Over £5.5m in public money given to consultants over future of ferries

Transport Scotland has recruited two sets of firms to provide legal and commercial advice over the award of the Clyde and Hebrides Ferry services contract.

It has emerged that international law firm CMS Cameron McKenna Nabarro Olswang LLP has been recruited on a four year contract worth £1m to provide legal advice to the Transport Scotland ferries unit over the contract.

A further £4m has been given to Edinburgh-based infrastructure consultants Turner & Townsend, which will examine commercial implications.

That is on top of the contracts worth more than half a million pounds that have been spent with private consultants Ernst and Young since 2015 on ferries.

The eight-year Clyde and Hebrides Ferry Services contract with CalMac Ferries, ends in October 2024.

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A Transport Scotland spokesman said: “External specialist legal advisers and specialist commercial and technical advisers have been appointed to support the preparation of the next Clyde and Hebrides Ferry Service (CHFS) contract. 

“It is not uncommon to utilise specialist support on this type of complex, high-value project.”

But it comes as radical plans have been examined to scrap Scottish Government-controlled ferry operators and owners CalMac and CMAL and form one new organisation which would cut costs and improve the failing lifeline services.

Contracts worth £560,000 were paid out to external multinational consultants Ernst & Young which has been tasked by ministers to look into the future of Scotland's ferry service structure including the option of “unbundling of routes into smaller packages”. The option was later ruled out by ministers.

Ernst and Young have been paid £156,000 for the Project Neptune examination of the Scottish Government-controlled structure that underpins Scotland's ferry service.

A further £404,000 was given to Ernst and Young for analysing the financial state of the CHFS contract operated by CalMac.

Project Neptune contained a proposal to merge the ferry owners and operators - who between them employ more than 1700 staff - into one organisation has come as a result of an investigation sanctioned by ministers into the structure that underpins Scotland's failing west coast services.

The Project Neptune probe issued scathing criticisms of the existing governance structure for the lifeline island ferry services.

Part of Project Neptune's remit was to look at whether the structure was "fit for purpose", against a background of years of failing, ageing ferries.

It criticised an “absence of long-term planning”, with a “sub-optimal” approach to the maintenance and replacement of vessels, potentially causing “higher than necessary or unforeseen maintenance costs”.

But the analysis also supported a move to turn the ferry owners and operators into one integrated publicly-owned company responsible for the operation and the supply of vessels on the west coast of Scotland.

The investigation carried out by global consultants Ernst and Young said it had "potential for improved passenger experience in the longer term, once initial challenges of integration were overcome".

READ MORE: Ministers do not rule out more public money millions over ferry crisis

A scoring process over the potential for best value of a series of suggestions for structural reforms, including privatisation and giving local authorities responsibility for procuring ferry services and vessels found that integration of CMAL and CalMac was by far the most positive option. The scoring also into account passenger experience, support for local communities, deliverability, accountability and transparency.

CMAL offices in Port Glasgow.

The study said that there would be "opportunities to achieve efficiencies in their operations", for instance over vessel maintenance."

It said: "The new body may also benefit from greater alignment of objectives and be more easily understood by users. There would be clearer accountability to customers and stakeholders and the potential to improve VfM (value for money) by removing duplication and interfaces."

The new merged enterprise "could improve service delivery". The new company has even been given a name - CHFS Ferries Co.

It said: "Process for vessel management/renewal should be easier to manage from within a single organisation, which should have positive repercussions for vessel quality."

The analysis said there were international benchmarks pointing to Canadian firm BC Ferries, which carries in the region of 22m passengers per annum across 25 routes.

Project Neptune emerged amidst growing concern that the service is "cocooned" inside four levels of Scottish Government control with the Transport Scotland agency as funders, the procuring and vessel owning company, CMAL, the ferry operators Calmac and the nationalised shipbuilders Ferguson Marine (Port Glasgow).

It came as it emerged Scottish Government-owned Calmac has been hit with record performance penalty fines over the running of ferries last year.

It has amassed over twice as much in performance fines in one year than in its first nine years in charge.

The ferry operator amassed nearly £10m in fines since 2007 and nearly £8m in penalties has come since it kept the contract just over five years ago.

Some £4.454m in penalties has been incurred in the 20 months to June this year.

Before CalMac Ferries Ltd, a subsidiary of David MacBrayne Ltd, took the £1bn eight-year contract under competition from the services company Secro, the penalties over nine years to September, 2016 amounted to just £1.36m.

Meanwhile, compensation paid to CalMac passengers rose to more than £450,000 last year – as the number of ferry sailings cancelled by the state-owned operator was said to have reached its highest level for at least five years.

The payments, which can cover meals, accommodation and alternative transport for passengers, rose from £261,000 in 2021-22 to £454,000 in 2022-23.

That takes the total amount CalMac has paid in compensation over the last five years to just over £1.1m.

It comes after the ferry operator cancelled 11,301 journeys in 2022, with a further 5,781 sailings arriving late.

In response to the compensation issue, CalMac chief executive Robbie Drummond said: “We take our responsibility to provide a reliable lifeline ferry service very seriously and work hard to avoid disruption. We recognise that disruption to services due to breakdowns and technical faults is extremely challenging for local communities, and we sincerely apologise to those affected when this happens.

“We spent a record £34m on fleet maintenance last year, which was an increase of around 70% from £20m in 2017. This increased investment can be attributed, in part, to the age of the vessels, with more than 38% of them exceeding 30 years of age and increasing challenges around obsolescence and obtaining parts. Investment in maintenance is planned to grow to well over £43m in 2023.

“In terms of compensation, we always encourage passengers who have been left out of pocket by delays or cancellations to check our website to see if they are entitled to make a claim. These can be made electronically and processed quickly.”