MSPs call for ‘overhaul’ of ferry procurement process

Ferry procurement processes are not fit for purpose and a “root and branch overhaul” is required, MSPs have said.

Holyrood’s Rural Economy and Connectivity Committee launched an inquiry after it was announced two new vessels for the Clyde and Hebrides network were £100m over budget and four years late.

In its new 129-page report published today, the committee said there was a “lack of robust due diligence”, a “lack of transparency” and an apparent willingness from the Scottish Government to proceed despite risks.

MSPs also said there was strong evidence to suggest Ferguson Marine Engineering Limited (FMEL) had deliberately constructed specific sections of the vessels to trigger payments. The committee said it was “appalled” CMAL was legally bound to make these payments.

Convener Edward Mountain said: “The evidence to our inquiry into this fiasco has revealed that all parties involved must share in the responsibility for the catastrophic failure to deliver this contract on time or on budget.

“A lack of due diligence, poor project management and a failure by all parties to take the necessary action to resolve problems as they emerged, means that the cost of the contract has increased from £97m to almost £200m while the island communities who are relying on these ferries to be delivered continue to suffer.

“Our report calls on the Scottish Government to commission an independent external review of the processes for public procurement of ferries to ensure appropriate lessons are learned for the future.

“This review should consider the robustness of financial due diligence, the processes for assessing the technical capabilities of bidders, and the design development and sign-off procedures, investigating precisely how such a situation could have arisen and to ensure such errors are never repeated.”

Contracts worth £15m were awarded to three companies in September to finish construction of the ferries, which were meant to be delivered in 2018.

The Ferguson shipyard was nationalised in 2019, four years after the initial contract for the ferries was rewarded, following a dispute between the firm and the Scottish Government.

The committee said the assessment of the financial stability of FMEL and its capabilities had lacked due diligence. It also concluded insufficient work had been undertaken by the contractor to develop and secure sign-off on the basic design of the vessels.

The report urges Audit Scotland to undertake a separate review of the financial management of the contract and the role of Transport Scotland, as well as to investigate the processes followed by the Government in granting loans to FMEL.

Labour MSP Colin Smyth said: “The buck stops with the SNP government over what has been a catastrophic failure from start to finish. 

“It’s clear that problems with the contract were flagged up to government ministers from an early stage and they could and should have intervened. Their failure to do so means taxpayers have been left with a bill double the size of the original contract and our island communities still don’t have the ferries they desperately need.”

The two new ferries are scheduled to be delivered in 2022 and 2023 for the Arran-Ardrossan and Uig-Lochmaddy-Tarbert routes, respectively. It is anticipated the final cost could be as high as £196.8m, more than double the £97m initial price.