(Note to Reviewers - the 'price' given below is simply to enable publication here. Actual price will be published when a bid is accepted). Background The FID Enabling project team sits in DECC’s Commercial Directorate. The project is designed to enable early investment decisions for low carbon plants ahead of the implementation of the Electricity Market Reform (EMR). Chapter 4 of our recent Technical Update provides further information (http://www.decc.gov.uk/assets/decc/11/meeting-energy-demand/energy-markets/3884-planning-electric-future-technical-update.pdf). The FID Enabling process is open to low carbon developers who meet the characteristics outlined in paragraph 157 in that document, which includes demonstrating they are in a position to take a final investment decision prior to EMR’s implementation. Those who choose to come forward will participate in one-to-one negotiations with DECC over what form of comfort might be given to them ahead of EMR. We anticipate a series of negotiations with different developers from May 2012 until EMR is implemented, due in 2014. The eligible technologies that may choose to participate are renewables, nuclear and carbon capture and storage (CCS). The first developer to have come forward is NNB Generation Company Ltd, a consortium of EDF and Centrica to build a new multi-billion pound nuclear power plant at Hinkley Point. Engineering work required For the Hinkley Point C price setting process, DECC will make use of an open-book cost discovery exercise with the developer. Similar work may also be required for other developments if they come forward. We are therefore seeking expert nuclear engineers to evaluate, verify and, where appropriate, challenge costs submitted by NNB Generation Company Ltd. i. Detailed verification of the range of costs submitted by the developer. This will involve examining the basis of and assumptions behind costs and contingencies across the full lifecycle of the development (construction, operation and decommissioning), including the supply chain, based on benchmarks and an in-depth knowledge of the market. This will include assessing project plans, timelines and any relevant engineering information, along with the adequacy of the technical specifications; conducting independent cost evaluations; and attending meetings with the developer. The level of uncertainty around each cost will also be evaluated. The costs identified here will interact with the financial assumptions being assessed by DECC’s financial advisers. ii. Close interaction with the developer to secure additional information and challenge their assumptions where necessary. The principal aim of this work will be to assure DECC of the correctness of the costs submitted. A secondary aim will be to demonstrate to the developer that any amendments to their original estimates are justified. iii. Facilitation of the transfer of data and information into the cost and price model. For the cost data to be usable by DECC, it must interact properly with the cost and price model that informs the CfD strike price. iv. Adaptation of tools developed in the work above so that these can be used for subsequent developments, if relevant. This would include for example adapting any cost verification model, if DECC concludes there is value in doing so. Timescale and milestones The resource requirement below is our indicative estimate for the purpose of these bids and assumes the timely provision of good quality data from the developer. Delays in receiving data from the developer may shift these dates accordingly. The actual level of work required may also vary considerably. We expect senior staff to constitute a reasonable proportion of the resource provided. Expected Outputs • A detailed report with a conclusion on the correctness of the cost ranges estimated by the developer and the reasonableness of the uncertainties claimed by the developer. • An auditable suite of documentation, covering the processes followed, information exchanged and evaluations undertaken to achieve the above outcomes. • A report capturing lessons learnt from this work and how best to use the work undertaken for this negotiation in subsequent negotiations. • Additional such reports may be sought for other low carbon developments. Conflicts of interest Suppliers should include the following details in their bids: • Confirmation that they have no conflict of interest in respect of this work regarding the development at Hinkley Point C; OR • A list of existing relationships which could be considered potential conflicts of interest, along with a description of how these are proposed to be managed. • Details of how potential future conflicts of interest will be identified and avoided or managed. • A copy of their organisation’s code of ethics. We recognise it could be difficult to secure high quality engineering firms with no apparent conflict of interest regarding this project. Therefore we will carefully assess each supplier’s approach to managing any conflict that exists. Performance Monitoring Performance will be regularly assessed by the FID Enabling team in DECC’s Commercial Directorate. In the event that the performance of the supplier or their subcontractors is unsatisfactory, DECC will take steps to understand the basis for this and agree performance improvement measures with the supplier’s contract management representative. Should issues with performance remain, termination of the contract will occur according to its terms. Suppliers must provide details as to how they will manage sub-contractors.
Ref: TRN 406/05/2012,
james.clarke@decc.gsi.gov.uk
Contract value: 1.00GBP
Published: 13 Dec 2012, Receipt by: 13 Jun 2013
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