The report questions why Ministers ignored advice by placing the order with the yard which is now five years late. It then states that the decision to nationalise it was taken “without a full and detailed understanding of the amount of work required to complete the vessels, the likely costs, or the significant operational challenges at the shipyard”.
The Auditor General’s report holds out little hope of the ferries being delivered even to the delayed schedule and makes clear that feuding between the Scottish Government quango CMAL and the now publicly-owned Ferguson yard has continued to plague the project.
As recently as last month, the boards of the two organisations were brought together for a crisis meeting in order to discuss how they could work together – almost seven years after the order for the two ferries was announced.
The Auditor General states: “Major problems remain unresolved at the shipyard ... More than two years after the Scottish Government took over control, significant operational failures still need to be fully resolved and further remedial work on the vessels continues to be uncovered”.
The report accuses Scottish Government Ministers of placing the order in spite of multiple warnings about the risks: “There is no documented evidence to confirm why ministers were willing to accept the risks of awarding the contract to Ferguson Marine Engineering Ltd, despite CMAL’s concerns. We consider there should have been a proper record of this important decision”.
To date, £240 million has been committed to building the two vessels and this week a former adviser to the Scottish Government predicted that the total bill could reach £400 million – more than five times the original estimate.
Stephen Boyle, Auditor General for Scotland, said: “The failure to deliver these two ferries, on time and on budget, exposes a multitude of failings. A lack of transparent decision-making, a lack of project oversight, and no clear understanding of what significant sums of public money have achieved. And crucially, communities still don’t have the lifeline ferries they were promised.
“The focus now must be on overcoming significant challenges at the shipyard and completing the vessels as quickly as possible. Thoughts must then turn to learning lessons to prevent a repeat of problems on future new vessel projects and other public sector infrastructure projects.”
Mr Boyle’s report makes clear the contract was botched from the outset: “CMAL used an industry standard shipbuilding contract. This internationally recognised contract places full responsibility and risk for the design and build of the vessels with the shipbuilder and does not allow the buyer to intervene. The contract works effectively when backed with a full refund guarantee as it provides complete protection for the buyer.
“As a full refund guarantee was not in place for the contract, some of the risk was transferred from FMEL to CMAL and meant the contract was not effective when problems emerged. In addition, some of the milestones in the contract were not clearly defined and had no link to quality standards. CMAL was legally obliged to make those milestone payments despite its concerns about FMEL’s performance”.
The vessels were initially estimated to cost a total of £72 million. The Port Glasgow bid was the most expensive at £100.5 million, but CMAL also assessed it as being the highest quality. However, after discussions with Ferguson’s – then owned by Jim McColl – they warned Ministers in September 2015 against “the financial, commercial, procurement, and technical risk”.
In July 2017 FMEL submitted a £17.5 million claim to CMAL for price increases claiming that problems were a result of CMAL’s “inadequate concept design and interference”.
In February 2018, “both parties abandoned mediation attempts”. Following nationalisation of the yard in June 2020, the new Ferguson board’s “ability to effectively scrutinise has been limited due to insufficient management information and not being fully sighted on CMAL’s concerns about progress”.
A turnaround director named Tim Hair was recruited and brought in a new management team. However, the report states: “The workforce representatives have expressed a lack of confidence in their ability to turn the shipyard around.”
Political reaction to the report has been scathing.
Highlands and Islands MSP Donald Cameron said: “There must be an independent public inquiry into the ferry procurement fiasco which has contributed to the crisis afflicting west coast communities.
“Just days ago, a former Scottish Government advisor, Luke van Beek, estimated the two uncompleted ferries could cost the taxpayer as much as £400m – a quite extraordinary amount, given that they were supposed to cost less than £100m. We absolutely have to get to the bottom of this and I will be demanding a commitment from the Scottish Government for an independent public inquiry.”
Highlands and Islands Labour MSP Rhoda Grant said: “The wrong choices were made time and again with no ability to foresee consequences or listen to the risks even when they were presented by the Government’s own quangos on a silver platter. The arrogance is astounding and the ones suffering are the communities”.