Ferguson Marine failed to meet key financial requirements as Scots ferry fiasco deal legality in question

The fails are revealed in a confidential Pre-Qualification Questionnaire (PQQ) completed by Ferguson Marine Engineering Ltd (FMEL) before it was ever even considered as a preferred bidder for the building of two lifeline ferries to serve Scotland's islands.

It states 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 be taken forward to the tender stage before a preferred bidder was identified.

In September last year, Ferguson Marine, less than a year into nationalisation, failed to get past the questionnaire stage in a similar procurement exercise carried out by CMAL for two new £105m lifeline ferry contracts which have now been awarded to Turkish shipyard Cemre Marin Endustri.

Officially, the two vessels at the centre of Scotland's ferry-building scandal that remain at the Inverclyde yard will be delayed until at least next year – over five years later than planned while costs have at least doubled from £97m to £250m.

But the Herald on Sunday has previously revealed that a catalogue of faults with Glen Sannox and Hull 802 the under the stewardship of now minister-controlled Ferguson Marine has prompted serious shipyard concerns over whether they will ever see service.

One of the "mandatory minimum requirements" set down by to Caledonian Maritime Assets Limited (CMAL), the Scottish Government-controlled firm that owns and procures CalMac’s ferries was to provide a builder's refund guarantee.

The guarantee had to be in place before work started and bidders such as FMEL 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 give any make a firm commitment on the guarantee in the PQQ.

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

Another mandatory requirement 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 adminstration 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 outling the current financial position.

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

Ferguson Marine said: "We are unable to provide historical financial information at this time, as the company Ferguson Marine Engineering Ltd was recently formed. We have instead included a forecast for 2015 and 2016 of net assets and closing cash balances."

Would-be contractors were also expected as a mandatory requirement to provide two relevant examples from within the previous five years to demonstrate experience in delivering "a similar project to the requirements of this procurement exercise as the principle contractor".

As a two-month-old company, Ferguson's was unable to show this either.

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 preferred bidder in August, 2015. Mr McColl has denied this and said he only bid for the £250m ferry scandal contract after receiving written guidance from transport minister Derek Mackay that refund guarantees were not mandatory to win building work.

Mr Mackay told a local MSP in a letter three months after the questionnaire process, and six months before Mr McColl’s Ferguson Marine yard was to become preferred bidder that transport bosses saw refund guarantees as only “a preference”.

Asked if CMAL had sought an evidentiary statement in the form of a letter from the bank confirming a willingness to provide the refund guarantee, Mr McColl said: "No-one sought any evidence [of a builder's guarantee] from a bank because FMEL made it clear that they could not put up a cash backed guarantee."

He said they had been competing against Polish, German and Turkish yards all of which had government schemes that backed their refund guarantees.

He said the need for refund guarantees was relaxed and an "alternative arrangement put in place" which consisted of a smaller cash deposit of £15m and an insurance bond.

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

New evidence given by senior Scottish civil servants to a parliamentary audit inquiry claims that there was "tacit acceptance" of the requirement for the guarantees.

Fran Pacitti, director of aviation, maritime, freight and canals, said that all parties invited to tender for the contract after the questionnaire process were invited to comment on the terms set out "which was clear around the requirement for guarantees".

"Ferguson's, as I understand, didn't raise any comment in relation to that. And in line with standard procurement process, it was then assumed that they had accepted that, by failure to to have raised it at that point.

"It is my understanding it is common practice in a procurement you would invite comment, and your silence is taken as tacit acceptance."

Before Mr MacKay and deputy first minister John Swinney signed off on the contract to preferred bidder Ferguson Marine in October, 2015, the CMAL board “considered that there were too many risks involved to award the contract” to Ferguson Marine and told Transport Scotland it would prefer to start the procurement process again.

According to Audit Scotland, Scottish ministers were "aware of the risks but were content to proceed to contract award”.

Taxpayers ended up losing over £80m after ministers subsequently provided a £106m special incentive to ensure that the ferry fiasco 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.

It came with a crucial pledge that they would not have to repay anything until after the vessels had been delivered and that it would ensure it would remain as a going concern whatever happened.

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, as it saved the yard from closure, rescued more than 300 jobs, and ensured that the two vessels under construction will be completed.

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

It says it was only in  September 2015, the month after being selected as preferred bidder, that Ferguson Marine stated it could not provide the full builder’s refund guarantee, as per the contract terms and "contrary to what was in its bid".