Two firms who lost out on decommissioning 12 nuclear sites will get £97.5m compensation.
A subsidiary of the infrastructure giant Babcock won the £6.1bn contract to clean up the sites in 2014.
But last year, the High Court ruled that the Nuclear Decommissioning Authority (NDA) had wrongly decided the outcome of the procurement process.
The NDA agreed the settlements, which include costs, with Energy Solutions and Bechtel.
The contact, awarded to 65%-Babcock-owned Cavendish Fluor Group, is also being handed back early because, Babcock said, it “is now materially different in volume to that which was initially specified”.
The 14-year contract will now end in September 2019 after just five years.
That will dent Babcock’s annual revenue by £100m in 2020-21. The group said it would replace that with new business.
Nonetheless, its shares were down more than 3% in Monday trading after the news.
Which nuclear plants will be affected?
Berkeley, Bradwell, Dungeness A, Harwell, Hinkley Point A, Oldbury, Sizewell A, Winfrith
Chapelcross, Hunterston A
There will be an independent inquiry into how the tender process was run and why the contract awarded proved unsustainable.
In a written ministerial statement, Business Secretary Greg Clark 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.”
He added that the inquiry will “review the conduct of the NDA and of Government departments and make any recommendations it sees fit – including what further investigations or proceedings, for example possible disciplinary proceedings, may be required as a result of its findings”.
The inquiry will be headed by Steve Holliday, the former chief executive of National Grid.