Ferry contract fails 'would not' halt award to Jim McColl

Shortcomings over the process to award Scotland's ferry fiasco contract had "no material impact" on the awarding of the £97m deal to tycoon Jim McColl's Ferguson Marine.

So says Kevin Hobbs, chief executive of state-owned ferry owners and procurers Caledonian Maritime Assets Limited at the centre of allegations that the awarding of the contract in October 2015 was rigged.

A review by a CMAL-commissioned senior lawyer into the procurement of the much delayed and over-budget ferries still to be delivered from the now-nationalised Ferguson Marine found no evidence of fraud though it found parts of the process were "not entirely satisfactory".

Barry Smith KC's report did state CMAL had the view during the procurement process and prior to the announcement that the contract had been given to Ferguson’s that "Scottish ministers were determined that the contracts should go to FMEL".

The Herald revealed in May last year that Ferguson Marine could not fulfil mandatory requirements to qualify to contest for the contract for the two lifeline ferries which remain languishing in an Inverclyde yard.

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Evidence showed that the tycoon's shipyard firm which was favoured by the SNP government could not give a commitment to provide a mandatory builder's refund guarantee (BRG) as required and was unable to provide other crucial financial details.

The omission that raised questions about the legality of the procurement process was revealed in a confidential Pre-Qualification Questionnaire (PQQ) completed by Mr McColl's Ferguson Marine Engineering Ltd (FMEL) before it was ever even considered as a preferred bidder for the building of Glen Sannox and Hull 802 to serve Scotland's islands.

The Herald revealed that Ferguson Marine could not fulfil mandatory requirements to qualify to contest for the contract (Image: Newsquest)
It 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.

But Ferguson Marine remained one of six companies with the highest scores which were to be taken forward to the tender stage before a preferred bidder was identified.

The guarantee had to be in place before work started and bidders such as 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 Mr McColl's Inverclyde-based shipyard firm was unable to make a firm commitment on the guarantee in the PQQ. It was also unable to provide historical financial information at the time as the company Ferguson Marine Engineering Ltd had been recently formed.

Mr Hobbs accepted that the lawyer's report raised issues relating to the procurement which "in retrospect CMAL would do differently".

He said they included "unclear drafting" of the PQQ relating to the "minimum mandatory requirement".

The KC said that the question relating to the minimum requirement was "poorly worded and lacking clarity" but felt that it was incorrect to say that failing to meet the minimum requirement should have resulted in exclusion from the process.

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He said the CMAL finance director had been sufficiently reassured that Ferguson Marine had met the PQQ criteria in relation to financial standing and the builder's refund guarantee.

And he stated: "I found no evidence that any CMAL employee was involved in any intentional impropriety."

Mr Hobbs has said in a letter to the Scottish Parliament's Public Audit Committee: "CMAL has no intention of minimising the shortcomings identified in the report, which we consider are fair. We do not consider however that these items had any material impact on the decision made by Scottish ministers to award the contracts [for the ferries] to FMEL.

CMAL has previously stated that issues over the provision of the builder's guarantee were not an issue until after Ferguson Marine was named as the preferred bidder in August 2015. Mr McColl has denied this and said he only bid for the ferry contract after receiving written guidance from transport minister Derek Mackay that refund guarantees were not mandatory to win building work.

CMAL states that the builder's guarantee was not an issue until Ferguson Marine was named as the preferred bidder (Image: Newsquest)
Mr McColl, once one of Nicola Sturgeon's own economic advisers, has denied cronyism, saying the SNP government favoured the yard and not him personally and wanted to make "political capital".

The Herald revealed that taxpayers ended up losing over £80m after ministers subsequently provided a £106m special incentive to ensure that the ferry contract could go through without the normal financial safeguards.

Ministers approved a £106m public money loan with special provisos to CMAL to protect them as it raised concerns about the yard being unable to provide the guarantees.

And the KC observed: "It is the singular feature of the period under consideration that the CMAL board did not wish to award the contracts to [Ferguson Marine] absent full coverage guarantees and that the Scottish Ministers intervened."

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

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

Mr Hobbs says that ship broking services, technical consultants, and financial advisory services all form part of the array of specialist third party support that now input into tender processes in the wake of the concerns.