Construction and Procurement of Ferry Vessels

– in the Scottish Parliament at on 2 February 2021.

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Photo of Christine Grahame Christine Grahame Scottish National Party

I remind members that social distancing measures are in place in the chamber and that you should take care in observing them. The next item of business is a Rural Economy and Connectivity Committee debate on motion S5M-24025, in the name of Edward Mountain, on an inquiry into the construction and procurement of ferry vessels in Scotland. Those members who wish to speak in the debate should press their request-to-speak buttons.

Photo of Edward Mountain Edward Mountain Conservative

I am pleased to contribute to the debate in my capacity as the convener of the Rural Economy and Connectivity Committee. We published our inquiry report into the construction and procurement of ferry vessels in Scotland in December 2020, which was more than a year after we started it. I thank the many people who gave evidence to the committee in person or via written submission, and I thank the clerking team for assisting us.

We note the minister’s response to the committee’s unanimously agreed report, which is very dismissive of our findings. On the public procurement side, our inquiry has revealed a “catastrophic failure” in Caledonian Maritime Assets Ltd’s and Transport Scotland’s management of the procurement of vessels 801 and 802, and we have concluded that the current procurement processes and structures are not fit for purpose. The Scottish Government’s disdainful response to the committee’s critical conclusion is, frankly, surprising.

Contrary to the minister’s assertion in his written response that the committee did not highlight in detail the poor performance of the shipyard’s former management as a contributory factor to problems with the project, we did. It is clear, however, that the procurement process that the minister is attempting to defend was not fit for purpose. There can be no bigger failure in the process than the inability to identify at the outset that the bidder lacks the management and financial capabilities to fulfil the contract. That is precisely why the committee has called for an independent external review of procurement processes. The minister clearly needs to reflect further on that recommendation and take the necessary steps to ensure that lessons are learned and failures are not repeated.

Turning to delays and cost overruns, I note that the cost of delivering the vessels has ballooned from an original budget of £97 million to an eye-watering £200 million, and we are still counting. The ferries will also be delivered four to five years late, with islanders and other users paying a huge price for those delays. The committee has called on Audit Scotland to undertake a detailed audit of the financial management of the contract, and we welcome the Scottish Government’s willingness to co-operate fully with such an inquiry—as, I am sure, do taxpayers.

On the commercial loans, there has been complete amazement at the minister’s response in relation to the £45 million of Scottish Government loans that were made to Ferguson Marine shipyard. The committee highlighted a total

“lack of transparency surrounding the purpose, agreement and payment of these loans.”

It is disappointing that the minister appears to want to ignore those findings. The loans have, in effect, been written off following nationalisation of the shipyard, so it is essential that the Scottish Government honours its commitment to co-operate fully in any investigation by Audit Scotland of the process that it followed. The committee made specific recommendations to improve transparency and accountability for future loans, and those recommendations must be fully considered and implemented where that is appropriate.

On the relationship between CMAL and FMEL, the committee heard evidence that problems with the contract were not helped by the relationship between the former management of Ferguson Marine and CMAL, which became more than toxic. The Scottish Government’s response records

“disappointment that the report does not ... reflect the extensive and proactive steps taken ... to facilitate and negotiate a better outcome with the contractor”.

Whatever those steps were, it is clear that they failed. The inquiry concluded that the Scottish Government should and could have acted more quickly and decisively to address those matters.

It is notable that, although CMAL first expressed concern to the Government in March 2016 that the contract was running behind schedule, the doomed attempts at mediation were not initiated until a year later. It should be remembered that, by that point, the contractor had received £74 million of the total amount of £97 million in contractual payments. Given this disaster, the committee believes that there must be

“stronger provisions on the application and enforcement of dispute resolution mechanisms” in future contracts—especially contracts of such a nature—to prevent any repetition of the situation.

On engagement with local communities, one of the most concerning aspects of the delay in, and spiralling costs of, delivering the vessels has been the impact on island communities. The committee heard of widespread dissatisfaction about the limited opportunity for communities to have meaningful input into the ferries policy. I therefore welcome the minister’s commitment to produce a revised communications and stakeholders strategy, which must include much better and genuinely meaningful engagement on the design and delivery of new ferries.

On the future decision-making structure, the inquiry has exposed a cluttered decision-making landscape that lacks transparency. It is clear that all the decision makers that were involved, including the Scottish Government, failed to some degree to discharge their responsibilities effectively. However, we accept that plans are under way to review the legal structures and governance arrangements for the provision of ferry services. Despite the minister’s belief that the current tripartite arrangement works well, the review must reflect the root-and-branch overhaul that the committee calls for. The minister should be mindful of the committee’s suggestion that that could go so far as to result in some bodies being merged or even abolished.

On the future procurement and construction strategy, the committee concluded that the approach to procuring and delivering new ferries

“has been short-term, piecemeal and lacking in strategic direction.”

Given that, the forthcoming islands connectivity plan cannot be a business-as-usual, updated version of previous plans. We cannot afford to have an increasingly ageing and unreliable fleet that regularly causes major service disruptions. The committee is calling for nothing short of an overarching, strategic, long-term vision for all vessels that serve Scotland’s ferry network, underpinned by an appropriately funded plan to replace the entire ferry fleet over the next 25 years.

In the short time that I have been given, I have focused my remarks on the key issues that were raised by the committee. The committee believes that the Scottish Government has a responsibility to face up to the catastrophic failures that have contributed to the myriad problems with the contract. It is simply not good enough to dismiss the conclusions that were reached unanimously by the committee, on a cross-party basis. One simply cannot blame the contractor for all the failings. Good leaders and good systems prevent failures—poor ones do not.

We must ensure that lessons are learned and that the costly and damaging mistakes that are evident in this case are never repeated. We believe that reforms are needed to ensure that our remote island communities remain connected, and that is what the committee has highlighted in its report.

I move,

That the Parliament notes the conclusions and recommendations contained in the Rural Economy and Connectivity Committee’s 12th Report, 2020 (Session 5),

Construction and Procurement of Ferry Vessels in Scotland

(SP Paper 879).

Photo of Paul Wheelhouse Paul Wheelhouse Scottish National Party

I welcome the opportunity to respond to the committee report on behalf of the Scottish Government. I thank the committee members and the clerks for their detailed consideration of what the report clearly acknowledges are broad-ranging, complex and important issues. I also thank the many stakeholders who fed into that work, not least the communities themselves.

We should not forget that at the heart of these issues lie communities that rely on the vessels in the fleet, the crews who operate them and the skilled workforce at the yard at Ferguson’s. Those groups have been at the forefront of our minds throughout all this and are why we stepped in to save the jobs and the yard and to ensure that the vessels will be delivered.

At the outset, I also want to reiterate that, notwithstanding lessons learned, we remain fully supportive of the efforts of CalMac Ferries Ltd, CMAL and Transport Scotland in delivering ferry services on the Clyde and Hebrides network and the work undertaken by CMAL to support services to the northern isles. However, as I set out in my written response to the committee, we also recognise the challenges in doing that work and the need for continuous improvement and investment to optimise delivery of infrastructure to support our lifeline services.

Along with my colleagues, particularly the Cabinet Secretary for Economy, Fair Work and Culture, I have taken time to reflect on the content of the report. As I set out in my response, there are some conclusions in the report with which we do not agree, and some instances where it is not clear to us how the conclusion or recommendation that has been made fully reflects the breadth of evidence that was presented to the inquiry.

However—and I stress this point for the benefit of the convener and other committee members—we recognise the committee’s focus on the outcome of the delay in the delivery of the two ferries, which has had a particular impact on communities that are awaiting the delivery of ferries that are yet to be completed. Clearly, the cost outturn and delay are far from what was anticipated or desired at the point of contract award to FMEL. We accept that lessons have to be learned and I want to reassure members that they are being learned.

However, I reiterate our view that contractor failure played the primary role in the difficulties. I appreciate the convener’s points, but we are disappointed that that was not more fully reflected in the final report. I accept that it is the committee’s right to take its own view on the issues, but the Government is also entitled to take a view. I also take the opportunity to refute comments made by others following the publication of our reply to the committee. It is clear from the commitments that I am about to repeat that we have reflected on the feedback and are already implementing improvements that colleagues may welcome.

We have already committed to commissioning a study on the legal structures and governance arrangements that exist between the tripartite group of Transport Scotland, CMAL and CFL. That relationship was considered at length throughout the inquiry and I can assure members that the organisations involved have committed to engage constructively in that review process and to reflect on any recommendations produced. However, we must also recognise and safeguard those areas in which the tripartite arrangements are judged to perform well.

Preparation for the project is well advanced and we are currently evaluating submissions from advisers with a view to commencing the work shortly. I will update the committee on the initiation of the work and later in the year, ministers will update the committee or its successor on the progress and outcomes of that work.

We are absolutely committed to the principle that those who are directly affected by decisions on ferry services are able to engage in the decision-making process in a meaningful way. I note the convener’s remarks on that being an important part of the committee’s report. As was evident during the inquiry, there are often competing views from different groups and it is important to balance those in our decision making. That includes consideration of value for money and the lifetime costs of any investment.

We have already begun the process of developing a revised communications and stakeholder strategy. I welcome the positive feedback following the most recent engagement by Transport Scotland and CMAL on the new Islay vessel. That feedback was provided to the committee by the CalMac community board. We will continue to build on improvements with stakeholders by developing greater transparency in how community views are received and included in our decision making. In particular, we will provide a clearer explanation of why specific design decisions have been reached, and why community or individual preferences have not been reflected in the final outcome.

I note, as an example of on-going engagement, the fact that CMAL, CalMac and Transport Scotland held a webinar on 14 January to outline the analysis of the new Islay vessel options and how stakeholder views had helped to shape the consideration and investigations that are under way. The webinar was attended by 140 individuals. Later in the year, we will publish a ferries stakeholder engagement strategy to improve engagement with communities.

On due diligence, although audits have demonstrated compliance with public procurement procedures, we are committed to enhanced arrangements, where possible. To that end, CMAL is committed to an enhanced due diligence process for all contracts of a value greater than £500,000. CMAL also intends to engage the services of a shipbroker to enhance the analysis of shipyards, including in relation to established track record, skills and competencies and first-class products. An additional level of assurance for tender assessment will be introduced by engaging naval architecture companies in support of that process.

I note the committee’s request to provide updates on costs and the programme. We are committed to being transparent in reporting progress on hulls 801 and 802. On 19 January, Tim Hair from Ferguson Marine (Port Glasgow) Ltd provided an update to the REC Committee regarding the impact of Covid-19 on production at the yard. It is my understanding that a further case of Covid has been detected. The individual was sent home from work and has been self-isolating, along with 11 suspected close contacts, in line with the test and trace procedures. I wish a speedy recovery to the individuals involved.

I note the committee’s concerns regarding the purpose of the commercial loans that were provided to FMEL by the Scottish Government, and the sharing of information about them with CMAL, which the convener mentioned. The purpose of the two loans is recorded in the contract documentation that was published on the Scottish Government’s website for the September 2017 and June 2018 loan agreements, alongside the conditions and monitoring that were associated with the loans.

We took great care to ensure proper separation between the two contractual spheres, and we could not share confidential commercial information with any of FMEL’s clients, including CMAL, without breaching our duty of confidentiality to FMEL. However, when taking decisions, the Scottish ministers had a full understanding of the complex commercial and contractual issues that were at play.

We remain committed to the actions that I have outlined, to Scotland’s lifeline ferry services and to the communities that they serve. The Government’s actions have saved hundreds of jobs in Inverclyde and in the local supply chain. I hope that we can all agree that that is a positive outcome.

Photo of Graham Simpson Graham Simpson Conservative

I thank the Rural Economy and Connectivity Committee for its work on the inquiry and for managing to unanimously agree on a report and a set of challenging and robust recommendations.

I was looking through my dictionary for the definition of “humility”, and I found that it is to show that one is conscious of one’s failings. Normally, when a Government is lambasted in the way this Government has been in the committee’s report on the construction of ferries, the minister would have done just that. He or she would have taken the criticism on the chin, thanked the committee for its diligent work, promised to take the action that it called for and vowed never to let anything similar happen again.

When I found the word “humility” in the dictionary, I found two others nearby. One was “humble pie”, which is what the minister should have been eating. Instead, we got the final word from my lexicon labours: “humbug”. The minister’s response was nothing short of a disgrace—appalling, in denial, shameful and even arrogant. It was unbelievable from start to finish. In essence, the minister, or whoever it was from Transport Scotland who wrote his response, was saying to the committee, “We gave you the evidence, but you didn’t listen to us, so you are wrong.”

At the heart of the matter is the complete failure to deliver two ferries on time and on budget. They are neither.

Photo of Paul Wheelhouse Paul Wheelhouse Scottish National Party

I will keep this brief. Will the member acknowledge that, in the speech that I just gave, I acknowledged significant areas in which the report made recommendations that we have adopted? Are we not also entitled to state where we believe that the balance of the evidence said something different? We certainly accept the committee’s report, and we will support it, but we have identified the areas—

The Deputy Presiding Officer:

That was not brief enough, minister.

Photo of Graham Simpson Graham Simpson Conservative

I do not think that the minister has accepted anything in the report, based on what he has said. [

Interruption

.] You see? He is saying, “I am not listening”—just like he told the committee. He did not listen.

The ferries will be up to five years late, if they are ever finished, and their cost has more than doubled. If the ferry owner, CMAL, which is a Government body, were privately run, it would be out of business by now. The upshot is that the taxpayer is out of pocket, which is nothing new with this Government, and the communities that the ferries are meant to serve have to put up with old vessels, much like the rest of our island communities.

The committee said that it

“believes that there has been a catastrophic failure in the management of the procurement of vessels 801 and 802, leading it to conclude that these processes and structures are no longer fit for purpose.”

Anyone taking a rational analysis of what has happened would conclude the same.

However, the minister, in his breathtaking response, said:

“We do not accept the committee’s description of a ‘catastrophic failure.’”

It is not his fault, and it is not the fault of Transport Scotland or CMAL, which are both arms of the Government. The Government and its bodies are, in his view, entirely blameless for what has gone wrong. It is a case of, “There’s nothing to see here now, so move along please, everyone.” If minister Paul Wheelhouse really believes that, he should change his name to Paul Asleep-at-the-Wheelhouse.

The Deputy Presiding Officer:

Members, I have no spare time in hand—I have made that plain. Minister, you can deal with that issue in summing up.

Graham Simpson, I will give you a little bit of extra time but I cannot do so after this.

Photo of Graham Simpson Graham Simpson Conservative

I am grateful.

Nobody but the minister’s chums in Transport Scotland and CMAL agree with his response. The minister should have taken the committee’s report and used it to knock some heads together at both those organisations, but he has not. Frankly, he looks afraid to rock the boat with CMAL or Transport Scotland, the former of which, instead of showing some corporate humility, is expanding its empire. It is extraordinary.

The committee said:

“a root and branch overhaul of current decision-making structures is urgently needed and that this should consider the relative roles and responsibilities of all bodies involved in decision-making around the procurement of new vessels and should ... streamline” the

“decision-making structures by merging or abolishing certain of them.”

It means CMAL; what the committee is saying—and I agree with it—is that we do not need CMAL.

The committee also says that the next Clyde and Hebrides network franchise should be for a much longer period of time than is currently the case. That would give the operator the chance to take responsibility for the ferries, to procure its own and to get on with modernising an ageing fleet that is not fit for purpose. That model is followed successfully elsewhere in the world, for example in British Columbia in Canada.

One of the most concerning aspects of this debacle has been the loss of tens of millions of pounds in loans from the taxpayer. There is a pattern emerging here, in which the Scottish National Party Government ploughs money into private firms, which is then lost for ever. We have also seen that with Burntisland Fabrications recently, but there is never a hint at contrition. It is almost as though it does not matter.

At the end of the day the taxpayer has lost out through this fiasco but, perhaps more importantly, so have the disgruntled island communities that deserve better. That is why we need Audit Scotland to urgently investigate.

The way forward is for the Government not to bury its head in the sand but to listen to the MSPs of all parties who have said unanimously that wholesale change is needed.

Photo of Colin Smyth Colin Smyth Labour

Much can be said about the ferries fiasco, but it can be summed up in three words from the Rural Economy and Connectivity Committee’s report: “a catastrophic failure.”

The two ferries are £100 million over budget, double the planned cost and rising, and at least four years late, which is depriving our island communities of these lifeline ferries. Astonishingly, however, and arrogantly, the Scottish Government’s response in the minister’s dismal letter to the committee is that

“the outcome has not been that for which we had hoped”.

That is the very definition of an understatement. That shocking response is from a Government that is in denial, out of touch, and thinks that it is beyond criticism. It shows no humility at all and there has been no apology from the minister again today. It is just not good enough for Scotland’s taxpayers, for ferry passengers, or for the workforce at Ferguson’s. They all deserve better.

Week after week during the inquiry, the committee received damning evidence exposing weaknesses at every part of the process and mistakes from every organisation that was involved. The clear conclusion was that the procurement processes and structures are, and I quote from the cross-party report,

“no longer fit for purpose”.

That is a conclusion that few could credibly argue with and is why the committee was unanimous in calling for

“a root and branch overhaul of current decision-making structures”.

The committee hoped that the report would act as a stimulus to improve how things are done, to ensure that we never find ourselves in this position again, and to create a ferry procurement system that is fit for purpose. Instead the Government’s response is to tinker at the edges of a process whose failings were not just graphically exposed by this fiasco but were already flawed. The process is too disconnected from the communities that our ferries are supposed to serve; too slow to replace ageing vessels; and too short-sighted to provide certainty to the shipbuilding industry in Scotland. There has clearly been a case for a fundamental overhaul of the processes for some time and this fiasco has just made that an urgent necessity.

The committee’s aim throughout was not to point fingers or lay blame needlessly, but to identify what went wrong and learn lessons for the future. However, the minister’s response makes me fear for the future. To be fair, I sympathise with Paul Wheelhouse. He has been left to clean up the mess made by the inaction of previous ministers, who did not meaningfully intervene when the Government knew that the contracts were going badly wrong. The failure of the First Minister and Derek Mackay to give evidence to the committee leaves us unable to answer questions about why ministers made the particular decisions that they did, and why they failed take more robust action to intervene earlier.

The refusal of the Government to acknowledge the significant structural failures of the process begs the question of what did go wrong, according to the Government. Its answer appears to be that it is all down to failures on the part of Ferguson Marine. In his letter, the minister says that

“contractor failure has been a very significant factor in the difficulties we have seen”, highlighting

“the contractor’s non-performance, contract management and financial management, described in independent evidence to the inquiry”.

The committee certainly highlights questions about those issues, the management and financial capabilities at Ferguson’s, and we heard from the workforce, whose concerns were clearly ignored by Ferguson’s management at the time. There is clearly a need for Audit Scotland to undertake a more forensic inquiry into CMAL’s management of the contract, and into the role of ministers during the process, including the awarding of loans to Ferguson’s.

I find it astonishing that the Scottish Government thinks that blaming contractor failure alone is a good defence of the procurement processes that gave them the contract in the first place. If, as the minister said, the entire fiasco is almost exclusively a result of mismanagement, incompetence, and lack of capability on the part of Ferguson Marine, why were they awarded the contract in the first place? It exposes the fact that, in awarding the contract, there was a clear

“lack of robust due diligence” on the part of CMAL in assessing the financial stability of Ferguson’s and its capabilities in areas such as project management and design.

That raises serious questions about the Scottish Government’s willingness and political desire to proceed, despite what we now know were significant risks. That deserves further investigation—criminal investigation, if necessary—of the awarding of the contract in the first place. That is not to seek to undermine Ferguson’s at all; indeed, quite the contrary. The yard was more than capable of delivering ships, but we know now that it was not capable of delivering this contract. It is clear to me that CMAL failed in its duties and the time has come to consider whether an organisation, for which there appears to be no legal requirement, should exist and whether it should be scrapped.

The one group of people who were not to blame for the fiasco is the Ferguson’s workforce and I want to highlight the committee’s recommendation paying tribute to the “skills and dedication” of the workers throughout. The workforce has been a credit to the yard in the most challenging of circumstances. I will say more in my closing comments about the future process, but we should pay tribute to the workers and the importance of maintaining their skills and that yard when it comes to the future procurement of ferries in Scotland.

Photo of John Finnie John Finnie Green

Colleagues on the Rural Economy and Connectivity Committee will know that I was not an enthusiast for the inquiry. I wondered what we could achieve, other than a cursory examination of what are detailed issues. The committee gave it its best shot, but I still believe that it will not bring one single ferry one day earlier to the constituents I am obliged to serve. The inquiry was a distraction, not least from a catastrophic Brexit.

The Scottish Government has the lead role in all this. It has overall responsibility and should have taken charge. It is entirely reasonable that it is being held to account. I will not labour the point about the minister’s letter, which has already been alluded to. However, to say in it that

Scottish Ministers remain fully supportive of our transport agency, Transport Scotland, of Caledonian Maritime Assets Limited” is simply disappointing. The minister rightly pointed out in his letter that the structures concerned were in place before 2007, but he went on to say that the Government will reflect

“on whether the governance arrangements between the tripartite bodies remain fit for purpose having regard to the overarching objective of effective, efficient and economic delivery of lifeline ferry services.”

Really? Ministers do not know the answer to that already?

Hearing the word CMAL, most folks would say, “Who?” Who, indeed? We get a flavour of what CMAL is from a series of tweets that it put out at the end of December 2020 . I bear no ill will to any of the people whose roles I refer to. CMAL announced that it was appointing a new finance director who would be

“responsible for CMAL’s financial strategy to provide efficient, cost-effective & safe ferries, harbours & infrastructure.”

It would have been good to have had that. Cost effective is not building vessels that do not fit harbours; it is listening to customers. We saw the shambles with the Isle of Lewis and Ullapool. Notwithstanding the webinar that was referred to, I fear that we might be about to repeat the same problems with Islay.

CMAL said that it wanted a new head of business support

“overseeing the successful implementation of strategies, plans & policies.”

That was clearly absent for the 801 and 802 vessels.

I was interested in the tweet that said that CMAL was

“leaving our Port Glasgow HQ temporarily to make way for an office expansion project.”

I would make that a permanent but different sort of removal. CMAL needs removed from the equation and the so-called cluttered landscape where no one takes responsibility for anything. CMAL is a protective shield for the ineffective Transport Scotland—they have both frequently been missing in action—and a further buffer for ministers.

Turning to Ferguson Marine, I echo others’ comments on its outstanding skilled workforce. However, as regards the management, Mr McColl initially did not play ball with the committee, then jetted in from his tax haven with his film crews in tow, dumped a large dossier on the table, pontificated and jetted out. That suggested to me that not a penny of his personal money went into the project. He wanted a profile and he had his chance, but he failed and has limited scope for criticism of others. He lacks credibility on the issue, other than as a failed shipbuilder.

Self-evidently, things went wrong, but there is still an opportunity. We are a maritime nation, we need a fleet of new vessels, we have a workforce with proven skills and the Ferguson Marine yard was saved. The Scottish Government should embrace the term “nationalisation”; it is to its credit that it saved the yard and the community, but it does need to get a grip.

CalMac, the operator, is an innocent party in all that has happened. A six-year contract is inadequate and it should be much longer. The sleeper contract is 15 years and I would award it directly. It would assist with forward planning and ensure that the fleet and infrastructure were aligned. There is much to be learned here about an integrated transport system and there is a role for Audit Scotland.

Photo of Mike Rumbles Mike Rumbles Liberal Democrat

I want to re-emphasise to colleagues that, as we have heard, the committee report was unanimous. Committee members constructively engaged with one another and our witnesses throughout the process. What was our report’s aim? It was simply to influence the Scottish Government on how best to improve the system of ferry procurement. To do that, we had to examine in detail what had led up to the situation where the current system had simply failed to produce the goods.

By and large, we successfully resisted taking a partisan approach to the report. I was particularly concerned that committee members should not divide on the report, because it has been my experience, since our Scottish Parliament was established back in 1999, that we are far more likely to get the Government to act on our conclusions and recommendations if we work constructively to reach a unanimous report. I thank my colleagues for working to do just that, and that is what we achieved. That is why I am so astonished and disappointed by the Government’s written response to our report.

To solve a problem, one must first accept that a problem exists. If that is not done, no matter how many constructive recommendations are made, they will be ignored. That is what the Government has so far done with our report.

Our report says:

“the Committee believes that there has been a catastrophic failure in the management of the procurement of vessels 801 and 802, leading it to conclude that these processes and structures are no longer fit for purpose.”

It also says:

The Committee believes that the experience of the ferries contract has exposed a cluttered decision-making landscape that lacks transparency and where there have been varying degrees of failure by all of those with decision-making responsibilities, including the Scottish Government.”

What is the Government’s written response to our unanimous report? The minister said:

Scottish Ministers remain fully supportive of our transport agency, Transport Scotland, of Caledonian Maritime Assets Limited (CMAL) and of CalMac Ferries Limited (CFL).”

So much for our unanimous view that the system is not fit for purpose. The minister also said:

“I trust that the evidence provided by Scottish Ministers has assisted the Committee with its understanding of what is a well-established process, with the parties’ roles and responsibilities clearly set out”.

He added:

“I am satisfied that procurements in relation to 801 and 802 were undertaken fastidiously, in good faith and following ... due diligence.”

Contrast that with the view of one of our witnesses. On being asked why a bid that was the highest quality but also the highest price was successful, he responded:

“I do not know the answer, but three things spring to mind. One is incompetence; another is vested interest; and the final one is corruption.”—[

Official Report

,

Rural Economy and Connectivity Committee

, 29 January 2020; c 23.]

Personally, I feel that the answer to that question is simply incompetence rather than anything else.

However, for the Government to turn a blind eye to the evidence from so many witnesses that there were real problems and many deficiencies in the whole procurement management system is quite mind-boggling. In its response to our report, I expected from the Government an acceptance that things had gone badly wrong, with everyone making mistakes along the way. What did we get? The minister criticising the committee:

“I would however, respectfully, record some disappointment”— and there follows a paragraph criticising the committee for not blaming Ferguson’s management even more.

I said earlier that, to solve a problem, one must first acknowledge that there is one to solve. The Government is simply blaming the contractor, and does not see its failings and that of its agencies. I am sure that our report will simply end up gathering dust on the Government’s shelf. There are none so blind as those who will not see. What a waste—

The Deputy Presiding Officer:

Thank you, Mr Rumbles. You must end.

Photo of Mike Rumbles Mike Rumbles Liberal Democrat

—of everyone’s time and taxpayers’ money. The minister really should have done so much better.

The Deputy Presiding Officer:

Thank you. I am sorry—time is tight.

Photo of Stewart Stevenson Stewart Stevenson Scottish National Party

We would not be here today if the project manager and their office had conducted their activities in relation to the construction of vessels 801 and 802 at Ferguson Marine to anything approaching normal professional standards. That was not a mere contributory factor. I make that observation as someone who has run projects of similar financial scale and collections of projects multiple times the scale of this project.

The contract and processes around procurement were industry standard, had worked previously and are used not just in Scotland but widely. However, the response of those in charge of procurement to the project manager’s failure was inadequate and substantially contributed to our being where we are today.

Did CMAL know about the project manager’s failures early enough to have intervened to minimise the damage? My conclusion is that it almost certainly did. Did the complexity of the procurement structure, which involved CMAL, Transport Scotland and the Government, contribute to the problem? I am pretty clear that it was more complicated than it needed to be. However, the legal requirement to have such a structure ceased only at 23:00 on 31 December 2020. I have never said that leaving the European Union would not have some advantages, and that might just be one of them. I see that Graham Simpson is nodding his head in response to that.

Another question is whether, in providing financial assistance to Ferguson Marine, the enterprise agency should have informed CMAL and others that it was doing so. Here, I differ from the quite strongly held views of Edward Mountain—I hope that I am not misrepresenting him—in saying that it should not have told them. However, although it was not told by the funder, through proper oversight of the project, CMAL should have known by other means. Why? In providing support to a commercial company, the enterprise agencies must not discriminate by favouring state companies over private sector ones. I heard Graham Simpson say that we should not be ploughing vast sums of money into private companies. That is unusual for a member who sits on the Tory benches, but there we are.

The whole point is that we have to be blind as to whether such a transaction involves a state company or a private sector one. There is nothing new about such a situation, which involves what are termed Chinese walls. I will tell members a little story from my own experience. In the 1980s, my spouse was part of a team of advisers to The Distillers Company Ltd when it was bidding to purchase the company that produced Bell’s whisky. One of the teams working for me was part of the Bell’s team on the other side of that takeover battle. Therefore, in our household, there was clearly a conflict between our respective professional interests. We applied the old saw,

“He that would keep a secret must keep it secret that he hath a secret to keep.”

My spouse and I discussed nothing about the matter and we knew nothing of each other’s involvement in it until, six months after the event, we were having lunch with someone who had been involved in the transaction and who raised the subject. That was the first time that either of us knew that we had been on opposite sides of a takeover battle on the stock exchange. That is how Chinese walls have to work, and so it must be for our enterprise companies when they work in that context.

Of course, examination of the accounts receivables and knowledge of what the business was getting its contracts for would have been important for CMAL.

I will conclude by saying that the primary failure definitely lay with the then management of the yard, but I think that CMAL could have done more. I say to the minister that I hope we will look at that aspect very carefully.

Photo of Peter Chapman Peter Chapman Conservative

The Rural Economy and Connectivity Committee’s report into the building of ferry vessels 801 and 802 is damning. We decided that it had, indeed, been a catastrophic failure. That was our view after a detailed and comprehensive study of the facts, which led to our unanimous conclusion.

Therefore, Paul Wheelhouse’s subsequent dismissal of much of our report was really shocking. The minister has demonstrated an unbelievable degree of arrogance and a worrying degree of ignorance. His response amply shows what we already know about the SNP Administration—that it displays a shocking level of incompetence, little understanding of business and a cavalier attitude to wasting millions of pounds of taxpayers’ money.

Normally, individuals in Governments learn from their mistakes, but with such attitudes it is no surprise that industry has no confidence in the SNP Scottish Government, whose economic growth rate continues to lag behind that of the rest of the United Kingdom. Those ships will eventually be delivered, but they will be five years late and at least two and a half times over budget. I noted from last week’s budget statement that Ferguson Marine is to receive another £47 million of taxpayers’ money this year. Yet, incredibly, Paul Wheelhouse told the committee:

“I am satisfied that procurements in relation to 801 and 802 were undertaken fastidiously, in good faith and following appropriate due diligence.”

Really? I say to the minister that that is not what the committee found. Our experience was that Transport Scotland and CMAL applied inadequate due diligence in scrutinising and signing off the procurement process.

There was a lack of scrutiny of the financial stability of the winning bidder, and the Scottish Government was willing to proceed

“despite ... significant risks associated with awarding the contract to”

Ferguson Marine. There has been a catalogue of errors and failings by ministers and CMAL, but I was particularly concerned to learn that

“four years after the contract was ... awarded, 95% of sign-offs on the basic design of the vessels were still not completed”.

It is of grave concern that CMAL

“did not intervene to halt the process as soon as it became aware that FMEL was proceeding to build at risk without having secured sign-off on the basic design”.

These are the wrong ships, given to the wrong yard, and the outcome is that island communities across the west coast are suffering a poor and unreliable service. The promised new ships are nowhere to be seen, and the whole CalMac service is stretched to breaking point. There is no spare ferry anywhere in the system, and, if there is a breakdown or a ship needs maintenance, sailings must be cut and islanders’ essential journeys abandoned. That makes running a business on our islands, which is already expensive and difficult, almost impossible.

This is a debacle of the worst kind. It has cost taxpayers hundreds of millions of pounds; it has made life for our island communities more difficult; and, far from securing a reliable future for the Ferguson Marine yard, I believe that the yard will find it difficult to secure new work under the dead hand of this incompetent Government and with the abysmal legacy of these ferries. The failure of the yard could well be the final disaster of the whole sorry saga—a sad end for a committed, skilled and reliable workforce who deserve so much better.

Photo of Stuart McMillan Stuart McMillan Scottish National Party

First, I will touch on some comments that I have heard from colleagues. Peter Chapman complained about the £47 million from the budget that is going to the yard next year, and his final comments were really quite astounding. He said that the order was given to the “wrong yard”, but, without the order, the yard would have shut—the yard would not have been there and we would not have over 400 people employed at that yard—so his comments were actually quite ridiculous.

We had the Greens saying that we should remove CMAL from Port Glasgow, taking jobs away from Port Glasgow and taking more jobs away from Inverclyde. Then, from the Labour Party, we had Colin Smyth calling for a criminal investigation into the awarding of the contract. So, Labour does not want the order—it does not want the work at Ferguson’s in Port Glasgow. I am looking forward to putting that on my election leaflet for May.

Earlier, we had Graham Simpson saying that we should scrap CMAL. That would mean that jobs would be lost. He also complained about the loans of £15 million and £30 million. That financing, as well as other things, helped to secure the yard and kept the yard—

Photo of Stuart McMillan Stuart McMillan Scottish National Party

I have only four minutes, Mr Simpson. I normally take interventions, but I will not today.

I note the report and its recommendations. I agree with some parts of it, but I respectfully disagree with others.

Not one person can say that what has happened at the yard over many years has been positive—not one person. I am the constituency MSP for Greenock and Inverclyde, and as I grew up in Port Glasgow, the son of a coppersmith whose last job was working at the yard, my loyalty has always been to the yard. [

Interruption

.] I am sorry, but I cannot take any interventions. I want the yard to succeed; I want the yard to build more ships; and I want the yard to employ more people and have a future for many decades to come.

I have never been particularly vexed about the ownership or the management of the yard. I am not really fussed as to whether it is a nationalised or a privatised yard. It is about the success of the yard. It is about the jobs, the apprenticeships and, as things currently stand, the completion of these ships to ensure that the yard can build more ships in the future.

The report covers many aspects, but what is clear to the independent reader of the report is that the Scottish Government has consistently supported the yard and its workforce. I am glad that the committee inadvertently recognised that in the final bullet point in section 71, on page 29. My constituency and my community welcome the fact that the Scottish Government has proceeded to save the yard.

From the awarding of the contract, which was won fairly, to the two loans of £15 million and £30 million and the rescue of the yard, it is clear that the SNP Government has more than stepped up to the plate to support shipbuilding on the lower Clyde, in my constituency. I believe that the workforce knows that, that the local community knows it and that every single politician knows it, even though they will not say it publicly.

The committee’s report touches on a number of matters. Paragraph 120 refers to Robbie Drummond’s evidence on the future approach of standardising vessels, which I agree with.

Paragraph 129 refers to the evidence from CMAL that FMEL changed strategy after winning the contract. That goes some way towards explaining the damaging evidence from Tim Hair, the turnaround director, which is referred to in paragraph 96. In relation to the sign-offs of the basic design, he said:

“5 per cent of them were completed and 95 per cent were not completed when we took control of the yard in August 2019.”—[

Official Report, Rural Economy and Connectivity Committee,

22 January 2020; c 11.]

One thing that is certain is that I want as much work as possible to go to Port Glasgow in the future. I do not want the hulls to be built in Vietnam or other lower-cost countries and then to be brought to Port Glasgow, as Dr Alf Baird described in evidence to the committee on 29 January, and I do not want the scrapping of the two vessels, as was advocated by Roy Pedersen in the same evidence session. That would have resulted in mass job losses and the possible closure of the yard. My constituency and my community know that the SNP Government saved the yard and the jobs, so they now have a future.

Photo of Rhoda Grant Rhoda Grant Labour

We are debating the Scottish Government’s abject failure in building new ferries. Meanwhile, the communities that the Government serves struggle as they are badly served by old vessels that are subject to breakdown. We need a fundamental review of how we provide lifeline services to the islands and how we procure new ferries.

We no longer need to tender services. While we were in the EU, there were regulations, although even then there were exemptions such as the Teckal exemption. However, now that we have left the EU, there is no argument for the complex web of many companies that have a hand in owning and running our ferries. We need to abolish CMAL, and there is a strong argument that CalMac should own, buy and procure the ferries that it runs.

The previous few vessel procurement processes have proven to be vanity projects in which CMAL has been looking for kudos rather than the fit-for-purpose ferries that our island communities desperately need. The ferries have been eye-wateringly expensive, as have the alterations to harbours that were needed to allow the ferries to berth. One would hope that boats would be built to fit harbours, and not the other way round.

Not one bit of the process has provided better services for islanders. We are now looking at a cost of close to £200 million for two ferries that could have been procured at a fraction of the price. I am told that a reasonable price to pay would be around £10 million. Even if we added to that the cost of ensuring fair work practices for the workforce that built them, with the money that has been spent, we would still have almost enough money to renew the whole fleet. Meanwhile, our communities suffer due to old ferries breaking down and they are having to make do with replacement boats that are not fit for purpose.

Those vanity projects do not take into account the fact that, as we have heard, ferries have to move around the routes when maintenance is needed or when breakdown occurs. Because the new ferries need bespoke harbours, they will not be able to provide cover for other routes. We also require additional capacity. A relief vessel for winter maintenance periods would also add capacity in the summer, when people struggle to get a place on a boat. While a relief vessel is being procured, the Scottish Government needs to lease one. Pentland Ferries has a spare vessel, so why cannot an agreement be reached to lease it from time to time when the need arises?

The sheer folly of allowing building to start on the ferries before the design was signed off is breathtaking. The fuel that is used is supposed to make them more environmentally friendly, but I understand that any benefit would be gained only on journeys that are a lot longer than the ones that they will take. Therefore, the vessels will not be more environmentally friendly, especially when the fuel is being shipped from the other side of the world. The design also adds to their complexity and, no doubt, will leave them more subject to breakdown.

You really could not make it up. The Government’s response to the committee clearly shows that no lessons have been learned. There has been no apology. The Government has not apologised for squandering taxpayers’ money or for its incompetence and, sadly, it has not apologised to the workers and island communities that it has so badly let down.

Photo of Kenneth Gibson Kenneth Gibson Scottish National Party

Although they make for uncomfortable reading, I welcome the conclusions and recommendations of the Rural Economy and Connectivity Committee’s “C onstruction and procurement of ferry vessels in Scotland” report and thank the committee for its sterling work over many moons.

I speak as the constituency MSP for Cunninghame North, which includes Arran, the community that has been directly impacted by the lengthy delay in delivering into service ferry 801, or the Glen Sannox, as it is now named.

Alongside Ferguson Marine’s obvious project management failures, others with decision-making responsibilities—CMAL, in particular, and Transport Scotland—are accused of failing to discharge those responsibilities competently and effectively. There was a lack of clarity regarding remit and responsibilities, and there were no clear processes to escalate matters quickly when those went unfulfilled, which has resulted in mounting costs, delays and little progress. The vessels in question, which were originally due to be completed in 2018, are now five years overdue, and Covid restrictions could delay them further.

However, let us go back to the beginning. Why was the Glen Sannox needed? It was needed because the many positive developments that the Scottish Government introduced, such as the road equivalent tariff, which I relentlessly and successfully lobbied for over many years, huge increases in the number of summer sailings, the addition of the MV Catriona on the Lochranza route, and so on, all increased service demand. That, taken together with the beauty of Arran as a destination and the fact that we had a rapidly ageing fleet that faced increasingly adverse weather conditions with diminishing vessel resilience, made at least one new ship essential.

In scores of Arran ferry committee meetings that I participated in, islanders argued for a couple of Finlaggan-style vessels that would be more able to utilise Ardrossan and deliver a better all-year, all-weather service. However, Transport Scotland and CMAL were intent on reinventing the wheel by opting for a new “world-beating” design that would use liquefied natural gas.

Of course, when the contract was awarded, all seemed well. I recall that there was no opposition; that has obviously been sharpened by hindsight. The price differential in accepting a foreign tender was not enough to outweigh the benefits of construction at a yard an eight-minute drive from CMAL headquarters, where an historic shipyard could also be revitalised, creating and sustaining hundreds of skilled jobs in an economic black spot. However, as progress faltered and stopped entirely, island communities had to endure the very real impact that the delays imposed on their economies and populations.

I was struck by the evidence that the committee heard on stakeholder engagement, which emphasised the need for decision makers to engage with island communities on ferry procurement and construction in a far more meaningful way. If communities do not feel that their views have a material impact on the design and delivery of new vessels, that dissatisfaction is likely to continue into how they regard day-to-day ferry services. I therefore welcome the Government’s commitment to improve community engagement, which must be meaningful and have tangible outcomes. That will give communities evidence that they are being listened to and that their views are genuinely being considered, which is vital to rebuilding the trust of islanders.

Even when design choices are not clearly influenced by consultation, increased transparency should lead to a greater understanding of the considerations involved. It is clear that there needs to be a comprehensive overhaul of the key decision-making processes around ferry vessel procurement. Islanders cannot understand how the current state of affairs was allowed to drag on, even after alarm bells began to ring back in 2017.

An independent review that is based on the committee’s findings and recommendations is needed urgently. For too long, decision making on new ferry construction and procurement has been delayed, despite the fact that concerns have repeatedly been raised by CalMac, the National Union of Rail, Maritime and Transport Workers, islanders and other ferry users, as well as MSPs of all political persuasions, including me. Many ferries are now significantly beyond their originally planned operational lifespan, and more vessels must be ordered. Where Transport Scotland already knows the views of island communities, that should happen now.

We must absorb and learn from the committee’s report and take on board its findings to ensure that the same thing does not happen again. The commitments that the Scottish Government has made so far are hugely encouraging, but they must be fulfilled, and ordering new vessels while ensuring a start date on site for the associated but seemingly never-ending Ardrossan harbour redevelopment, which will be essential to dock and service the Glen Sannox, would be a very good start.

Photo of Finlay Carson Finlay Carson Conservative

Those of a certain age will remember a television show called “Blankety Blank”, which attracted millions of viewers every week. Well, it would appear that the Scottish Government is attempting to resurrect that show, but its version is certainly no laughing matter. Its version should be called “Blank Cheque”, given that we are talking about a scatter-cash SNP Government that is apparently happy to dish out money as if it was going out of fashion. How else can we explain its catastrophic failure in the disastrous procurement from Ferguson Marine of two new ferries destined for CalMac?

The undoubtedly skilled workforce in the Port Glasgow yard was due to deliver the ferries to serve on the Clyde and Hebrides network three years ago. Today, the vessels are still tied up and will now not be completed until next year. If we are lucky, the second one might be complete in five years.

More importantly, because of the incompetence of the Scottish Government, the vessels will cost more than two and a half times their original contract price—nearly £250 million. Can you imagine coming home and telling your wife, partner or husband, “I’ve just bought a new car. The garage was selling it for £10,000, but I told them I’d happily pay £20,000. I’ll pick it up this year—or maybe next year or the year after that”?

Even in this debate, Mr Wheelhouse’s response to the ferries fiasco appears to be in line with other SNP debacles: “Oops. We’ll try again. We’ll maybe learn some lessons.” It is just like the minister’s failure on reaching 100 per cent—the R100 broadband programme. He should not be alone in shouldering the blame, however, as the former finance secretary, Derek Mackay, is also responsible for handing out loans to Ferguson Marine whenever it came calling. That is the gentleman who promised to nationalise the yard without even knowing how much it was going to cost.

Then we had Fiona Hyslop, Cabinet Secretary for Economy, Fair Work and Culture, saying how proud she was of the progress that had been made since the Scottish Government took control of the business last August. Does she not realise that the ferries have not been delivered yet and that they are costing more than double the price in the original contract?

The Rural Economy and Connectivity Committee has already said that the procurement process was not fit for purpose, but the Scottish Government pressed ahead regardless, despite the risks involved. The committee found that the due diligence of Caledonian Maritime Assets Ltd, the Scottish Government’s procurement body, and of Transport Scotland was “inadequate”.

Why should we be surprised at all that? It is not exactly the first time that the SNP Government has been woefully shown up. Take the sick kids hospital in Edinburgh, which cost £150 million, yet will still open late—and only after an extra £16 million was ploughed in to rectify faults with the ventilation.

What makes it worse is that the Government does not appear to listen. Ask the islanders who patiently waited, and are still waiting, for the new ferries. Government ministers ignored their advice that the proposed ferries were not fit for purpose, with islanders arguing that they were too big. Indeed, it was only after the contract was signed that the Scottish Government realised that it would have to spend another £50 million on the quayside infrastructure in order that the ferries could dock.

As the shadow minister for rural affairs and the natural environment, I know how important the ferries are for the local economies, which rely on them heavily. They provide remote communities with a lifeline to the rest of the country.

Concerns have already been voiced about the overall age profile of Scotland’s ferry fleet, with many vessels now operating beyond their expected lifespan. Indeed, about 50 per cent of the vessels in the CalMac fleet are now beyond their 25-year expectancy, and there are inevitable breakdowns and cancelled sailings. It should not be forgotten how critical the new, state-of-the-art ferries are; it is just a pity that the sheer incompetence of the SNP Government has left our island communities up the stream without a paddle.

Rather than burying your heads in the sand and learning nothing from the committee report, you in particular, Mr Wheelhouse, and your arrogant Government should hang your heads in shame.

Photo of Angus MacDonald Angus MacDonald Scottish National Party

I am pleased to take part in this afternoon’s debate—not just as a member of the REC Committee, but as a regular user of CalMac Ferries, not least the MV Hebrides, which is patiently waiting to be replaced by vessel 802.

We all know that Ferguson’s has a history of decades of building for the CalMac fleet good-quality ships, on time and on budget. Indeed, it is because of the quality of that workmanship that there has not been the massive outcry that we would expect on the islands of Lewis and Harris over the delay in delivering vessel 802. The current MV Hebrides is such a good ship, and has faithfully plied the Uig triangle day in and day out, weather permitting. It is worth remembering that she was built by Ferguson’s 20 years ago and is still going strong; in fact, she is probably the best ship in the CalMac fleet.

P roof exists that Ferguson’s has, in the past, delivered excellent fit-for-purpose ships for the fleet—that was until FMEL appeared on the scene.

T here is clearly some disquiet on the islands at the prospect of further delay, with the 802 not coming into service until between December 2022 and February 2023. That has not been helped, of course, by the Covid pandemic, which has delayed work on the ferries by another six months.

I turn to the committee’s report. On the procurement and construction strategy, the committee was extremely concerned about the overall age profile of Scotland’s ferry fleet, which includes many vessels that are now operating significantly beyond their original planned lifespans.

We considered that the current situation reflects a failure by successive Administrations in Scotland to develop and implement an effective strategy for renewing the fleet.

To that end, I was delighted to see in the minister’s recent response to the committee that the Government will invest at least £580 million during the next five years, to build on its vessel replacement and deployment plans, which we are assured will

“improve resilience, reliability, capacity and accessibility”.

I turn to the future, and engagement with local island communities in particular. During our evidence sessions, CMAL and CalMac claimed strong levels of engagement. Robbie Drummond of CalMac said that it undertakes hundreds of meetings per year with local ferries committees and ferries stakeholder groups, and Jim Anderson of CMAL said that CMAL’s engagement with local communities had been extensive, and that the design of vessels 801 and 802 was, as a result, responsive to the needs and expectations of those communities. Referring specifically to 802, Mr Anderson claimed:

“the communities are, by and large, getting the ship that they want. The ship is like the MV Hebrides and we know that they are very happy with the Hebrides. I would say that the ship will be Hebrides plus when it is finished.”—[

Official Report, Rural Economy and Connectivity Committee,

11 March 2020; c 5.]

That was music to my ears, but sadly not to those of Comhairle nan Eilean Siar, which claimed that with a vehicle-deck capacity increase of only 25 per cent over that of the vessel that it is replacing, vessel 802 will only partially alleviate capacity issues on the Uig triangle. That suggests that the decision to provide the service with a single new vessel was contrary to the preference of the local community, which reminds me of the situation with the now six years old MV Loch Seaforth. The community originally wanted two smaller ferries operating on the Stornoway to Ullapool route, instead of the one large ferry that it got. It is fair to say that there is still room for improvement when it comes to engagement with local communities, so I am glad that the minister has acknowledged that.

It should not go unnoticed that the Scottish Government, which faced an unprecedented and most unwelcome predicament that, I am sure, none of us would envy, took action to secure delivery of the vessels to serve the island communities that rely on them, and secured hundreds of skilled jobs and wider economic activity. For the record, that includes some 350 employees at the yard, including permanent, temporary and contract workers, and 26 apprentices. Of course, the yard also supports an estimated 350 jobs in the rest of Scotland. The saving of one of Scotland’s last shipyards cannot, and should not, be disregarded or undermined.

Photo of Lewis Macdonald Lewis Macdonald Labour

Alasdair Allan will be the last member to speak in the open debate.

Photo of Alasdair Allan Alasdair Allan Scottish National Party

The committee’s report is unambiguous, as others have pointed out. There were, it seems, catastrophic failures associated with the building of two vessels for CMAL. Some of those failures can be attributed to the procurement process of CMAL, but many are clearly attributable to the way in which the project was managed by the contractor that was then operating Ferguson’s. The people who are not to blame are the workforce of Ferguson’s.

I will neither minimise those facts nor rehearse them. Instead, I want to look at some human consequences. Much of the debate has legitimately concentrated on what the episode means for jobs in Inverclyde. Given the proud heritage of shipbuilding there, I readily understand and sympathise with that focus. Indeed, it was, I believe, right that the Government stepped in when it did, to save the jobs.

However, as Kenneth Gibson did, I want to add a word about what the delay to the vessels’ completion actually means for island communities. Vessel 802, which is now running some four years behind schedule, is intended for the route that runs from Uig in Skye to the islands of Harris and North Uist in my constituency. CalMac, of course, already has vessels running on those routes. However, because of a period in the first years of this century during which no new major vessels were built for CalMac routes, some of the current fleet is now becoming distinctly stricken in years, as we have heard.

The pressing need for new tonnage to serve island routes becomes strikingly clear in the summer—at least, in any normal summer—when CalMac can simply no longer meet hugely increased demand. Less widely highlighted, however, are the problems that CalMac and the communities that it serves now face in the winter, when the fleet is shuffled around while many vessels have their annual refits. At the end of last year, three of CalMac’s largest vessels were out of action at the same time, which meant that the company could not cover all lifeline services.

Only a few combinations of ships and piers are actually interchangeable. If we add bad weather or vessel breakdown to the picture, the situation becomes extremely difficult to manage. At Easter in 2018, for instance, Lochmaddy in North Uist went without any ferry service at all for the holiday long weekend, and there was a waiting list that stretched to nearly three weeks. Such sustained ferry problems have significant consequences. It can become difficult to keep shops stocked, it can become impossible for families to attend funerals, and tourism businesses are unable to honour bookings.

It might be obvious and unhelpful to say this, but I say with the best will in the world that a CalMac ferry does not take six years to build. The nearest comparison that comes to mind is the Queen Mary liner, which took five and half years from the laying of her keel to her maiden voyage in 1936. However, she was then the largest ship in the world, and work stopped halfway through her construction because of the great depression.

It would be remiss of me not to take the opportunity to focus at least some of my speech on the need to ensure that the two vessels are completed soon, and on the need to ensure that another vessel that is intended for Islay is ordered or—which is more important—completed soon in order to ensure that the CalMac fleet can cope in the years that lie ahead.

Photo of Colin Smyth Colin Smyth Labour

The debate has highlighted the fact that many unanswered questions remain. That is why so many of the committee’s recommendations called for further investigation—for example, by Audit Scotland—and for reviews of the procurement process, of the design, of development of vessel specifications and of the propulsion technologies. As I have already made clear, my view is that further investigation is needed into the decision-making process for awarding the contract in the first place.

Although there are unanswered questions, there are some unavoidable facts. The building of the ferries was a catastrophic failure. As the committee’s report said, the experience

“exposed serious failures in the current tripartite decision-making” processes. In calling for an urgent root-and-branch overhaul of the decision-making structures, we specifically noted that that should

“consider the relative roles and responsibilities of all bodies involved in decision-making around the procurement of new vessels and ... whether each of these bodies should continue to exist”.

It is becoming increasingly clear that there is no longer a need for CMAL, now that we are not subject to EU procurement laws. Its failure to carry out due diligence in awarding the contract should hasten that decision. Stuart McMillan says that that failure should be swept under the carpet; he says that we should simply keep CMAL—which is a failing organisation—because it creates jobs. He seems not to understand that the jobs will still need to be done. Taking ferry building fully in-house would simplify the procurement process, improve accountability and ensure better alignment with communities’ needs and wider Government policy aims.

Photo of Stuart McMillan Stuart McMillan Scottish National Party

At what point did I actually say that?

Photo of Colin Smyth Colin Smyth Labour

Mr McMillan made it absolutely clear that he does not support the scrapping of CMAL. He specifically talked about the jobs that were being created. I wonder how many jobs could be created with the £100 million that has been swept into the Clyde because of his Government’s ferry fiasco.

Photo of Colin Smyth Colin Smyth Labour

Mr McMillan ignored that point in his speech.

It is absolutely vital that we do not look only at the structures for how contracts are procured. Ferry building should be properly aligned with wider policy, including our ambitious carbon reduction targets. The Scottish Government must look at what more can be done to support low-carbon technology in our shipbuilding sector in order to reduce emissions and to create vital green jobs in Scotland.

There are some exciting projects under way in Scotland, such as the HySeas III project in Orkney. I understand that it is seeking funding through the United Kingdom Government’s clean maritime demonstration programme. If we are serious about building a green economy, such work must be supported. We want to see it being supported in shipyards in Scotland.

That brings me on to the future of the Ferguson Marine shipyard. The Government has been keen to emphasise the role that it played in protecting the shipyard’s future by bringing it into public ownership. I fully support that decision, but the situation should never have been allowed to escalate to that point in the first place; the decision should not have been necessary. That fiasco led to the demise of the company behind Ferguson’s. We should not be celebrating that—the fact that they are celebrating it certainly came across in some members’ speeches.

It is clear from the committee’s inquiry that, despite the failings of the management and the financial model of the company, Ferguson’s has a dedicated and skilled workforce, which makes it an invaluable asset to Scotland’s shipbuilding industry and an important source of jobs in the local economy.

Now that the welcome initial intervention to save the yard has been made, the focus must be on work to protect its long-term future by investing in and developing the yard’s skills and expertise. We must focus on ensuring that the yard is equipped to develop the cutting-edge green technology that we will need, and that it secures the contracts that it can deliver.

We need a joined-up strategic plan for shipbuilding and ferry services in Scotland. As well as revisiting the procurement process for shipbuilding, the Scottish Government needs to set out plans for awarding contracts for lifeline ferry services. The Government needs to learn from the mistakes of this fiasco, but for that to be possible, it cannot continue to be so dismissive of so many of the committee’s recommendations. It should remember that £100 million of taxpayers’ money has been wasted and, most important, that lifeline ferry services have not been delivered to communities that have had to wait far too long for delivery of the contract.

Photo of Jamie Halcro Johnston Jamie Halcro Johnston Conservative

The debate comes at an important time, following the Rural Economy and Connectivity Committee’s report. I thank the committee’s members and clerks and the convener, my colleague Edward Mountain, for a clear and comprehensive examination of the subject. As a new member of the committee, I did not participate in the work that has taken place over the past year. However, as an islander, I am all too aware of the issues that our ferry networks have faced.

At the heart of all this are two vessels and hundreds of tonnes of steel sitting on the banks of the Clyde. It is a story as tragic as it is ridiculous. It all started quite differently—the easy promises, the First Minister’s launch of the Glen Sannox in 2017, with only the Potemkinesque painted windows hinting at the trouble ahead, among the sea of little flags issued to schoolchildren. However, instead of those two vessels sailing the clear waters of the Clyde and Hebrides, as they now ought to be, the Scottish Government has created a pair of grandiose monuments to its own incompetence. Our island communities—not to mention the taxpayer—have been left with the consequences.

The committee’s report in December was damning, and those two words “catastrophic failure”, which have been repeated many times today, should haunt all those responsible. The report told a tale not only of enormous delays and cost overruns but of huge flaws from the start to the end of the procurement process, of missed opportunities for the Scottish Government to mitigate problems at earlier stages and of a deaf ear turned to concerns from numerous parties. Over the summer, the Glen Sannox was pulled into dry dock—its frame had been left exposed to the elements too long and remedial action was needed. Glasgow has the fish that never swam; Port Glasgow has the ship that never sailed.

Since the tide so publicly turned on the project, the Scottish Government has created a legacy of evasion. It tried to shift blame at every opportunity, suggesting that it was all the fault of Ferguson Marine, with innocent ministers the real victims. Those suggestions dissolved under the light of the committee’s investigation. My colleague Graham Simpson highlighted that when he spoke about the Scottish Government’s response to the report and the minister’s lack of humility or acceptance of the lessons to be learned. However, Paul Wheelhouse can no longer ignore a five-year delay and a nine-figure overspend. Given his record with the ferries, broadband roll-out and the proposed publicly owned energy company, the Minister for Energy, Connectivity and the Islands is fast getting a reputation as the minister for delays.

As Finlay Carson and others rightly pointed out, Paul Wheelhouse is not the only politician with questions to answer; he is just one of the SNP ministers involved in this shameful affair. Stay-at-home politician Derek Mackay should be here, too, or at least joining us remotely to answer questions, but he is not. Peter Chapman took up the issue of the gulf between the committee’s findings and the Government’s response. Significantly, the issues around Transport Scotland’s and CMAL’s oversight and due diligence have been a constant theme of discussion. Peter Chapman also mentioned an issue that I know is close to the hearts of islanders, and especially businesses: resilience. If ferry services cannot adapt when normal operations break down, faults inevitably lead to lost journeys.

The debate has shown the Scottish Government’s lack of strategic planning for our ferries—an issue that I have raised in the chamber for years. Ferry links are vital to our island communities and should be driven by the needs of islanders. The committee notes, with some alarm, the ageing profile of our ferry fleet, a lack of built-in resilience and the short-termist approach that has been taken.

We see that, too, in the northern isles—we still have no answers from the Scottish Government on the future of the interisland ferries that will themselves need to be replaced. All the while, private operators seem to be able to commission new vessels on time and on budget. The fear is that, so long as these long-standing questions remain unanswered, it will be only be a matter of time before the SNP’s next catastrophic failure comes along.

Photo of Paul Wheelhouse Paul Wheelhouse Scottish National Party

After that underwhelming contribution from Jamie Halcro Johnston, I will not take any lessons from someone who got fewer than 500 votes to get into the Parliament. Julian Fellowes need not fear that he will be replaced as a Tory scriptwriter.

In more positive contributions, Rhoda Grant, who I appreciate is online and cannot respond, and Stewart Stevenson raised issues to do with state aid and its replacement. It is clear that there is a different environment post-Brexit, but we also have to take into account the fact that we need guidance from the UK Government on how the subsidy arrangements will be made before we can draw conclusions about the implications for direct award, although clearly we are interested in looking at that.

There were a number of other positive contributions. I appreciate much of what Colin Smyth said, although it may have been less positive. He called for a tripartite review, as did others. I want him and other colleagues to acknowledge that we have committed to that, and it is about to be commissioned. It will report to Parliament and to ministers, and I reassure him and others that—

Photo of Paul Wheelhouse Paul Wheelhouse Scottish National Party

I am not sure that I have time, but if the Presiding Officer allows me, I can.

Photo of Graham Simpson Graham Simpson Conservative

Are there any circumstances under which the minister would consider scrapping CMAL?

Photo of Paul Wheelhouse Paul Wheelhouse Scottish National Party

We have to commission the review and see what comes forward. I praise the work that CMAL, CalMac and Transport Scotland do, and I acknowledge that there are lessons to be learned, as I said in my opening remarks and in my written submission. I promise that we will learn the lessons, but we also need to wait for the review to conclude. We will consider what the ideal arrangements are given the kind of procurement models that we need to look to get investment in the fleet. With respect to the member, I understand what he is trying to get me to say, but we have to see what is recommended as the best organisational structure to ensure that we have the appropriate steps in place.

Alasdair Allan was right to focus on the communities, and I hope that he and Kenny Gibson and others would acknowledge that I have been in contact with communities and I have given them the absolute assurance that we are doing everything that we can to get the vessels in place in time, and I have expressed my regret that they are facing delays as a consequence of what has happened at Ferguson’s.

Mike Rumbles charged us with the risk that the report will sit on a shelf and gather dust—I assure him that it will not and we are already acting on a number of the recommendations. Even the convener acknowledged and welcomed some areas in his opening remarks, including our willingness to contribute to any Audit Scotland review, should that be asked for by Audit Scotland—[

Interruption

.] I do not think that I have time, but I will happily engage with the member afterwards.

In relation to wider contributions, we have signalled that we remain committed to those communities and to take on board lessons. We recognise the impact that delays have had and we have given additional investment to CalMac and CMAL of £4 million a year to help with additional maintenance costs, as we try to bridge the gap until the vessels arrive. In recent months, we have made significant progress on other key vessel replacement projects with the appointment of naval architects for the Gourock to Dunoon and Kilcreggan vessels and approval of the initial stages of the small vessel replacement programme that will see seven of the loch class vessels replaced in a rolling programme. In addition, CMAL has commenced work on the options for replacing the freight vessels for the northern isles. Our infrastructure investment programme, which Angus MacDonald referenced, has committed to £580 million of investment in ferries over the next five years.

We are also looking at whether there are positive lessons that we can take from the impact of Covid on services—in particular, we are considering, inspired by discussions with Dr Allan and colleagues in the Western Isles, whether the retention of an appropriate percentage of tickets on a turn-up-and-go basis should continue, which is of more benefit to islanders looking to travel at short notice, given capacity constraints.

I make those points to stress that, although we will reflect and improve as I have set out, we will also progress those vital projects. Some of the work may also require port infrastructure improvements to support the introduction of new vessels with larger capacity and to accommodate standardisation of vessels, which is something that the committee and witnesses have called for. John Finnie made that point in his remarks at the beginning of the debate. Those costs will be understood through the development of the project and tested against a detailed cost benefit analysis across the lifetimes of vessels.

We are also committed to ensuring that that work is underpinned by an overall investment strategy that considers ports and vessels and supported by the development of the island connectivity plan, which the convener mentioned earlier, which will be the successor to the current ferries plan. We will look more comprehensively at connectivity to the mainland for islanders.

We continue to welcome the commitment and professionalism of the workers and the management team in the yard at Port Glasgow. We will update the committee at appropriate intervals on progress in completing both hulls, 801 and 802. We firmly stand behind our decision to step in and ensure jobs for Inverclyde, a future for the business and the delivery of vessels. Stuart McMillan was right to focus on that.

As part of the intervention that we have made, we have reluctantly accepted the additional cost that has resulted from the contractor’s failure to deliver to the fixed price that it promised. That was underpinned by failures in processes by the former management, which were set out in the report that the turnaround director made when the yard was brought into public control.

That does not mean that we do not accept that things must change. I accept that members have made such points, which we have acknowledged. Even in my response to the committee, I acknowledged that. We do not rest the situation entirely on contractor failure, although it was a significant factor in the problems that unfolded, as I said. I hope that fair-minded members will accept that.

Photo of Mike Rumbles Mike Rumbles Liberal Democrat

On a point of order, Presiding Officer. You will be aware that I made a point of order last week about the inability to intervene on members who contribute remotely. I asked you to take that issue forward and you suggested that members should bring it to our business managers’ attention.

We have a similar issue today. The Parliamentary Bureau has programmed this very important debate for a short time, which means that members other than front benchers have been able to speak for only four minutes and have—rightly—not had time to take interventions. That is not a debate. Parliament is turning into a place for speech after speech, and I hope that the bureau will note that.

The Deputy Presiding Officer:

I a m not at all sure that that is a point of order. It is important to say that what the Parliamentary Bureau proposes, Parliament can agree or disagree to. The timing for the debate was agreed by Parliament.

I call Maureen Watt to close for the committee.

Photo of Maureen Watt Maureen Watt Scottish National Party

I hope that that intervention has not eaten into my speaking time.

This has been a rumbustious debate on the committee’s report, which had to be debated in the chamber. As has been said, a minority report was not issued, but it is fair to say that there was robust discussion and disagreement in the committee. It is thanks to the clerks that we managed to get to the point of having the report to help us in our work.

The committee was right to agree to hold the inquiry, because a considerable amount of taxpayers’ money is involved in ferries generally and specifically in vessels 801 and 802. As members have said, many of our island communities are being and will be affected by the slippage in the procurement of the new ferries, given the ageing fleet.

The Scottish Government and the minister must accept that changes are necessary. I am pleased that consultation with islanders, for example, will be improved and, above all, that feedback will be seen as necessary, as that is an important part of the engagement process. The wants of islanders are not a homogeneous ask. The needs of the wider economy, such as those of tourism and business, all need to be factored in.

The Scottish Government must develop standard designs for small, medium and large vessels to get economies of scale, and have better co-ordination of quay sizes and quay facilities throughout the Western Isles and the northern isles. That will mean that we can take into account islanders’ various needs and have co-ordination and standardisation, especially as propulsion methods will change to take climate change into account.

It has been important to have the debate so that we could hear contributions from members who represent the islands. The tendering and procurement of ships is unique; it involves a long-standing process that is unlikely to change significantly just because of these ferries. However, there is room for better design specification and for the requirements in tenders to be more specific.

We want the shipbuilding industry in this country to survive. That has been the consensus throughout the debate. It would be unthinkable not to have vibrant shipbuilding capacity in Scotland, given that we are an island and have lots of island communities to serve.

It is clear that as long as Ferguson’s shipyard is in public hands, it will be a subject for debate in future sessions of Parliament. The Government should be held to account on the subject. There is much to be done to turn the business around. It will take many years to put it on a sound financial footing. The Government is right to look forward, but it is important that we question the current decision-making structure, in particular the length of the CalMac contract, which should be longer.

Members who visited the yard cannot but have seared on their memories what we saw as the result of FMEL’s tenure of the yard. Vessel parts and machinery were stored in appalling conditions, without sufficient inventory in place. There was steel of insufficient quality to hold the bow doors in place, capstans of insufficient strength to hold the ships in port, and no pipework from the liquefied natural gas tanks to the engine room—not to mention the infamous bulbous bow. All of that had to be replaced at huge cost, due to FMEL’s incompetence and negligence.

All in all, Scotland must have a sustainable shipbuilding industry. In Inverclyde, we must have a yard that is in a position to be competitive. As Stuart McMillan has said, Inverclyde is one of the most deprived areas in Scotland and it is really important that the Government continues to support the yard.

The Deputy Presiding Officer:

That concludes the debate on the inquiry into the construction and procurement of ferry vessels in Scotland.