CMAL acts after ministers 'instructed' them to award ferry fiasco contract to Jim McColl's Ferguson Marine

It said the process that led to a Scottish Government intervention that forced them to award the contract despite its serious concerns about a lack of mandatory financial safeguards was "not normal".

CMAL has said it was told by ministers to award the contract for the two stricken lifeline ferries still languishing in the now nationalised Ferguson Marine Inverclyde shipyard.

In a new analysis, CMAL said they were had been concerned that it had been informed by the Scottish Government agency Transport Scotland that Ferguson Marine was even named as preferred bidder in August 31, 2015, two months before the final contracts were signed.

CMAL has told the public funds auditors that in future it will ensure that only shipbuilders who agree to provide a full builder's refund guarantee can qualify as a preferred bidder "regardless of the views of Scottish ministers".

Audit Scotland has previously criticised the government for failing to provide an adequate paper trail around the decision to award the £96m contract to the shipbuilding company headed by tycoon Jim McColl without the safeguards.

The Scottish Government had previously been accused by critics of forcing through the deal, despite the concerns of CMAL, for political reasons.

The final signing of the £97m fixed price contract was announced in October, 2015 two months after Ferguson Marine was announced as preferred bidder, to applause on the opening day of the SNP conference in Aberdeen.

Roy Brannen, interim director-general of the Scottish Government's Net Zero department, which oversees Transport Scotland previously insisted that CMAL was not overruled by ministers and that the public company had been content to sign the contracts to Ferguson Marine.

CMAL has told a different story. In a detailed position commentary, it said that ten days before it was named preferred bidder on August 31, 2015, Ferguson Marine made it clear through their lawyers guarantees were a problem.

And four days later they had requested a "letter of comfort" from Transport Scotland because of the risk of "insufficient guarantees" offered by Mr McColl's firm.

CMAL has previously stated that it was not until September 2015, the month after being selected as preferred bidder, that Ferguson Marine had stated it could not provide the full builder’s refund guarantee.

CMAL says it was concerned that an announcement of the preferred bidder was being planned on August 31, 2015, "amid significant publicity at the Ferguson's yard" would "materially reduce their negotiating hand and at a time when negotiations were far from concluded".

CMAL said: "CMAL made Transport Scotland aware of these concerns, including at the CMAL board meeting held at Victoria Quay on August 25, 2015. None of the non-executive CMAL board members attended the public announcement of the preferred bidder on August 31, 2015. The CMAL board had not taken the decision to award the contracts to [Ferguson Marine] at that stage.

"It was clear to the CMAL Board that Transport Scotland and the ministers wished the award of the contracts to be made to [Ferguson Marine] and for the vessels to be built in Scotland."

CMAL added in a new analysis: "CMAL were told that they should not seek a ministerial direction by the ministers in relation to the contract award of the vessels to [Ferguson Marine] However, the board were sufficiently concerned about the contracts in all the circumstances instead to seek a letter from the ministers holding CMAL harmless in the event that the contracts encountered the financial and technical issues identified in the risks paper.

"The CMAL directors were also concerned in respect of their duties always to act in the best interests of the company, and always in a position of solvency, and such a letter of comfort was considered an appropriate mitigation."

The Herald on Sunday previously revealed that ministers provided a £106m carrot to ensure that the ferry contract could go through without the normal safeguards in the wake of CMAL concerns that it was being put at commercial risk if Ferguson Marine became insolvent or failed to deliver on the ships without the full refund guarantees.

Ministers sanctioned special financial support for CMAL with a crucial pledge that the ferry owners would not have to repay anything until after the vessels had been delivered.

CMAL would normally have been expected to pay off the loan over 25 years using revenue it generates from the fees they get from the lease of vessels like CalMac's ferry fleet and harbour access charges.

And they promised other public funding to cover other performance risks to ensure it did not lose out and further money to meet any debts to ensure CMAL remained in existence.

A letter from John Nicholls, then director of aviation and maritime at the Scottish Government agency Transport Scotland confirmed that ministers had sanctioned the approval of the award of the ferry contracts to Ferguson Marine.

"In this way, CMAL was effectively instructed to proceed with the purchase from [Ferguson Marine] despite the concerns raised," said CMAL.

"CMAL were not content with the final draft contracts. In these circumstances, the ministerial approval process was not normal."

CMAL said it made no further recommendation to Transport Scotland or ministers and the contracts were signed.

While the ferries were first ordered in October 2015, they are now delayed by at least five years while costs have soared from £97m to at least £250m.

Mr Brannen previously told MSPs that CMAL "were content to award the contract and were seeking approval from the minister to do so".

When asked whether he could be absolutely certain nobody was overruled or there was no threat to overrule anyone he said: "Yes. I'm certain, on the basis of the information that's been presented to the minister and what I've been able to review."

CMAL also said that after receiving bids from various shipyards, before the preferred bidder was announced, a tender evaluation was made. That made use of a confidential Pre-Qualification Questionnaire (PQQ).

CMAL said at this stage, Ferguson Marine had not indicated that the builder's refund guarantee was not available. The ferry company said if it had done so it would have materially affected their scoring in the evaluation or led to the rejection of their tender as non-compliant.

But evidence shows that the tycoon's shipyard firm failed to fulfil mandatory requirements to qualify as the ferry fiasco contract bidder.

CMAL had previously insisted that Ferguson Marine had "satisfied all questions" on the PQQ.

But the firm that was favoured by the SNP government could not give a commitment to provide a mandatory builder's refund as required and was unable to provide other crucial financial details including records of past achievements.

The PQQ stated that an inability to meet mandatory requirements would result in exclusion not just from any future bidding process, but from the scoring exercise itself. That would mean failing at the first of what was a three-step procurement hurdle.

In the questionnaire, Ferguson Marine had to provide an "evidentiary statement" in the form of a letter from the bank confirming a willingness to provide the guarantee "if requested to show you can provide this requirement".

But the Ferguson Marine questionnaire showed that Mr McColl's Inverclyde-based shipyard firm was unable to give any firm commitment on the guarantee.

They merely stated in the questionnaire: "Ferguson Marine Engineering Ltd understand your requirement for refund guarantees and will endeavour to comply with your request."

Ministers had previously stated that they did not become aware of the issue around the refund guarantee until after they had approved the appointment of Ferguson Marine as the preferred bidder.

Mr McColl has previously told the Herald on Sunday that CMAL had not sought any evidence [of a builder's guarantee] from a bank because Ferguson Marine made it clear that they could not put up a cash backed guarantee.

Transport minister Derek Mackay (above) told a local MSP in a letter three months after the questionnaire process completed, and six months before Mr McColl’s Ferguson Marine yard finally was named preferred bidder that transport bosses saw refund guarantees as only “a preference”.

CMAL said it had no awareness of the exchange.

Another mandatory requirement in the questionnaire that proved problematic involved the provision of a copy of audited accounts for the most recent two years and a statement of turnover, profit and cash flow for the most recent full year of trading.

Mr McColl's investment firm Clyde Blowers Capital had rescued the Ferguson's yard from administration just two months before bidding for the contract to build two lifeline vessels for the islands.

Those that did not have this financial information in an audited format could provide an end of period balance sheet.

If unable to provide those, would be bidders could provide "additional information and documentation that will give the authority the assurance that you are capable of carrying out any subsequent awarded contract" like a cash flow forecast for the current year and a letter from the bank outlining the current financial position.

But CMAL warned that it did not undertake to accept any tender where the financial health of the supplier would, in its opinion, imposed "too high a risk".

Mr McColl, once one of Nicola Sturgeon's own economic advisers has denied cronyism and has said the SNP government favoured the yard and not him personally and wanted to make "political capital" from the contract award.

The yard was nationalised after it financially collapsed in August 2019, amid soaring costs and delays to the construction of two lifeline island ferries.

The Scottish Government has said it believed it was acting in the public interest in taking complete control of the yard firm by December, 2019 as it saved the yard from closure, rescued more than 300 jobs, and ensured that the two vessels under construction will be completed.

An Scottish Government spokeman said: "CMAL were not fully content with the contracts and put forward a paper for consideration, outlining potential risks. Ministers provided the assurances that CMAL had sought, and that enabled CMAL to take the decision to proceed.

“This was referred to in the testimony by Mr Brannen and the former chairman of CMAL, who was also clear that with the wider assurances they were able to proceed with the contract award.”