Design change work to try to resolve Scots ferry building chaos being done in Romania

The taxpayer-funded award was made in April to Isle of Man-based International Contract Engineering Ltd to supply engineering servies for the stalled construction of MV Glenn Sannox to "correct and complete" the design.

Ministers said last week that it was in the public interest to carry out a state takeover of Ferguson Marine Engineering Ltd (FMEL), owners of the last civilian shipyard on the Clyde to save jobs and protect the local economy.

Now it has emerged ICE's work for on the project centres around 80 specialists at a Romania base.

The move has been confirmed in an update report on the progress of the two ferries being built by state-owned Ferguson Marine.

It says that ICE is "UK-owned" but has an operating base is in Romania, employing over 300 graduate naval architects and marine engineers "and have a track record of delivering complex vessel designs to shipyards across the world".

It says: Currently, ICE have over 80 specialists working on the ferry project, a level that could never have been achieved by Ferguson or its previous sub-contract design partner."

READ MORE: Secret Scots shipyard deal wiped out £25m ferry completion bonds to allow state takeover

The Isle of Man, is a self-governing territory that is part of the British Crown but enjoys separate autonomy, since its days as an Edwardian seaside resort has more recently has been accused of selling companies' escape from taxes and transparency.

FMEL went into administration in August, last year following a dispute with Caledonian Maritime Assets Ltd - the taxpayer-funded company which buys and leases publicly owned CalMac's ships on behalf of the Scottish government - over the construction of two ferries under a £97m fixed price contract.

The Scottish Government took Ferguson Marine into public ownership at the end of last year after the Port Glasgow yard fell into administration while the cost of delivering the ferries soared from £97m to over £200m. The former management of Ferguson Marine Engineering Limited (FMEL) believe that that has now soared to over £300m.

The EU has previously confirmed it was not notified of the state takeover or the issuing of two commercial loans to Ferguson Marine Engineering Ltd (FMEL) in Port Glasgow totalling £45m before the yard fell into insolvency.

Ferguson shipyard won the £97m contract to build two new ferries for Arran and the Hebrides in 2015.

The report continues: "Recruitment of technical specialists to re-evaluate the ferry designs and then complete the project has proved extremely difficult. Although some good appointments have been possible, the local demand for these skills on either a contract or employed basis is high and it has not been possible to resource the project at the required level.

"ICE is an internationally recognised marine designer and the largest independent ship design consultancy in Europe. UK-owned and with an operating base in Romania, ICE employ over 300 graduate naval architects and marine engineers and have a track record of delivering complex vessel designs to shipyards across the world.

"Currently, ICE have over 80 specialists working on the ferry project, a level that could never have been achieved by Ferguson or its previous sub-contract design partner.

"Ferguson remains responsible for technical oversight of the project and the in-house team at Port Glasgow was under-resourced even with ICE carrying out the detailed design."

Last Tuesday, the Scottish Government came under fire for failing to explain how it was that it created a pathway to the controversial state takeover of Ferguson Marine while issuing a £30m loan which it said was “to further diversify their business" but knowing that it was actually address the danger of its financial collapse.

The Herald on Sunday revealed yesterday that Scottish Government-controlled CMAL agreed to give up nearly £25m in 'default' payments to complete the construction of the two lifeline ferries after the collapse of the shipbuilders, paving the way for its controversial nationalisation.

The secretly negotiated deal which formed the pathway to a state takeover involved waiving the amount which acted as an 'insurance' against the company going under and not being able to complete two lifeline ferries. The Scottish Government has said "a substantial sum" was agreed to be paid but refuse to divulge how much.

The delivery of the new island ferries MV Glen Sannox and Hull 902 have been delayed by a further six months as a result of the coronavirus pandemic.

The further delays means that the delivery of both ferries, which were due online in the first half of 2018, will be between four and five years late.

At the time of the ICE appointment, said that "design is currently the critical activity and that is progressing well with both ICE and Ferguson engineers working effectively from home".

A Scottish Government-commissioned report into the ferries in December found a lack of project management which meant no one person fully understood the complex construction of the vessels. It claimed poor care had led to equipment damage in the Glen Sannox. Rain had got into Hull 802 and affected its paint protection.

According to details of the contract given to ICE it was to provide work over the supply of engineeering for a revision to the basic design of MV Glenn Sannox. It involves services surrounding the completion of the "detail design and production information".

The new design came after an investigation of the status of the partly-constructed vessel – including performing a laser scanning survey of technical spaces.

It said that the justification for not going to a competitive tender was: "Extreme urgency brought about by events unforeseeable for the contracting authority...."

It added:"The services offered by the supplier were identified as a key requirement to get the design of the vessels onto a schedule that would allow the ships to be built in the shortest time possible. Due to these time restraints and the urgent requirement for the services, the contract was awarded as a NCA [non-compete agreement]."

The collapse of FMEL led to a war of words between former Ferguson owner, tycoon Jim McColl, ministers and CMAL, the taxpayer-funded company which owns and procures ferries for another Scottish Government-owned company ferry service provider CalMac.

It led to concerns about the nation's ferry procurement process now engulfed in four levels of Scottish Government-controlled bodies.

In February, the Competition and Markets Authority watchdog warned of the dangers of government-owned Ferguson Marine being awarded work without a competitive tender process, saying “it is unlikely to make it a commercially sustainable business” and “it may also have a negative impact on the wider industry”.

That came as the Scottish Government faced questions about failing to notify the EU about nationalising Ferguson Marine after being found to have given £50m of "illegal state aid" to two airports.

Illegal state aid was found to have been made to Sumburgh Airport on Shetland and Inverness Airport after both received taxpayer support that had not been approved by the European Commission.

Contract award details revealed that the Alliance Project Controls award was also made without prior publication for a "call for competition" in the Official Journal of the European Union.

The justification given for avoiding going for tender was also given as: "Extreme urgency brought about by events unforeseeable for the contracting authority..."

It said the project managers were originally contracted when Ferguson Marine were in administration and that "this is therefore a continuation of that contract".

The details briefing continued: "The services offered by the supplier were identified as key requirement to get the planning of a detailed build programme for the vessels and create a schedule that would allow the ships to be built in the shortest time possible."

It said the contract was awarded in accordance with Public Contracts (Scotland) Regulation 33.1 (ii) on the basis that there is "now a body of knowledge and understanding built up by the supplier that cannot be readily transferred within a reasonable timescale".

Defending the ICE award, a Scottish Government spokesman said at the time: "The award to ICE was subject to proper approval as a non-competitive action. The need to move promptly was one of the factors considered in the approval.

"The Turnaround Director’s report, released in December 2019, identified the ability to increase resource at Ferguson and the management of the existing design contractor as key challenges. The report also made reference to ICE, an internationally-recognised ship design specialist, as a potential source of additional technical resource.

"Ferguson’s management subsequently concluded that the best solution was to consolidate the outsourced design to ICE and to access the large pool of graduate Naval Architects and Engineers that they employ.

"The Turnaround Directors report identified that the design of the ferries was immature and incomplete and this had been the cause of major rework on the ferries. The report also identified that the design work would be completed by zone in order to allow the production work on the ferries to be completed with any change minimised.

"The work contracted with ICE is for the completion of the design to produce the required production information and also to correct previous problems identified. The work is proceeding as described in the report."