"Serious questions" need to be asked of the Nuclear Decommissioning Agency (NDA) following the collapse of a multi-billion contract, according to a damning new report.

The National Audit Office (NAO) made the comments after it investigated the way the Cumbria headquartered organisation handled a contract, which will be terminated nine years early at a cost of more than £100m to the taxpayer.

The NDA has apologied for what it described as "past mistakes".

The deal covered a contract awarded to Cavendish Fluor Partnership (CFP) to decomission and manage 12 magnox sites. These included Chapelcross, near Annan, Dumfries and Galloway.

This 14-year deal was announced in September 2014 following a two-year £6.1bn tender process. CFP is a joint venture between British plc Babcock International and American firm Fluor.

Greg Clark, the Energy Secretary, announced in March though that the NDA was terminating its contract in 2019. He also announced a public inquiry, which is still ongoing.

The aim of this deal was to cut costs by up to 10 per cent and the process was given the green light by HM Treasury.

This report states though: "In July 2016, the High Court found that the NDA had wrongly decided the outcome of the procurement process; the NDA agreed to settle claims in March 2017. Energy Solutions, one of the incumbent contractors for the Magnox sites until 2014, unsuccessfully bid for the contract, and subsequently issued legal claims against the NDA for damages.

"The High Court found that, had the NDA applied its evaluation criteria correctly, the winning bidder, Cavendish Fluor Partnership (CFP), would have been excluded from the competition. The NDA agreed to settle legal claims with Energy Solutions and its consortium partner at the time of the bid, Bechtel, at a cost of £97.3m."

It also says that while to contract was being consolidated the costs of the programme rose by more than £2bn, with a quarter of these costs not expected by the NDA.

This helped lead to an extension of the consolidation process and the NDA received advice that its contract could be subject to legal challenges. Mr Clark though had to announce the cancellation following a "significant mismatch" between the work specified in the contract and the work that needs to be done.

The NAO has estimated that the contract has cost the taxpayer "upwards of £122m", most of which came from a variety of legal costs and some coming from staff time.

Amyas Morse, head of the NAO, said: “The NDA's fundamental failures in the Magnox contract procurement raise serious questions about its understanding of procurement regulations; its ability to manage large, complex procurements; and why the errors detected by the High Court judgement were not identified earlier.

“In light of these issues, the Department must consider whether its governance and oversight arrangements surrounding the NDA are sufficiently clear and effective in providing the scrutiny and assurance it requires to meet the standards expected in managing public money.”

Meg Hillier MP, chairman of the Committee of Public Accounts: “The NDA was badly mistaken about the work it needed to do on its sites when it let this contract, and has had to cancel it nine years early. It now has to start again from scratch.

"This was one of government’s biggest ever contracts and it has gone wrong on a fundamental level. Its failure raises serious questions about the NDA’s capability.”

NDA chief executive officer David Peattie said: “I would like to apologise for these past mistakes. Since taking over earlier this year I have made a number of improvements to the way the NDA operates to provide greater focus, discipline, standardisation and simplification to our work. I have also taken steps to bolster our legal and commercial capability by the recruitment of a general counsel and commercial director. I am committed to doing everything to ensure these mistakes will not be repeated.

“We should not overlook the fact that good progress and savings continue to be made elsewhere in our decommissioning and hazard reduction work. However, this does not detract from the regrettable series of events highlighted by the NAO today.”