CalMac to get uncontested award of ferry fiasco contract

The ferry operator CalMac's community board has said it is working with ministers after being "clearly informed" that the Scottish Government-owned ferry operator is to get an uncontested award of the lifeline islands contract, despite objections.

The Ferries Community Board, formed as part of CalMac's franchise bid for the Clyde and Hebrides Ferry Service to be the voice of the communities, say that the new arrangements going forward include assurances that "improvements and innovation will be part of that and most importantly that community input to decision making will be embedded in the new set up".

It said that it had in "good faith" been inputting suggestions to Transport Scotland as to how this might operate within a new contract for the beleaguered service and that the exercise has been going on since the end of last year.

But it had serious misgivings about how it was progressing.

The board said it was "clearly informed that there will be a direct award" although transport minister Fiona Hyslop has said no decision has yet been made.

It is understood ministers have been looking at giving a permanent contract to CalMac, giving it the right to run lifeline services in perpetuity as "an arm of government", which has sparked a row amongst user groups.

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It had initially indicated opposition to the Scottish Government's bid to provide a direct public contract to CalMac to run the ageing ferry fleet without going through a competitive tendering process after carrying out a consultation.

Ms Hyslop has indicated there does not appear to be any barrier in providing an uncontested award of a lifeline ferry contract to CalMac.

In the wake of a raft of disruptions to services due to ferry fleet breakdowns, a South Uist demonstration involving hundreds of residents and visitors was staged in June last year which came after the island lost nearly all its services for the month. It led to a public meeting attended by some 250 where there was a "unanimous" vote of no confidence in the ferry operator as the island was constantly at the wrong end of reductions in services – as the operator shuffles its pack when vessels break down.

The direct award without going through a competitive tendering process to state-owned ferry operator CalMac has been stated as the preferred option for the next contract over the future of lifeline ferry services.

CalMac's current £975m eight-year Clyde and Hebrides Ferry Services 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.

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.

A final decision after a due diligence process – which will establish the feasibility of that approach from a financial, operational and legal perspective – was expected in the summer, with an aim to have the new arrangement in place by October 1 next year.

But Ms Hyslop has said there has been a delay in the due diligence process leading to CalMac getting the current contract extended by a year.

A letter from the board chairman Angus Campbell sent to some MSPs seen by The Herald said that while the board was working with ministers on the direct award as of the end of May, "no definitive proposals have come forward and we are concerned that time moving on does not bring the change that communities had hoped.

"It is accepted that there will be an extension of the present contract due to time constraints and as a board we will continue to push for the necessary change to make this a more effective and responsive arrangement. This is essential to ensure we don’t enter a long term way of working that is then hard to change to meet the needs of islanders and the economies that support island populations."

The board confirmed that the "majority view" from their consultation was that the contract should go out to tender "to test the market for best value and encourage innovation and best practice".

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Angus Campbell, chairman of the board, said: "This response from communities was very much in the context of real anger and disappointment at how the existing contract was managed and also the decision making at senior management level both at CalMac and Transport Scotland.

"There was particular anger at the failure to put islanders' needs at the heart of the process and include local knowledge to improve the output for users. A common sentiment was that not to change the culture of management and the priorities it works to would be rewarding failure and not bring necessary change.

"It must also be highlighted that an equally strong response was the appreciation of front line staff both in ports and on vessels and the need to protect them in any new arrangement. That remains a priority for islanders."

Transport Scotland officials examining how to continue west coast ferry operations are currently looking at the potential to provide a direct award using what is described as a Teckal procurement exemption 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.

The exemption 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.

Now that the UK is out of the EU, the procurement principles that exist in Scotland are still derived from EU law.

The government had considered two contractual arrangements to ensure continued operation of these services at the end of the current contract.

A ferry user group official said that the board appeared to have "no choice" but to try and make "the best of a bad hand" to try and "change things from the inside".

"The question is if it did go out to tender, who would take this all on," he said. "It may well be the best way to go to improve the service and get value for money, but only if there was anyone out there that could firstly do the job, and then secondly that they could do it better.

"But giving a direct award just rejects any notion of competition which is massively unhealthy and utterly objectionable."

Ms Hyslop has said she held the community board in "high regard" and added: "The preferred option for a direct toward subject to due diligence is, I would say, progressing well. There doesn't look to be any problems in terms of being able to do that, but we're not at the final decision yet."

On being told of the board's past objection, she said that she had held various meetings with them in the wake of the preferred route and that they said their "main focus is to have a resilient and reliable service, and by and large, we do have that".

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She added: "But where it isn't resilient and it isn't reliable, we all know that has major impact, and I'm very, very conscious of that.

"They [the ferries community board] are actively involved in identifying their role within the new award. Indeed, just on Friday, there was a working session with the board to help establish what that is.

"I can also reassure that we don't have to wait until the award is given to see the improvements and the interim chief executive of CalMac is progressing that improvement enhancement plan, regardless of the direct award.

"Because the issues that the ferries communities board particularly wanted to address was about the culture of a management that wasn't responsive to where they were, and CalMac has been working hard over the last year to make sure that that relationship, that engagement, is not just a one way traffic in terms of communicating what problems are, but also in how we might resolve and improve them."

Alison Irvine, interim chief executive of Transport Scotland, has accepted that what was being planned with the new ferry contract was "novel and contentious" and "involves hundreds of millions if not billions of pounds of government money".

She said: "It is really, really important that we get this right."

The Scottish Government has previously said that a direct award 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".

One advantage cited for a direct contract is a saving on the tender process. The Scottish Government has estimated that the costs of tendering the 2016 to 2024 contract was £1.1m. But that included a £439,000 bill for consultancy support.

But public spending auditors which were critical of the process said bidders had told them that their costs were increased due to delays during the project.