An inquiry has been launched after a multi-billion pound nuclear contract was branded "unsustainable" and had to be cancelled, nine years before it was due to end.

Greg Clark, the Energy Secretary, announced in a written statement today that the Nuclear Decommissioning Authority was terminating its contract with Cavendish Fluor Partnership (CFP) for to decommission and manage 12 magnox sites.

These include 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.

Mr Clark said: "It has become clear to the NDA through this consolidation process that there is a significant mismatch between the work that was specified in the contract as tendered in 2012 and awarded in 2014, and the work that actually needs to be done.

"The scale of the additional work is such that the NDA board considers that it would amount to a material change to the specification on which bidders were invited in 2012 to tender."

As a result, the contract will be terminated in 2019.

"Dealing safely with the UK’s nuclear legacy is fundamental and non-negotiable," Mr Clark added.

"It is important to emphasise that this termination is no reflection on the performance of Cavendish Nuclear or Fluor, and work on decommissioning at all the sites will continue with the management of CFP for a further two and a half years.

"During this period, the NDA will establish arrangements for a replacement contracting structure to be put in place when the current contract ends."

Mr Clark also announced that the NDA has agreed financial settlements with two other bidders for the tender who had taken a dispute over the process to court.

He said: "Taxpayers must be able to be confident that public bodies are operating effectively and securing value for money. Where this has not been achieved such bodies should be subject to rigorous scrutiny."

He announced an inquiry into the tendering process and the subsequent contract, which will be led by Steve Holliday.

"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," Mr Clark said.

NDA chief executive David Peattie said: "Terminating is no reflection on CFP as performance on the sites under its ownership has been strong. Making progress on the ground and keeping our sites safe and secure remain our collective priorities. I would like to thank CFP for its ongoing commitment, as we transition to new arrangements."

Babcock chief executive, Archie Bethel, added: "I am pleased that the NDA has confirmed that CFP's performance has been strong. We have developed a good working relationship with the NDA and we look forward to working with them, not only to bring this contract to an orderly end in two and a half years' time but also on future projects, including the completion of the decommissioning of the Magnox power stations."

This change takes about £800m from Babcock's £20bn order book. The company's shares have fallen in trading today.