Anger as ministers plan to make ferry firm CalMac 'arm of government'

But a row has blown up as government officials have talked during discussions over giving CalMac the right to run services directly without any time-limiting contract at all, with some saying this would make it an arm of government, like Transport Scotland.

There is concern that the plan to give CalMac the permanent right to run services has not been a feature of the written consultation and some have argued that there must be a separate public discussion over the proposal.

The Herald has had separate confirmation that ministers are contemplating the move.

READ MORE: How CalMac ferry chief's 'tokenism' departure was totally expected

It comes after the ferry operator received some £10.5m in poor performance fines in the six-and-a-half years since CalMac took the franchise – nearly eight times more than in its first nine years in charge of the west coast fleet.

Joe Reade, chairman of one of Scotland's key ferry user groups said he had a discussion with a key Transport Scotland executive during the consultation further confirming an intention is to award contract to CalMac "not just for 6 or 8 years, but in perpetuity".

"If this is going to be a permanent solution, then what is the incentive to change? The default position would be that CalMac continue doing the job.

"There is nothing in the consultation that says that this will be an ongoing permanent arrangement.

"Stating it is a contract implies a start and end date.

"It needs highlighting, because nowhere in the consultation is it even suggested it would be forever."

MSPs on the Scottish Parliament's Net Zero, Energy & Transport Committee which has been examining the future of ferries in an inquiry said that beleaguered state-owned ferry operator should benefit from a direct award for an extended ten year contract to run lifeline services on the west coast of Scotland.

It said it supported the length of the new CalMac contract from eight to ten years as it was needed to "ensure continuity of service and avoid disruption" with the current contract due to expire in September.

It came against a background of major disruption to lifeline ferry services involving a ferry fleet where more than half of the vessels are older than the 25 year life expectancy.

READ MORE: Ministers told to scrap CMAL to create ferries agency and keep CalMac

Two lifeline vessels, MV Glen Sannox and Glen Rosa, due to serve Arran, are still languishing in the now state-owned Ferguson Marine shipyard, with delivery over six years late and with costs of their construction expected to soar to quadruple the original £97m contract.

Mr Reade, chairman of the Mull and Iona Ferry Committee said it was clear that the committee only proposed direct award if it was a temporary solution "yet government are using it as a justification for the [permanent] decision".

He said: "They are seeking to demonstrate that CalMac is effectively an arm of government and therefore they feel they don't need to put it out to tender, and don't need to negotiate a contract. The use of the term 'contract' implies it is temporary.

"I asked if you award the contract how long would it be for. He said there wouldn't be an end date.

"There would be periodic assessments on how they are performing.

"The consultation is misleading. The premise is misleading. Because nowhere is permanence mentioned.

"A permanent award doesn't uphold what the committee said and it is counter to encouraging change."

The First Minister Humza Yousaf, when he was transport minister, indicated in 2017 that it was his intention to scrap future tendering processes for the Clyde and Hebrides ferry services and appoint the contract to CalMac "indefinitely".

He said that he hoped that any changes to staff will be "minimal".

The Herald can reveal that in his explanation of what the changes may mean, he said: "Essentially, we will have to ensure that governance of [CalMac parent company] David MacBrayne Ltd is aligned similarly to our own Government departments. How Transport Scotland aligns with the Government is perhaps an example of that. We will work through the detail of what that will mean and, of course, we will work closely with CalMac.

"A minimal change would be better, because our relationship with CalMac works well at operational level.

"If we can satisfy the criteria, certainly with regard to Clyde and Hebrides ferry services, it is my intention to scrap any future tenders."

The Competition and Markets Authority has previously warned about the "potential risks" of state control over the way ferries are operated, run and paid for in Scotland.

There has been concern over the management of ferries being cocooned inside three levels of Scottish Government-controlled bureaucracy known as the 'tripartite' arrangement.

This features the Scottish Government agency Transport Scotland as funders, the procuring and ferry owning company CMAL, and service providers CalMac.

On top of that is Ferguson Marine, the shipbuilding company that came under the control of Scottish ministers in August 2019 when it fell into administration under tycoon Jim McColl's control in the midst of a cost implosion and delays over delivery of two key ferries.

But Transport Scotland officials are continuing to examine how to make the award directly through what has been described as the Teckal procurement exemption without leaving itself open to legal challenges through a breach of the UK's version of the state aid rules.

The idea behind state aid rules is to avoid financial assistance given by a government that favours a certain company or commercial group and has the potential to distort business competition.

The Teckal exemption removes the legal obligation on a public authority to tender public contracts when it can be proven that the public authority can provide the services itself, subject to certain ‘control’ and tests.

Another ferry user group official said that ministers should not be given an open-ended right for CalMac to run ferry services in Scotland.

"While CalMac are not to blame for the age of the ferries or the lack of investment, they are not without blame on how services have been managed in that prism.

"We only need to look at last year's island protest at South Uist over how it has been so badly hit by cancellations and disruptions to know that the management of the ferry fiasco has been far from competent."

Transport secretary Fiona Hyslop said any direct award to CalMac should be a "catalyst for change" with a new management culture emerging, "one that is more supportive of the community's customers and passengers served by the network".

The Ferries Community Board, which formed as part of CalMac's franchise bid for the Clyde and Hebrides Ferry Service (CHFS) to be the voice of the communities has said that to gain community support for a long term directly awarded contract, there would need to see "significant change in the structure organisation and culture of the management and operation of the ferry services".

On April 3, Robbie Drummond stepped down as chief executive of CalMac with "immediate effect" following a review of its executive leadership as it faces "challenging years ahead".

CalMac won the current £975m eight-year CHFS contract having previously won it for six years in 2007 - after ministers were forced to tender for routes to satisfy European competition rules.

But it has been criticised over how it has managed services with the ageing fleet.

One of the key criticisms levelled at Mr Drummond's time in charge revolved around the review around how CalMac acts during ferry breakdowns as it copes with old vessels.

A major protest was launched on South Uist last summer when it once again became the victim of cuts when ferry breakdowns and delays in annual maintenance meant that islanders lost their service for nearly the whole of June.

It had been drawing the short straw, because it was felt according to the way CalMac runs its lifeline service disruption management, that the least number of people will be affected if their allocated vessel, MV Lord of the Isles, is withdrawn to help out elsewhere.

An estimated 500 residents, 200 cars, 40 vans and 20 lorries converged on Lochboisdale – the port which links South Uist to the mainland – on June 4 to protest about the cancellations.

And after Scottish Government intervention, CalMac launched a review of the criteria which was subsequently changed.

The Herald revealed earlier this week that nearly £6m has been spent by ministers on a series of consultants providing advice over the future of ferries, in a move described as "scandalous".

Private consultants Ernst and Young are the latest to benefit from the spend having been given a quarter of a million pounds for a new wave of advice over the future of lifeline island ferry services off the west coast of Scotland.

That comes on top of more than half a million pounds that was spent by ministers with the consultants between 2015 and 2022.

Ernst and Young was awarded its latest £250,000 contract at the start of the year to look into the legal and financial impacts of whether state-owned ferry operator CalMac can be given a new contract for the beleaguered west coast ferry services by "default" without going through a competitive tendering process.

A Transport Scotland spokesman said: “The Scottish Government’s preference for the next contract...is a direct award to CalMac using the Teckal exemption. Ministers will set out details of the arrangements following consideration of the consultation responses and satisfactory completion of the ongoing due diligence exercise.

"This will include the duration of the new arrangements and proposals for how they will be monitored. The recommendations of the Net Zero, Energy and Transport Committee will also be taken into account in setting this out.”

Transport Scotland said that a direct award could "allow us to deliver the improvements that island communities have been calling for such as improved resilience, greater transparency, better communications, and more certainty for communities and staff".

It said this would include an "improved performance management regime better reflecting passenger experience and intended to act as a catalyst for change, not a reinforcement of existing habits".