'Cheaper to scrap new CalMac ferry and re-order' says ScotGov report

[WAB]

https://www.greenocktelegraph.co.uk/news/24014750.secret-advice-warned-fm-ferry-fiasco-cost-soar/

Secret advice warned FM ferry fiasco cost could soar further

THE First Minister was given secret advice that the public cost of the ferry fiasco at Ferguson's is expected to soar by even further than anticipated when ministers decided to continue to go ahead with much of the project despite it not being value for money.

Despite the warning given by the secret report by consultants Teneo, ministers decided that the job must be completed at the nationalised Port shipyard.
Ministers have come under fire over secrecy over the ferries scandal - as it was confirmed it entered into ten gagging clauses with external private companies in relation to the yard.

The non-disclosure agreements (NDAs) revelation has come as ministers have been criticised for refusing to spell out the extra costings involved in continuing to complete one of the two dual-fuel vessels for CalMac, which they admit is not value for money.
A Scottish Government due diligence review supported by a secret analysis by consultants Teneo said it would be cheaper to scrap the ship still being built at Ferguson and place a new order elsewhere. It is understood the Teneo report is subject of a non-disclosure agreement.

Glen Sannox and her sister Glen Rosa are still not ready despite being due to be available for passengers in first half of 2018, when Ferguson Marine was under the control of tycoon Jim McColl.
With both due to serve Arran, they are almost six years late and the latest estimates suggest the capital costs of delivery could have more than quadrupled from the original £97m.
The wellbeing economy secretary Neil Gray gave a rare written authority in May to plough ahead with supporting the delivery of the two ferries at Ferguson Marine in May, saying it is the "platform upon which future success can be built".

He said that non-delivery of the ferries at the yard would put its future and the jobs it supports "in jeopardy".

It heralded the sanctioning of an extra £72.6m in capital spending on the ships. That was made up of £15m approved in December last year and a further £57.6m for 2023/24.
Just before Christmas the Tele revealed a warning of further delay and extra costs on the ferries in a quarterly update by Ferguson chief executive David Tydeman, which was described as "extremely concerning" by the wellbeing economy secretary.
It has now emerged that advice given from the Scottish Government's directorate of economic development and sent to both the First Minister and Mr Gray provides a warning from Teneo that extra costs would be anticipated over and above that which was considered in the value for money assessment.
The advice given in May states: 'The strategic outcomes sought when [Ferguson Marine] was taken into public ownership were to ensure completion of new lifeline ferry services (vessels 801 and 802) and secure a sustainable future for the shipyard, thereby retaining jobs and key commercial shipbuilding skills in Scotland and strengthening national resilience.
'Whilst the delivery of [the ferries] has been hampered by delays and budget overruns, their importance in terms of essential service and network resilience remains extant and has arguably strengthened given the increasingly ageing ferry fleet and well publicised challenges in securing temporary replacement vessels (cost and uncertainty).'

The advice marked 'official sensitive - commercial' states that costings provided by the chief executive Mr Tydeman had been 'interrogated rigorously both by officials and external commercial experts (Teneo)' because of 'historic concerns about the accuracy of forecasts'.
It said that while the delivery of Glen Rosa was not value for money 'Teneo also consider that based on [nationalised Ferguson Marine's] track record there is a potential for this gap to widen further in the months ahead'.
But the First Minister was told by Kate Hall, the Scottish Government deputy director of strategic industrial assets, that a full funding decision was "urgent" because Ferguson Marine had already incurred costs.
She said: "It is advised that there is no specific number allocated in the request given the uncertainties of the potential final cost.

"However we believe it is important that there is no 'blank cheque' for the vessels and therefore, as part of the correspondence, we have set out a strengthened approach to the monitoring and control of costs and delivery schedules with external commercial advisers providing quarterly reports on progress and projections.
"This would sit alongside the structure with [state-owned ferry and port owners] CMAL as technical advisers and ensure that ministers are sighted on the ongoing financial position and if any previous agreement, such as the written authority, had to be revisited."

The value for money study by consultants Teneo, which cost the taxpayer £620,000, has remained under wraps - with not even an edited version allowed to be seen.
Also being kept under wraps is a report by consultants First Marine International (FMI) into operations at Ferguson Marine, as part of wider work to evaluate the shipyard’s productivity which supported the analysis of proposals for continued investment.
A Scottish Government spokesman said: “The Scottish Government remains committed to being as open and transparent as possible in relation to decisions around Ferguson Marine (FMPG) and vessels 801 and 802.
“The due diligence concluded that the value for money criteria were met for Glen Sannox. In setting out the decision to issue a written authority to enable work on vessel 802 [Glen Rosa] to continue, there was clear, cross-party acknowledgement that this was the appropriate course of action - not least as it presents the fastest possible route to getting vital new ferries into service.
"Any updated projected costs are set out by the [Ferguson Marine] chief executive in his quarterly updates to parliament."

 

[Nicholas Lewis]

https://www.greenocktelegraph.co.uk/news/24014750.secret-advice-warned-fm-ferry-fiasco-cost-soar/

This has been a fiasco from the start but the SNPs behaviour over it is reprehensible operating as though they were a satellite Russian state. The money wasted here could have delivered much needed health and education improvements as well as far better transport outcomes. Fortunately it seems the Scottish electorate have finally woken up to reality and the SNPs days are numbeted.

 

[HSTEd]

The way things are going they could probably have replaced a bunch of CalMac's routes with bridges for the cost of these two ferries.

 

[Joe Paxton]

How has it gone so very wrong?

 

[yorksrob]

Realistically, If you want the ability to engage in heavy industry such as building ships, you sometimes have to put your money where your mouth is.

Has the value for money report factored in the cost of the shipyard going bust, potentially losing the ability to build ships in the future ?

 

[mpthomson]

Realistically, If you want the ability to engage in heavy industry such as building ships, you sometimes have to put your money where your mouth is.

Has the value for money report factored in the cost of the shipyard going bust, potentially losing the ability to build ships in the future ?

Not at this level of wastage, you don't. Ferguson Marine is a fairly small concern with no orders beyond these ferries so it's likely to close anyway once they're eventually complete. CalMac has ordered ferries since these two from overseas yards and there are no build issues, budget overruns or delays with them. Ferguson's are highly unlikely to get further ScotGov orders after this and it goes without saying that private businesses aren't going to touch it either after this debacle. It's also worth noting that there are now rumblings within ScotGov currently about FM and the financial input it needs, especially with elections due.

As a contrast, the new MV Isle of Isla is being built in Turkey, was ordered 4 years after 801 and 802, isn't much smaller and on current progress well may end up being delivered first being on budget and on time...

 

[yorksrob]

Not at this level of wastage, you don't. Ferguson Marine is a fairly small concern with no orders beyond these ferries so it's likely to close anyway once they're eventually complete. CalMac has ordered ferries since these two from overseas yards and there are no build issues, budget overruns or delays with them. Ferguson's are highly unlikely to get further ScotGov orders after this.

As a contrast, the new MV Isle of Isla is being built in Turkey, was ordered 4 years after 801 and 802, isn't much smaller and on current progress well may end up being delivered first...

Since the company is nationalised, they'd be better off calling some experts to transform the company into something more efficient. There will be some greater costs with construction in the west, however giving up on ship construction is not sensible given how unstable the world is at present.

 

[Tetchytyke]

How has it gone so very wrong?

It happens every so often in the shipbuilding industry. Look at the saga of Brittany Ferries' Honfleur; the construction of that ship went so badly wrong it bankrupted the shipyard building her.

The only difference was that Brittany Ferries had no particular allegiance to Flensburger Schiffbau-Gesellschaft, and so were quite content to walk away even though they knew it would bankrupt the yard. It's a bit harder for the SNP to do that to a Clyde shipbuilder, not without a huge amount of political fallout. The same people criticising the SNP for the waste would also be criticising the SNP if they'd simply walked away from the deal and it caused Ferguson Marine to close for good.

Realistically, If you want the ability to engage in heavy industry such as building ships, you sometimes have to put your money where your mouth is.

Has the value for money report factored in the cost of the shipyard going bust, potentially losing the ability to build ships in the future ?

Precisely.

Yes, you'll almost always get your ships cheaper if you buy from China, South Korea, or even Turkey. But if you never buy anything from your own shipyards, it shouldn't come as too much of a surprise when your own shipyards go bust.

 

[mpthomson]

Since the company is nationalised, they'd be better off calling some experts to transform the company into something more efficient. There will be some greater costs with construction in the west, however giving up on ship construction is not sensible given how unstable the world is at present.

However whether the Scottish population will see giving yet more money to what is clearly a failing operation as a good thing (and I don't agree that it is in reality) is another matter entirely. The SNP won't want that as part of a manifesto (and neither would any other party) as it's an open goal for the other parties in the run up to an election.

It happens every so often in the shipbuilding industry. Look at the saga of Brittany Ferries' Honfleur; the construction of that ship went so badly wrong it bankrupted the shipyard building her.

The only difference was that Brittany Ferries had no particular allegiance to Flensburger Schiffbau-Gesellschaft, and so were quite content to walk away even though they knew it would bankrupt the yard. It's a bit harder for the SNP to do that to a Clyde shipbuilder, not without a huge amount of political fallout. The same people criticising the SNP for the waste would also be criticising the SNP if they'd simply walked away from the deal and it caused Ferguson Marine to close for good.


Precisely.

Yes, you'll almost always get your ships cheaper if you buy from China, South Korea, or even Turkey. But if you never buy anything from your own shipyards, it shouldn't come as too much of a surprise when your own shipyards go bust.

My bold, in this instance I wouldn't, in fact I suspect it needs to happen. It's likely to close for good anyway. There's no way ScotGov is going to give it another contract after its handled this one so badly, it would be electoral suicide.

 

[yorksrob]

As I say, instead of giving up on ship building altogether, as the company owners the Government should be looking to make the operation more efficient. (I have no love for the SNP, however there is a bigger picture for the West at stake).

 

[Tetchytyke]

as it's an open goal for the other parties in the run up to an election

"SNP causes Clyde shipbuilding to end after 300 years" would be just as much an open goal.

As for the waste, there's always the sunk cost fallacy- in this case, the SNP would be roundly criticised for walking away from the ship and throwing all that money away- even if it was cheaper to do so.

Sometimes you're just screwed either way.

my bold, in this instance I wouldn't, in fact I suspect it needs to happen. It's likely to close for good anyway. There's no way ScotGov is going to give it another contract after its handled this one so badly, it would be electoral suicide.

Regardless of the rights and wrongs of this particular contract, I think it would be a huge mistake to give up on shipbuilding.

 

[najaB]

What needs to happen is a full and open investigation (a real one, not a normal one where the conclusion is written before it starts!) to find out why things went as badly wrong as they did. That's the only way to figure out if Fergusson is salvageable or not.

 

[SargeNpton]

As I say, instead of giving up on ship building altogether, as the company owners the Government should be looking to make the operation more efficient. (I have no love for the SNP, however there is a bigger picture for the West at stake).

Ferguson Marine went into administration in 2014 and bought by a new owner. In September of that year it was awarded the contract for these two ferries, despite there being some misgivings about the yard's ability to construct them - as they were bigger and more complex than anything the yard had previously built.

The yard was then nationalised in 2019, so the Scottish government has had four years to make it more efficient.

 

[Ken H]

Hybrid ferry MV Hallaig is running on diesel only due to the battery failing. New battery £1.5million.

Sturgeon's flagship hybrid ferry only runs on diesel as battery too dear to fix

SUNDAY MAIL EXCLUSIVE: It was hailed by the former first minister as a symbol of the SNP but the MV Hallaig's electric battery can't be replaced and it will take bosses 18 months to fix it

www.dailyrecord.co.uk

A hybrid electric ferry hailed by Nicola Sturgeon is now only running on polluting diesel because a £1.5million battery is taking 18 months to replace. The MV Hallaig was the first in the world to use a system which cut carbon emissions by 20 per cent when it was launched in 2012.

But the battery broke on the £10million vessel in September and bosses have admitted it could be April 2025 before it’s fixed because the replacement part is no longer available.

 

[najaB]

The yard was then nationalised in 2019, so the Scottish government has had four years to make it more efficient.

That's entirely true. However, it's likely that the bad decisions were made early in the project (e.g. the build planning) and they've been left trying to polish a turd.

 

[Strathclyder]

This has been a utter shambles from the word go. A clear and thorough investigation is what's needed here to get to the bottom of exactly what went so badly wrong here and why, but I know that's about as likely as Hull 802/Glen Rosa entering service before the end of this year.

Ferguson have built large ships for CalMac in the past when under prior private ownership and trading under different names - starting with the Isle of Arran in 1984, through the Lord of the Isles and Isle of Mull in 1987 to 89, peaking with the Isle of Lewis in 1995 and ending with the Hebrides in 2000 - they also built the Loch Dunvegan & Loch Fyne in 1991 (the last two ferries built for the Isle of Skye crossing prior to the Skye Bridge's completion in 1995) and the Loch Shira in 2006 prior to the Halliag, Lochinvar & Catriona - with none of the excessive delays or increasing costs that we've been seeing with these two vessels.

Clearly the ability to build such ships in a timely, efficient manner has been lost. Whatever the reasons for it (poor initial planning, lack of oversight, inability to control costs etc), ScotGov now has this poisoned challace in the form of Ferguson hanging around it's proverbial neck that's it's bound to aggravate someone with no matter what they decide to do with it: either cut their losses and shut it down for good when these two ships are finally finished and put lord knows how many people out of work and deal a severe blow to what's left of the Clyde shipbuilding industry and the local ecomony or continue throwing money and contracts at it and hope that this won't happen again; they're damned whatever choice they take.

 

[paul1609]

Personally as a Marine Engineer myself I would say that i think the situation can be resolved and that there are people in the Uk that could do it. This would be in the best interests of the global Uk and probably the Cylde companies and their employees themselves. Unfortunately it would mean a few unpalatables for the Scottish Government in that they would need to admit that they are totally out of their depth and ask the Uk Government for help. There are very capable people in the MOD for instance that could rescue this project management distaster. It might mean for instance new uk management coming in from outside Scotland or even the ships being moved elshewhere to be completed. The real issue is probably whether the Scottish Govt. has the courage to take these steps. The Uk government itself will never step in because its not politically expedient against a government that has an independance at all costs agenda

 

[Meerkat]

Realistically, If you want the ability to engage in heavy industry such as building ships, you sometimes have to put your money where your mouth is.

Has the value for money report factored in the cost of the shipyard going bust, potentially losing the ability to build ships in the future ?

There are at least two other shipyards in Scotland. To my untrained eye Ferguson's looks too small to survive in the modern world, unless as a subsidiary of a bigger outfit (who would then probably close it down)

 

[Nicholas Lewis]

What needs to happen is a full and open investigation (a real one, not a normal one where the conclusion is written before it starts!) to find out why things went as badly wrong as they did. That's the only way to figure out if Fergusson is salvageable or not.

Audit Scotland have done a report

https://www.audit-scotland.gov.uk/publications/new-vessels-for-the-clyde-and-hebrides

Then the Scottish Govt Public Audit Committee held numerous hearings

https://www.parliament.scot/chamber...ments-for-the-delivery-of-vessels-801-and-802

Both damming but like all scandals in this country no politician is ever held to account for their failures.

 

[EMU303]

Personally as a Marine Engineer myself I would say that i think the situation can be resolved and that there are people in the Uk that could do it. This would be in the best interests of the global Uk and probably the Cylde companies and their employees themselves. Unfortunately it would mean a few unpalatables for the Scottish Government in that they would need to admit that they are totally out of their depth and ask the Uk Government for help. There are very capable people in the MOD for instance that could rescue this project management distaster. It might mean for instance new uk management coming in from outside Scotland or even the ships being moved elshewhere to be completed. The real issue is probably whether the Scottish Govt. has the courage to take these steps. The Uk government itself will never step in because its not politically expedient against a government that has an independance at all costs agenda

As long as it’s not the “uk experts” who presided over the huge overspend on HS2, or the late and grossly overspent London crossrail or the debacle of the MOD Ajax programme referred to as the “biggest procurement failure of the decade”….

Calls to reform MoD procurement after ‘damning’ review of Ajax project

Tory backbenchers and opposition united in criticism of programme to build new fighting vehicle

www.theguardian.com

As long as it’s none of them….

 

[mpthomson]

"SNP causes Clyde shipbuilding to end after 300 years" would be just as much an open goal.

As for the waste, there's always the sunk cost fallacy- in this case, the SNP would be roundly criticised for walking away from the ship and throwing all that money away- even if it was cheaper to do so.

Sometimes you're just screwed either way.


Regardless of the rights and wrongs of this particular contract, I think it would be a huge mistake to give up on shipbuilding.

They wouldn't be giving up , BAe is happily building ships on the Clyde at Scotstoun and is investing massively in the site. The increased capacity this will bring would easily absorb the jobs from Ferguson's. The issue for the SNP is that the continuing business for BAe is likely to be frigates for the Royal Navy.

 

[HSTEd]

Ferguson Marine's facilities are of negligible use for defence purposes, and I am not sure the scale of this debacle is justifiable in the context of keeping an obsolescent shipyard open a bit longer.

UK "emergency"/defence shipbuilding needs are unlikely to justify keeping open more than one shipyard in the long run anyway. And that shipyard should be one that actually has the facilities to build the types of ships needed.

 

[paul1609]

Ferguson Marine's facilities are of negligible use for defence purposes, and I am not sure the scale of this debacle is justifiable in the context of keeping an obsolescent shipyard open a bit longer.

UK "emergency"/defence shipbuilding needs are unlikely to justify keeping open more than one shipyard in the long run anyway. And that shipyard should be one that actually has the facilities to build the types of ships needed.

Thats only true for the headline projects. As the Marine Engineering Officer of Minehunters and Patrol Boats Ive been in a handful of Scottish facilities sometimes sharing a dry dock with the smaller Calmac Ferrys. Theres also still alot of MOD auxiliary craft in various locations in Scotland.

 

[greyman42]

How has it gone so very wrong?

The SNP giving Ferguson the contract in the first place.

 

[mpthomson]

The SNP giving Ferguson the contract in the first place.

And it’s notable that when they needed to order more they went somewhere that could actually build them on time and on budget. As it stands Isle of Islay, ordered 4yrs later than 801, is likely to be in service before it.

 

[Nicholas Lewis]

This article in the Herald shows just how desperate the SNP have become

https://www.heraldscotland.com/news...-new-legal-loophole-block-reveal-ferry-costs/

Ministers have moved the goalposts as it continues to block disclosure of the full cost of the ferry fiasco – having sought legal loopholes to block the release of vessel construction updates.