Ministers have whittled down the contenders for a £1 billion-a-year contract to clean up the Sellafield nuclear site to two, with a decision expected to be announced next Friday, The Times understands.

The favourites, from a shortlist of four, are understood to be CH2M Hill - the US engineering and construction services company that was hired to clean up New Orleans after Hurricane Katrina, and SBB Nuclear - a consortium that includes Babcock & Wilcox, Serco, and Bechtel, the privately-owned US engineering consultancy.

Senior industry sources believe that the SBB Nuclear consortium is well ahead on price, but that the Government favours CH2M Hill primarily because it is a single company with clear lines of responsibility.

CH2M Hill is also renowned for its involvement in Rocky Flats, a former weapons facility that required one of the largest and most complex clean-up projects in the US.

The company has also spent a lot of time in Cumbria and has more support from the local community and unions.

The Nuclear Decommissioning Authority was understood to have sent its recommendations to John Hutton, the Secretary of State for Business Enterprise and Regulatory Reform, at the start of the month. However, the final decision on who will win the contract, which starts next March, rests with Mr Hutton.

The winner of this competition will be at the forefront of the UK's £70 billion nuclear decommissioning industry. The contract is initially for five years but could be extended to 17 years.

A nuclear industry insider said: “[SBB Nuclear] appears to be far cheaper than the other parties. But Bechtel is renowned for bidding low to secure contracts.

The Jubilee Line Extension, in which Bechtel was involved, experienced delays accompanied by soaring costs. Bidders for the clean-up contract have been asked to propose financial models of how they would wish to be reimbursed and incentivised for the contract.

It is thought that SBB Nuclear may have suggested a financially engineered repayment model that looks cheap in the early years but sees the consortium's rewards accelerate further into the contract.

As well as CH2M Hill and SBB Nuclear, the other bidders are a partnership between Fluor Corp and Toshiba, and Nuclear Management Partners, a consortium comprising Washington International Holdings, Amec Nuclear Holdings and Areva.

Whichever consortium wins will find itself in the throes of a dispute with Sellafield's 10,000-strong workforce.

After months of negotiations the employees have rejected a 2percent pay settlement and will ballot on industrial action later this month. Workers are expected to vote for a strike which would shut down of the plant for up to a week.

Nuclear workers have received relatively generous awards in the past, but unions believe that the latest below-inflation offer is too little during a time in which the nuclear industry is undergoing considerable change.

They were calling for a 3.8per cent increase - the same level as the retail prices index (RPI) in March. However, views have hardened since then as the Government has dug in its heels and RPI has gone above 4 per cent.

Mike Graham, national officer for energy at Prospect, the engineering union, said: “We are absolutely disgusted with the pay offer and it could well lead to industrial action. This is the time of the biggest change for Sellafield and we are being offered a very low reward.”

Prospect's opposition to the offer is backed by the GMB and Unite, the general unions.

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