget (not final figure!) is £46bn and no electricity is expected before 2031!
How is it possible to be so wrong on cost and budget? I can’t recall whether there was open bidding and other interested parties for building the reactor and whether edf got the go ahead because their budget/timetable was better but if they were we should be suing them (but of course won’t because it would cause diplomatic problems with the French).
In any normal world, having a final figure exceeding budget by almost two and half times and being at least 14 years late would not be acceptable. Well as least I would love to get my clients to cough up that much for delivering massively late!
Why are allowing foreign countries to be involved in the building of such nationally important assets? If it it going to be done incompetently and over budget we could easily do that ourselves!
Skeptisk said:
Why are allowing foreign countries to be involved in the building of such nationally important assets? If it it going to be done incompetently and over budget we could easily do that ourselves!
As we haven't built any nuclear power stations since Sizewell B in 1995 the knowledge has been lost as people have retiredI'd guess everyone shoves their noses in and it goes all chuckle bros, to me to you, hence a 10 year plan becomes a 25 year one and costs spiral out of control, I think the same has happened with HS2 everyone wants another tunnel or this or a that.
It's taken 23 years and billions to build 28 miles of road in Wales, I mean WTF?
We're not fit for purpose.
carl_w said:
s we haven't built any nuclear power stations since Sizewell B in 1995 the knowledge has been lost as people have retired
Building new ones would force us to rebuild that knowledge. No doubt at the time we were told it would be cheaper to use someone else with experience…Construction on the ground didn't start until 2017 - so 2017 was always going to be an optimistic start date!! Blame a lack of direction from the government (of both colours!) for not actually committing to it.
Over 50% of the cost is finance, IE interest payments.
The UK government didn't want to use their own borrowing to pay for it, and so made EDF (which was, at the time, a private company) pay for it instead. UK government would have paid about 2% on the debt, but EDF had to pay about 7% from memory. Of course, the UK consumer ends up paying in the end through higher bills.
The funding model they want to use for SZC will be different, and result in consumers paying more up front but borrowing is less and thus it will be cheaper overall. Also, building the second one will be cheaper and faster as a result of learnings from the first unit.
EDIT - Another thing to note, BTW, is that the cost over-runs are (I believe) being paid by EDF. The price they get for power is not related to the cost of building it and so while it's not great it's costing more than expected and taking longer than expected, the price we pay for the electricity remains the same.
Over 50% of the cost is finance, IE interest payments.
The UK government didn't want to use their own borrowing to pay for it, and so made EDF (which was, at the time, a private company) pay for it instead. UK government would have paid about 2% on the debt, but EDF had to pay about 7% from memory. Of course, the UK consumer ends up paying in the end through higher bills.
The funding model they want to use for SZC will be different, and result in consumers paying more up front but borrowing is less and thus it will be cheaper overall. Also, building the second one will be cheaper and faster as a result of learnings from the first unit.
EDIT - Another thing to note, BTW, is that the cost over-runs are (I believe) being paid by EDF. The price they get for power is not related to the cost of building it and so while it's not great it's costing more than expected and taking longer than expected, the price we pay for the electricity remains the same.
Edited by Condi on Tuesday 14th January 16:31
The simplest explanation is just corruption. We like to think Britain is transparent and honest and maybe it's all been held up by some rare owls or an interesting celtic burial site etc. In reality it's just loads of people milking it at every stage. It might not be brown envelopes full of cash but make work schemes and bloated fees. I'm not quite sure how other countries better manage to build power stations (or motorways etc for that matter) but they do, and we don't.
Do we even have the ability to build things any more? I think the idea was that everything got outsourced from collecting bins, changing lightbulbs, fixing potholes, to building nuclear powerstations.
As such when something comes up, it's not about who builds it, it won't be the UK govt, more who pays for it.
So at contract time, a budget is guessed at and a timeline. Since there aren't many prepared to do the job, the negotiation means the govt can't penalise for lateness, nor for going over budget (it's not their cost anyway).
One thing I think the govt did do was agree a strike price for the power for the first 35 years of operation £93 per MWh - so 9.3p per kWh/"unit".... but of course that's linked to inflation... so when last checked was at £139/13.9p But at least EDF can't just overcharge to cover their loss straight away.
As such when something comes up, it's not about who builds it, it won't be the UK govt, more who pays for it.
So at contract time, a budget is guessed at and a timeline. Since there aren't many prepared to do the job, the negotiation means the govt can't penalise for lateness, nor for going over budget (it's not their cost anyway).
One thing I think the govt did do was agree a strike price for the power for the first 35 years of operation £93 per MWh - so 9.3p per kWh/"unit".... but of course that's linked to inflation... so when last checked was at £139/13.9p But at least EDF can't just overcharge to cover their loss straight away.
JuanCarlosFandango said:
The simplest explanation is just corruption. We like to think Britain is transparent and honest and maybe it's all been held up by some rare owls or an interesting celtic burial site etc. In reality it's just loads of people milking it at every stage. It might not be brown envelopes full of cash but make work schemes and bloated fees. I'm not quite sure how other countries better manage to build power stations (or motorways etc for that matter) but they do, and we don't.
I often wonder if one of the differences is that the sort legal systemic pork-barrelling and job-making that blight major British projects are all about making sure stuff is not done, or at least not done as quickly (you can get several years of consultancy fees or departmental funding for doing impact assessments and re-assessments, and then more for reanalysing the finances and CBAs once everything's been set back five years etc. etc. etc.) while the more naked corruption that goes on in other places is about getting stuff done but with a brown envelope going into the right hand. The mayor of some village in an Italian alpine prefecture can say that the new autostrada won't be coming through his patch until he gets the brown envelope and the engineering contracting firm that he just-so happens to have founded a month previously gets the work, and his cousin's cement works gets a cut of the business, but a) that sort of thing is just accepted as to how these things work and b) once the envelopes have been exchanged and the convenient contracts signed, there is every incentive to get the project done so you can start making money off it.
The British system is 'designed' so that, in our bureaucratic, service-orientated economy, much of the money-making potential happens before a spade or a bulldozer blade ever hits the ground, so there is a perverse collective incentive to bog everything down with paperwork.
I am absolutely not a libertarian in these matters and do not yearn for a Milei-style chainsaw to the public sector, but imagine if the incentives encouraged bloating the engineering specs and execution rather than the pre-job paperwork?! Every Welsh valley would have an autostrada-grade highway winding up it, we'd have nuclear reactors on every headland and South Korean-spec broadband under every street.
phil4 said:
Do we even have the ability to build things any more? I think the idea was that everything got outsourced from collecting bins, changing lightbulbs, fixing potholes, to building nuclear powerstations.
.
Fundamentally, no we don't. Which is why we have to buy or generate those skills in at huge expense every time. .
After 40 years of everyone in power being convinced that not only should the state not do anything but often being true believers that it can't do anything, and with the off-shoring, out-sourcing and off-selling of those abilities, there is also a complete dearth of experience and expertise in the halls of power to actually draw up contracts, specs etc. and evaluate bids, write contracts and manage projects. These also get outsourced to external (for-profit...) organisations. Which is why these things so often heavily favour the private-sector contractor and become a seemingly unlimited and consequence-free money funnel.
Edited by 2xChevrons on Tuesday 14th January 16:43
Edited by 2xChevrons on Tuesday 14th January 16:43
carl_w said:
s we haven't built any nuclear power stations since Sizewell B in 1995 the knowledge has been lost as people have retired
Sizewell B cost a fortune. Building others on a similar template afterwards could *possibly* have been cheaper, but we like to re-invent the wheel every time in the UK. The UK regulatory environment doesn't help.The nuclear industry is a money pit.
Skeptisk said:
I was just reading an article on potential budgets for Sizewell C and it included some detail on the current development for Hinkley Point C.
Apparently the original budget was £18bn and in 2007 the CEO of edf promised it would be producing electricity by Christmas 2017. However the current budget (not final figure!) is £46bn and no electricity is expected before 2031!
How is it possible to be so wrong on cost and budget? I can’t recall whether there was open bidding and other interested parties for building the reactor and whether edf got the go ahead because their budget/timetable was better but if they were we should be suing them (but of course won’t because it would cause diplomatic problems with the French).
In any normal world, having a final figure exceeding budget by almost two and half times and being at least 14 years late would not be acceptable. Well as least I would love to get my clients to cough up that much for delivering massively late!
Why are allowing foreign countries to be involved in the building of such nationally important assets? If it it going to be done incompetently and over budget we could easily do that ourselves!
When large construction projects are budgeted they are done using historic costs because if the project takes 10 years to get approval and 15 years to complete it is inevitable that costs will have risen over that time. Therefore a "budget" is not really a budget more an illustration of the cost at recent prices.Apparently the original budget was £18bn and in 2007 the CEO of edf promised it would be producing electricity by Christmas 2017. However the current budget (not final figure!) is £46bn and no electricity is expected before 2031!
How is it possible to be so wrong on cost and budget? I can’t recall whether there was open bidding and other interested parties for building the reactor and whether edf got the go ahead because their budget/timetable was better but if they were we should be suing them (but of course won’t because it would cause diplomatic problems with the French).
In any normal world, having a final figure exceeding budget by almost two and half times and being at least 14 years late would not be acceptable. Well as least I would love to get my clients to cough up that much for delivering massively late!
Why are allowing foreign countries to be involved in the building of such nationally important assets? If it it going to be done incompetently and over budget we could easily do that ourselves!
As already pointed out, Hinkley Point C wasn't given approval until September 2016 with construction starting in March 2017 so it was never going to be generating electricity by Christmas of the same year.
I believe that the UK Government contribution to HPC is limited to £2bn with an index linked guaranteed strike price (the price that EDF can sell the electricity generated). The overspend is EDF's problem to deal with and have already had to go to the markets for €4bn of funding (75% of which was from the French Government).
If the project continues to overrun in terms of costs and time then ultimately it is the French taxpayer that is going to be taking the hit.
Condi said:
Another thing to note, BTW, is that the cost over-runs are (I believe) being paid by EDF. The price they get for power is not related to the cost of building it and so while it's not great it's costing more than expected and taking longer than expected, the price we pay for the electricity remains the same.
Which a good thing, particularly when the base price of electricity is higher than that locked with Hinckley. But not when the base price is less – as the case. I watched a programme last night about it in which they predicted each home in the UK will be paying between £10 and £15 a year more as a result of the deal.
JuanCarlosFandango said:
The simplest explanation is just corruption. We like to think Britain is transparent and honest and maybe it's all been held up by some rare owls or an interesting celtic burial site etc. In reality it's just loads of people milking it at every stage. It might not be brown envelopes full of cash but make work schemes and bloated fees. I'm not quite sure how other countries better manage to build power stations (or motorways etc for that matter) but they do, and we don't.
It's not corruption in the general sense of the term. The informal term is ‘buying a contract’. It used to happen lot in waste management where a Local Authority would tender for a seven or 12 year waste and recycling contract. Companies would bid at a price below the cost to provide the service. They’d be appointed, get up and running and then say they can’t afford to run the contract and need more money. The Local Authority couldn’t afford to run another bid, they needed the service so had no choice to pay up. A few played hard-ball and refused to pay and the waste companies just liquidated themselves and the council bought the services back in house.
Thankfully, Local Authorities now apply proper due diligence to bids and exclude any that are unusually cheap...... but then face criticism for not going with the cheapest bid.
Other countries? Most suffer the same. Those that don’t are those that build their own infrastructure and this is also where true corruption is rife. Exceptions are the Scandi nations that seem to have a well-managed approach to the process.
cossy400 said:
THIS!!!
When it's too far in to back put so they have to carry on also see HS2 which is miles over budget but they won't stop it as it's too far gone.
Cash cow Britain
So what is the alternative? Don't build anything new, and keep relying on 1960's power stations until they break? When it's too far in to back put so they have to carry on also see HS2 which is miles over budget but they won't stop it as it's too far gone.
Cash cow Britain
A large part of the reason we are where we are is because of a lack of infrastructure investment over the last 30 years.
Biker 1 said:
carl_w said:
Amazing what can be done with a jar of great crested newts.
Don't get me started on all that BS!!!!I'm in construction: asbestos surveys ok. Bat, newt, owl, plant surveys are utterly ridiculous, cost huge amounts of time & money, & achieve little or anything.
Condi said:
cossy400 said:
THIS!!!
When it's too far in to back put so they have to carry on also see HS2 which is miles over budget but they won't stop it as it's too far gone.
Cash cow Britain
So what is the alternative? Don't build anything new, and keep relying on 1960's power stations until they break? When it's too far in to back put so they have to carry on also see HS2 which is miles over budget but they won't stop it as it's too far gone.
Cash cow Britain
A large part of the reason we are where we are is because of a lack of infrastructure investment over the last 30 years.
I've never agreed with HS2 complete waste of money for the few minutes faster it ll get you to London.
Get up earlier ffs
cossy400 said:
Condi said:
cossy400 said:
THIS!!!
When it's too far in to back put so they have to carry on also see HS2 which is miles over budget but they won't stop it as it's too far gone.
Cash cow Britain
So what is the alternative? Don't build anything new, and keep relying on 1960's power stations until they break? When it's too far in to back put so they have to carry on also see HS2 which is miles over budget but they won't stop it as it's too far gone.
Cash cow Britain
A large part of the reason we are where we are is because of a lack of infrastructure investment over the last 30 years.
I've never agreed with HS2 complete waste of money for the few minutes faster it ll get you to London.
Get up earlier ffs
It’s a very worthwhile project but it’s been badly mismanaged by virtually everyone involved from ministers down.
For the real pissboiler though you’d be hard pressed to beat the proposed Lower Thames Crossing. Over £300m spent and over 360000 pages of documents produced just on the planning process so far and not a spade has hit the ground yet. It’s planning wheee things are held up and end up adding to the costs as they try and please everyone and end up spending double the original budget and taking a decade longer than envisaged.
Edited by valiant on Tuesday 14th January 22:56
Gassing Station | News, Politics & Economics | Top of Page | What's New | My Stuff