Nicola Sturgeon dragged into £200m CalMac ferry fiasco

“We were told that because it was publicly announced we were stuck with it,” he told the Holyrood inquiry into how the contract went wrong.

Ms Sturgeon made a hastily arranged visit to the Port Glasgow yard in August 2015 in an apparent attempt to steal the thunder from then Tory Chancellor George Osborne, who was announcing an extra £500m for the Faslane nuclear base later the same day.

Mr McColl also accused Finance Secretary Derek Mackay of having “defamed” the management at Ferguson Marine in a parliamentary statement.

Mr Mackay last year told MSPs previous management at the yard had been “disastrous”.

The Scottish Tories said it was clear the scandal went to the very top of the Government.

Mr McColl also said criticisms of the yard contained in a recent report by Government appointed turnaround director Tim Hair were “absolutely scandalous”.

He said Mr Hair’s claim that 95 per cent of the design work had yet to be agreed after five years was “nonsense”, and that 60 to 70% had been agreed.

Mr McColl’s Clyde Blowers empire took over Ferguson Marine in Port Glasgow in 2014.

The following year, Caledonian Maritime Assets Ltd (CMAL), the state owned firm behind CalMac, awarded it a contract to build two new CalMac ferries.

However the contract was plagued by significant design changes, delays and disputes over cost, with the yard’s management and CMAL blaming each other.

Ferguson Marine went into administration last year before being nationalised.

The boats are expected to cost double the original price and be delivered four years late.

The Scottish Government has also written down £45m of taxpayer-funded loans to Ferguson Marine to help it through cash flow problems, taking the total bill to around £250m.

Mr McColl told the committee Ferguson’s, the last civilian shipyard on the Clyde, had initially calculated it could do the work for £105m, and CMAL tried to negotiate it down to £97m.

He said the yard was ready to do the work for no profit, with the vessels acting as a “good reference” for future contracts.

He said: “We were in negotiations with CMAL to try to get it down to £97m.

“Before we agreed the negotiation the First Minister announced we had been picked as preferred bidder and the price would be £97m.

“They said ‘It’s been announced by the First Minister and you will just have to accept it.’”

He said that CMAL had probably told the First Minister the work was achievable for £97m.

He also said he was prepared “to take a small hit” in order to do the work as a showcase for winning more orders.

Mr McColl said CMAL had refused to discuss arbitration to sort the breakdown in the relationship with Ferguson Marine.

He said: “I had to make a personal appeal to the First Minister to get them round the table. “The chairman of CMAL refused 14 times to get involved.”

Mr McColl also claimed Ferguson’s had to ban an individual from CMAL from the yard because he was “bullying people on the yard”.

The Monaco-based tycoon also accused the Scottish Government of withholding "key documents" from the inquiry about the "mess" on dubiopus pretexts.

He also said he had had a meeting with Mr Mackay in which the Finance Secretary had ordered his officials out of the room and told him privately that he could not force CMAL to accept mediation as the entire board had threatened to quit en masse if he did.

Earlier, MSPs heard CMAL was “remarkably difficult” and “aggressive” as the contract went wrong.

Luke van Beek, a former independent adviser to the Scottish Government on shipbuilding, said some CMAL actions were “very unhelpful”.

Mr van Beek said CMAL should have agreed most of the design and build specifications before the work on the design and build contract began.

However he also said Ferguson Marine should not have started work on the boats before the design was agreed.

Ferguson’s ultimately had to rip out some work and start over because of design changes.

Mr van Beek said: “I would not have done it. I would have said this is just not specified enough.”

He added: “There were faults on both sides - no doubt about it.”

The committee previously heard that the relationship between Ferguson Marine managers and CMAL broke down completely in the latter stage of the contract, and work ground to a standstill.

Mr van Beek confirmed the relationship had broken down to the point where it became “very adversarial”, and that he had informed SNP Finance Secretary Derek Mackay.

He said he had met with CMAL bosses on several occasions.

He said: “On every occasion I met with them they were remarkably difficult to deal with.

“On at least two occassions they were very aggressive.”

He added: “There were some things that CMAL were doing that were very unhelpful.

“On top of all that they were adamant they did not really want to discuss ways of making the situation better.”

He said CMAL had “no interest” in compromising and rejected one idea “out of hand”.

He said: “They thought it would be better that Ferguson’s went into administration.

“I saw first hand and had some very difficult meetings with CMAL where they had no interest in compromising.”

He said he had been surprised his recommendation that the dispute be settled through arbitration was not taken up and the yard was ultimately nationalised.

“CMAL absolutely refused to consider it,” he said.

He also said CMAL did not actually want the specific type of vessels being built by Ferguson, in particular they did not want to be dual fuel, meaning they could use Liquified Natural Gas (LNG) as well as traditional diesel.

“I never got an answer as to why these ships were dual fuel,” he said.

Mr van Beek also confirmed the public loans were "significantly aligned" to helping through cash flows problems, rather than the other uses claimed by the SNP Government in public.

He also confirmed the public loans were "significantly aligned" to helping through cash flows problems, rather than the other uses claimed by the SNP Government in public.

Tpy committee member Jamie Greene said: “The plot thickens with every piece of evidence this inquiry hears. SNP ministers from the First Minister down are mired in this shambles.

“The taxpayer is out of pocket to the tune of £230m, no new ferries have been delivered for our island communities, and now the SNP is doing everything it can to cover up this scandal.

“This goes straight to the top of the SNP Government and the time for apologies has long past.

“The First Minister, her finance secretary and a raft of SNP ministers must be properly held to account over their gross incompetence and negligence.

“Jim McColl is right in demanding that only a full public inquiry, with witnesses giving evidence under oath, will unearth why hundreds of millions of pounds of public money has been so badly mishandled by the SNP.”

LibDem committee member Mike Rumbles said: “Jim McColl’s evidence to the Committee was astonishing.  There was a problem with this contract right from the outset.

"The First Minister undermined it by being more interested in PR gloss than setting the project out on the right footing.

“Hundreds of millions of pounds of public money is the cost of Scottish Government incompetence.

“This project is running years behind schedule, communities aren’t getting the boats they were promised and there are now serious questions about whether they ever will.”

A Scottish Government spokesperson said: "On the 31st August 2015, alongside Mr McColl and his senior management team, the First Minister confirmed that CMAL had selected Ferguson’s as the preferred bidder for the ferries contract.

"The announcement was made in line with standard practice for procurement, and was not the announcement of the award of the contract, but confirmation of the preferred bidder.”

CMAL vigorously denied its board had ever threatened to resign as Mr McColl described.

A spokesperson said: “The suggestion about our Board is categoricvally untrue.  It is a spurious claim and no such letter exists.”

CMAL chief executive Kevin Hobbs said: “We look forward to our opportunity to speak to the  committee later this month to address serious inaccuracies that have been heard so far.  

“In particular, we will address issues around what are being referred to as ‘design changes’ and the mediation and arbitration process.

“The previous senior management team at the shipyard failed to understand what the dual fuel ferry contracts required and they failed to deliver.  

“The management team got the specification requirements wrong many, many times and resulting mistakes had to be rectified.  

“The shipyard began building at risk - cutting and fabricating steel and building sections without sign-off by CMAL, the Maritime Coastguard Agency (MCA) and the classification society, Lloyds.  Therefore, work had to be re-done.  

“The bulbous bow, which was the focus of much discussion at the inquiry today, was rejected by class prior to the vessel launch because it didn’t meet the Lloyds Register Classification standards in manufacturing tolerance.  

“It was rejected by the Lloyds Surveyor employed by the shipyard.  The consequence of this is that, in post-launch dry dock, it will have to be replaced in order to meet the required tolerances of manufacture.  To say it was re-built because it was ‘ugly’ is ridiculous.

 “We did everything we could to assist the shipyard within the terms of the contract.  

“The contract includes terms for mediation and resolution, however there was no contractual or technical basis for the compensation claim submitted by FMEL, and the terms of mediation put forward by FMEL were outside the contract.  

“They wanted us to negotiate on a commercial basis.  As a public body and custodians of taxpayer’s money, we are in no position to enter non-contractual negotiations, and to make unsubstantiated, ex-gratia payments.

“The initial claim in July 2017 of £17.5m rose to £66m by August 2018, none of which was backed technically or contractually. As a consequence, CMAL was advised by our legal representation to follow any face-to-face meeting with a letter – in other words, on pre-litigation footing.  FMEL did not react well because they knew all along that any claim had no merit in the contract and could not be defended. They seemed to believe that CMAL would capitulate under pressure. We could not and did not.

“All CMAL ever wanted to do was deliver two vessels to island communities.  We are deeply saddened and frustrated with the current situation, however our primary aim remains to deliver two vessels to island communities.  We will work closely with the new Ferguson’s team to make this happen as quickly as possible.”