State-controlled CalMac has been given a year-long extension to its contract to run Scots lifeline ferry services following delays over deciding on their long-term future.
The Scottish Government has confirmed that that it will be unable to conclude its investigations into whether CalMac should get the contract "in propriety" in time for the conclusion of the current deal ending on September 30, 2024.
The transport minister Fiona Hyslop is now planning to give CalMac a year-long extension of up to 12 months to enable them to conclude their work.
CalMac has previously admitted there is a material uncertainty over its future as a going concern because of questions remaining over whether it will continue to run lifeline island services.
The Scottish Government's preferred option has been to provide an uncontested direct public contract to CalMac, the ferry operator it owns, to run the ageing ferry fleet without going through a competitive tendering process. But it has been opposed by its community board and no decision has yet been taken by ministers.
A final decision after a due diligence process - to establish the feasibility of that approach from a financial, operational and legal perspective – was expected in the summer.
It was thought that a direct award can only be legally done through what is called a Teckal arrangement which is seen as a way to avoid what some would see as unlawful state aid.
The 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.
But Ms Hyslop said: "While good progress has been made on the due diligence related to a Teckal compliant direct award to CalMac and we have clarity on the remaining issues to be finalised, it is clear that we cannot conclude these by 30 September 2024, which is the end date of the current contract.
"We therefore propose to implement a contract extension of up to 12 months to enable this work and the assurance processes, to be concluded prior to a final decision. I will provide a further update to Parliament later this year."
The Ferries Community Board, formed as part of CalMac's franchise bid for the Clyde and Hebrides Ferry Services (CHFS) contract to be the voice of the communities, is opposed to the direct contract move.
It says that to gain community support for a long term directly awarded contract, they would need to see "significant change in the structure organisation and culture of the management and operation of the ferry services".
One ferry group official said that the move shows that the ministers were prepared to ignore the views of users by seeking to find a way to give CalMac the contract for good "by hook or by crook".
"The uncertainty over the future is one thing, but really the planning has been awful," he said. "We have known for the duration of the current eight-year contract when it was to be concluded so it is unbelievable that this add on contract is having to be cobbled together.
"Now not only is the service in a limbo state, there seems to be a determination to find a way to give CalMac the sole, uncontested right to run the services, when their performance has been so questionable."
Independent auditors for CalMac's parent company David MacBrayne Limited said that directors had highlighted that its ability to continue as a going concern was dependent on the continuation of the lifeline services contract which is due to expire in September.
European Union state aid rules and guidelines still have a huge influence on the how ferry services were paid for in Scotland.
Teckal was developed through EU case law to allow contracting authorities to award a contract to a supplier without the recourse to a regulated procurement procedure.
Before CalMac was awarded the current contract in 2016, the RMT union’s legal advice, provided by a European procurement law specialist, is that the exemption could be applied to Scottish ferry contracts tendered by the Scottish Government.
The QC for the RMT said that the rules leave the authority able to supply goods and services by itself and therefore not have to seek a tender.
Gordon Nardell said that where the authority makes that supply through a body that is legally distinct but which is sufficiently under its control and does not act as a market player in its own right – EU law as laid down in Teckal treats that as "tantamount to the authority supplying the service itself".
The Scottish Government has said that a direct award with no contest from other potential bidders is the preferred option – closing the door on opening routes up to private operators.
CalMac's current £975m eight-year Clyde and Hebrides Ferry Services (CHFS) contract expires in September 2024.
It had previously won the contract for six years in 2007 – after ministers were forced to tender for routes to satisfy European competition rules.
Scottish Conservative shadow transport minister Graham Simpson said: “The SNP has dithered for far too long on this issue. This is just kicking the can down the road once again.
“Islanders will be shocked that they must wait up to another year to get any clarity on who will run their substandard ferry services. It is not good enough.
“Our islanders and shipyard workers deserve better.”
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