Northern Isles Ferry Services (Preferred Bidder)

– in the Scottish Parliament on 24th September 2019.

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Photo of John Finnie John Finnie Green

2. To ask the Scottish Government for what reason it has named Serco Ltd as its preferred bidder for the northern isles ferry services. (S5T-01794)

Photo of Paul Wheelhouse Paul Wheelhouse Scottish National Party

Serco Ltd was awarded the status of preferred bidder on the basis of an assessment ratio of 65 per cent price and 35 per cent quality, as was set out in the tender documents and made clear to all bidders when the invitation to tender was issued. Serco was assessed as providing the most economically advantageous tender under the terms of the competition, with a tender that was evaluated under the tender criteria to provide high-quality ferry services and value for money for the taxpayer.

The statutory 10-day standstill period commenced on Friday. During that period, I am constrained in respect of what I can say regarding details of either bidders’ submission.

Photo of John Finnie John Finnie Green

Last year, the Cabinet Secretary for Finance, Economy and Fair Work signed a commitment to application of the fair work principles across the Scottish Government and associated bodies. The National Union of Rail, Maritime and Transport Workers is in the process of taking strike action against Serco, as the operator of the Caledonian sleeper train, for reneging on pledges to address serious concerns about staff safety. Can the minister honestly tell Parliament that Serco is living up to the fair work principles? If not, perhaps he can explain why the fair work convention was considered to be suitable for civil servants but not for people who work in the transport sector under Serco?

Photo of Paul Wheelhouse Paul Wheelhouse Scottish National Party

We are required to act lawfully under procurement rules. Under those rules, there are no grounds for excluding Serco from the competition on the ferry services.

Mr Finnie referred to the fair work framework. I stress that there is no direct correlation between the contracts to which he refers and the contract for the northern isles ferry services, which have been operated successfully by Serco for the past seven and a half years.

As I mentioned, Serco was assessed as providing the most economically advantageous tender under the terms of the competition, with a tender to provide high-quality ferry services and value for money for the taxpayer. I reassure Mr Finnie—and the trade unions, as I have already—that the fair work framework applies in the tender, and Serco is signed up to it. That means that there will be protection of pension arrangements for staff, and that there will be no compulsory redundancies during the eight-year period of the contract. I hope that Mr Finnie takes some reassurance from that. The fair work framework applies to the contract: we will see that it is applied.

Photo of John Finnie John Finnie Green

I am very concerned by the Scottish Government’s apparent indifference to the possibility of reputational damage. Caledonian MacBrayne was the trusted provider of the ferry services until 2012. Since then, Serco has been involved in a number of controversies across its staggering portfolio of Government work. Last year, MSPs from all parties, including the Scottish National Party, condemned Serco’s plans to carry out mass evictions of asylum seekers in Glasgow. Does the minister believe that such a company is fit to carry out public services, and is deserving of public money in Scotland?

Photo of Paul Wheelhouse Paul Wheelhouse Scottish National Party

I am not dismissing the issues that Mr Finnie raises about practices elsewhere. However, as I said in my second answer to him, there is no legal basis for excluding Serco from the competition: Serco has won the competition fairly and squarely. The team that has been awarded preferred bidder status has been running the service for seven and a half years without issues such as Mr Finnie has raised coming to the fore.

More important is that Orkney Islands Council, Ryan Thomson from Highlands and Islands transport partnership and stakeholders across the area have welcomed the decision. I appreciate Mr Finnie’s points, but they are on matters that are completely separate from this particular contract. The preferred bidder has delivered the services successfully for seven and a half years, and the decision has been welcomed by the people who use the services.

The Presiding Officer:

There is quite a lot of interest in the matter. We will have supplementary questions, the first of which is from Liam McArthur.

Photo of Liam McArthur Liam McArthur Liberal Democrat

I welcome the end to uncertainty, and I welcome the continuity that will come with confirmation of Serco NorthLink’s selection as the preferred bidder for the lifeline services.

However, it is strange that when I raised the issue with the First Minister last Thursday, she felt unable to advise Parliament of the announcement that was to come the following morning, even though journalists were tipped off later that afternoon.

D oes the minister accept that the contract falls far short of meeting the growing, and increasingly urgent, demand for additional freight capacity that has been highlighted by key businesses in Orkney and Shetland in the past year?

Photo of Paul Wheelhouse Paul Wheelhouse Scottish National Party

I welcome Liam McArthur’s positive remarks. I point out that journalists were tipped off not about the decision itself but about the fact that one was coming, as is normal practice.

As Mr McArthur has mentioned, whether it would be appropriate to make the decision at that time was still being determined during that day.

However, I acknowledge Liam McArthur’s concerns about freight. A key factor in meeting state-aid rules is that services that are outlined in the public service contract are necessary and proportionate to the community’s needs. Any additional services could have been interpreted as being overprovision of aid and state support, thereby distorting the effect of operation in the market.

However, as Mr McArthur might be aware, the contract has been designed with greater flexibility in order to allow timetabled freight and ferry services to be amended to better reflect changes in demand across the year and from sector to sector. We want to support the key areas of the economies of the Orkney and Shetland islands, including tourism, fishing, food and drink, aquaculture and farming, and to help them to thrive. The new arrangements will support that. I will seek to engage with those key industries, and with Mr McArthur and others, as we move forward.

Photo of Maureen Watt Maureen Watt Scottish National Party

The new contract provides for a 20 per cent discount on cabin fares and a three-year fares freeze for passengers, vehicles and cabins, which builds on the 30 per cent discount on passenger and vehicle fares that islanders already enjoy, so is not it the case that the SNP Government has listened to islanders and put them at the heart of the contract’s terms?

Photo of Paul Wheelhouse Paul Wheelhouse Scottish National Party

Maureen Watt is correct, in that, separate from the announcement of Serco Ltd’s preferred bidder status, on Friday I was in a position to announce that, from 1 January 2020, islanders who use services between Aberdeen and Kirkwall and Lerwick will benefit from an additional 20 per cent reduction in cabin fares. Passenger, non-commercial vehicle and cabin fares will also be frozen for three years. That will add to the existing 30 per cent discount for islanders on passenger and vehicle fares.

Unfortunately, at this point in time the Scottish Government cannot introduce fare reductions or freezes on the Scrabster to Stromness route, due to the on-going state-aid complaint and the risk that further complaints will prolong the delay to full roll-out of the road equivalent tariff on that route. However, the Government remains committed to delivery of RET and will continue to explore all available options.

As I said in my responses to Mr McArthur and Mr Finnie, we will also continue to listen to island communities, which play a vital role in Scotland’s wider wellbeing, and we will take measures to ensure that they are able to access the same opportunities for growth as the rest of the country.

Photo of Jamie Greene Jamie Greene Conservative

I hope that the minister will agree that what is important is that, regardless of who operates the service, islanders should have an affordable and reliable service. The devil will be very much in the detail of the new contract. Has he sought assurances that whoever wins the contract will take action to improve cabin availability during peak times? Will he explain in more detail how the fare reduction and freeze will be funded and implemented? That was not clear from his initial response.

Photo of Paul Wheelhouse Paul Wheelhouse Scottish National Party

I acknowledge the point that Mr Greene has raised about availability of cabin space, which we are considering as part of the bid. One detail that I can reveal is that Serco has committed to upgrading 10 cabin spaces to premium standard. Although, in theory, that will reduce the number of standard-fare cabins that are available, given the discount that will be in place islanders will now be able to afford the premium cabins because they will be at the same or a lower price than the original standard fare, so they will be getting better-quality provision.

However, I accept that, in the longer term

, we will have to deal with the need for accommodation, especially for families, which has been raised by islanders. We are trying to address affordability first. We hope, in the longer term, to tackle supply.

Mr Greene requested that I explain the funding for those measures. That will become clearer in the budget process, but the Cabinet Secretary for Finance, Economy and Fair Work and I have had internal discussions and have ensured that resources are in place.

Photo of Colin Smyth Colin Smyth Labour

Will the minister confirm that under the new contract, all staff on the northern isles ferry services—including subcontracted staff on freight ships, as well as those on passenger services—will be covered by the RMT’s collective bargaining agreement?

Photo of Paul Wheelhouse Paul Wheelhouse Scottish National Party

I will write to Colin Smyth with an answer about the specific issues of the RMT’s terms. However, I reiterate that the contract adheres to the fair work framework, so there is protection for pension arrangements and terms and conditions, and there will be no compulsory redundancies throughout the eight-year period of the contract. I hope that those measures will be welcomed by the trade unions. However,

I will be glad to sit down with them and others including Colin Smyth to discuss those matters.