Ex-Ferguson boss says government knew of missing financial protections before giving yard preferred bidder status

The lack of a full refund guarantee for two new ferries commissioned by the Scottish Government was known prior to Ferguson Marine being announced as the preferred bidder, it has been claimed.

Jim McColl, the former owner of the Port Glasgow shipyard, told MSPs that the government had agreed to mitigate that before the First Minister visited the yard in August 2015 to make the announcement.

Speaking to Holyrood’s public audit committee, McColl said: “The final agreement was that we would put up a cash deposit of £25m initially and then all materials and all work, the ownership of everything that went into the vessels, would be the property of CMAL. We had no work in progress, we had no value in all the work we did or the equipment we bought. It transferred to their ownership.”

He said this later changed to a £15m cash deposit and £25m in bonds. He described this as “better” than a full refund guarantee.

Convener Richard Leonard said this “appears to be at odds” with the documents in which CMAL officials expressed concern about the lack of the guarantee.

Audit Scotland has previously criticised the government for awarding the contract without it.

It also said there was “no documented evidence to confirm why Scottish ministers were willing to accept the risks”.

A full refund guarantee was listed as a mandatory requirement in the initial tender for the two ferries. It is standard for contracts of this type as it creates protection for the buyer should problems arise.

McColl previously said Ferguson Marine only started to prepare a bid for the contract after guidance from the then transport minister Derek Mackay suggested that such a guarantee was not mandatory to win the work.

That guidance appeared in a letter between Mackay and local MSP Stuart Macmillan, McColl said.

Regarding accusations that the shipbuilders had built the ferries out of sequence in order to trigger earlier milestone payments, McColl said CMAL repeatedly changed the design or made late decisions.

The engine type, for example, was not chosen until six months after the contract was agreed, he said.

He added there was “no prescribed sequence” for how ferries are built, but acknowledged a decision was taken to go “out of sequence” compared to the shipyard’s own proposal due to delays in decision making.

He told MSPs the milestone payments were connected to the purchase of equipment or percentage of fabrication, and it was “valid” to build other parts of the ship earlier than originally planned to avoid further delay.

Leonard asked whether McColl or the shipyard bore any responsibility for the delayed and over budget ferries, to which McColl replied: “I don’t believe so.”

He added: “These two ferries inherently cost more than the bid that was put in. If we do share some responsibility, it’s perhaps in not realising the extent to which this might overrun and the extent of the shortcomings in the spec.”