A private consortium has been stripped of its contract to clean up nuclear waste at Sellafield.
The Nuclear Management Partners (NMP) group, which includes multinationals URS and Areva, was awarded the £9bn decommissioning contract in 2008, but it came under fire in a series of critical reports.
The Public Accounts Committee last year blasted the consortium's handling of the contract, warning of "substantially" escalating costs, missed targets, and "little improvement" since it had been appointed.
In a written statement published today, the energy secretary said "a change in model" was "the best way forward for the site" and confirmed that nuclear watchdog the Nuclear Decommissioning Authority (NDA) and site licence company Sellafield Limited Ltd would now oversee the clean-up.
"Under the new arrangement, Sellafield Limited will become a subsidiary of the NDA and will continue to be led by a world class team, who will be appointed and governed by a newly constituted Board of the Site Licence Company," Ed Davey said.
The GMB union, which represents some of those working in the nuclear industry, welcomed the move but accused the Conservatives of trying to block the changes.
"The termination of the NMP contract is welcome," the union's national secretary for energy Gary Smith said.
"We could not limp on any further. We said the contract should not have been extended in 2013. We understand the Tories overruled the NDA. The Government needs to be held to account."
Labour meanwhile said ministers had been "desperately scrambling to reverse" a contract extension agreed 15 months ago.
"Questions must be asked of Tory ministers, past and present, who oversaw the negotiation of NMP's contract extension and appear to have spectacularly mishandled the procurement process for such a major government contract," the party's energy spokesperson Tom Greatrex said.