Northern Isles ferry contract sends signals to west coast

Yesterday, 4th May 2012, Transport Scotland announced that it has appointed Serco Ltd as the preferred bidder for the NorthLink ferry routes between the Scottish mainland and the northern isles of Orkney and Shetland.

There is a statutory standstill period of ten days between the appointment of a preferred bidder and the letting of the contract, which will therefore take effect on 15th May.

The plan is for Serco Ltd to take over the ferry services for the Northern Isles this summer.

An immediate question is where this leaves NorthLink, the state-owned subsidiary of the state-owned David MacBrayne Ltd – because the state owned company has been the loser in the bidding process for a state-issued contract.

The NorthLink ships are owned and leased by the Royal Bank of Scotland. The lease will be taken up by Serco, seeing the ships and the NorthLink brand continue as the public and familiar presence of the service. NorthLink staff are to transfer to Serco under TUPE (Transfer of Undertakings (Protection of Employment) regulations.

The corporate entity that is NorthLink will either be brought to an end or be confined to limbo as an empty envelope.

Reading the reception of the announcement in a range of online news services for Orkney and Shetland, the change of provider seems of little real account locally. There is neither celebration nor complaint. This would seem to wrong foot suggestions that the making of the announcement of the change on the day after actual voting in the Scottish local authority elections was politically inspired.

The reasons for such suspicion, however, are real enough with the quite disgracefully prolonged withholding of the announcement of the change of the Dunoon-Gourock route to a passenger only service until after the Scottish parliamentary elections ion 2011. This was a shoddy little political dodge dating from the political stone age we seem reluctant to leave behind. It was painfully transparent. It fooled no one. But when matters progressed¬† – after the Scottish parliamentary election – as they were clearly destined to do, public distaste and anger at the attempt to deceive for advantage has not dispersed. What goes around…

It is this precedent that is setting the imperative for conspiracy theorists to be alert to imaginary as much as real moves of a similar kind. And who can blame them?

In this case, we feel that there is an agenda but not one tied to the short term political advantage of avoiding dissent at the local polls.

 The future of Scottish ferry services

On the Northern Isles services, Transport Minister, Keith Brown, in making the announcement, suggested that the new contractor will address problems arising in the service of the existing contractor, saying: ‘The needs of vital time sensitive freight exports like fish and seasonal livestock and vital imports like supermarket goods will be met, and the services available for passengers will be improved.

‘Passengers will see improvements to the journey experience with improved ticketing arrangements, premium reclining seats added on board overnight services, and improved catering, hospitality and customer care facilities.

‘Crucially, clear commitments that crossing times, including the 90 minute crossing between Scrabster and Stromness, will also be retained.’

This last can only indicate that the possibility of saving fuel costs by sailing more slowly had been on the cards. This seems a strange give-away in days when environmental cost is a real issue and bunker oil, a major pollutant which remains legal, is the cheapest and therefore the fuel of choice of shipping and ferry companies.

The issues to be improved, in addition to those Mr Brown mentioned, include time out for dry docking and what appears to have been the North link practice of using one of the two Shetland boats, Hrossey and Hjaltland, to cover the Orkney route when the Hamnavoe is in dry dock. Serco is to use a replacement ship on the Orkney route on such occasions, leaving the Shetland route unimpaired.

In practice, as detailed above, there appears to be little change. NorthLink pays for its use of the various piers and harbours to their respective owners and Serco will do the same. Aberdeen and Scrabster are owned by harbour trusts and Orkney and Shetland by their respective councils.

The general sense, smoothly transmitted, is that things will carry on as before – only better. Hence the calm local response to the news of the change of provider.

However, the promised savings to the taxpayer will have to come from somewhere and with crossing times now sacrosanct, there is going to be no reduction in fuel usage to set against rising fuel costs.

The use of a replacement ship to cover dry docking of the mainline ships will cost over and above the current running costs and the costs of the investment to be made in ship facilities and passenger comfort will be expected to be recoverable from somewhere.

Overall, there is something strange about this arrangement.

If the Serco proposal is to save the taxpayer money and return a profit for its shareholders, something has to give. Its business plan cannot but impact on staffing levels at some later stage after the TUPE transfer. And if crossing times are to remain ‘as is’, service frequencies may have to change. Oil is not going to get cheaper.

Serco may be a private sector company but it is one with first class linkages and access to governments. A 2006 Guardian article famously described Serco as ‘the biggest company you have never heard of’.

A sense of the company’s scale of operations and its hard wired links to government are evident in that article’s opening paragraphs: ‘Have you recently travelled on a train in northern England? Or on London’s Docklands Light Railway? Or perhaps been caught by a speed camera?

‘If the answer to any of these questions was yes – or you have spent any time in custody or the armed forces – chances are you have dealt with the support services company Serco. With almost 48,000 people helping to service 600 largely public-sector contracts around the world, Serco is probably the biggest company you’ve never heard of.’

Serco is not a natural choice as a ferry operator since the only ferry service it can point to in its portfolio is London’s Woolwich Ferry. This is a 10 minute 2-boat shuttle service straight across the Thames linking Woolwich and North Woolich 0 and the ends of the two inner London orbital road routes: the North and South Circulars.

Like NorthLink, the Woolwich Ferry is a public sector financed and licensed service and in our view, such operations are not what is generally understood by private sector enterprises. These are no more than arms-length and deniable public sector services. They lack exposure to the level of risk associated with the private sector.

Serco is already well known to the Scottish Government through its presence in Scotland, not least in its support services to Royal Navy ships. It also already runs Scatsta Airport on Shetland.

We feel that the reason for this contract award may indicate a government strategy to start moving the provision of ferry services out of what is effectively an in-house operation.

Serco is a ‘trusty’ – experienced in logistics and in military-level organisation, big and reliable. If you were a government on a mission to offload, this would be a good partner to trial a handover.

It is highly unlikely that a company like Serco would get involved in this if it were the total sum of the possibilities.

With the west coast ferry services, the Clyde and Hebridean routes, still facing possible ‘unbundling’ – ceasing to be a unitary service delivered by a single provider, it would be naive to imagine that Serco does not have its eye on that opportunity. It would be equally naive to assume that the Scottish Government is not aware of this and that the possibility of Serco involvement has not been discussed.

External evidence indicates that CalMac is aware of a very real threat to its operations and is set on doing all it can to resist.

It has recently appointed a new Managing Director whose background is in business management but not with a maritime focus.

CalMac is a very experienced company at knowing how to run the sharp end of its operation so this appointment looks very like a conscious attempt to get its business proposition in good competitive tune. The recent appointment for a replacement for the David MacBrayne group’s retiring Finance Director has been made at a level to suggest again a mustering of the right resources to compete with authority – and a determination to do so.

Looking at the overall picture sketched above, we see a battleground developing over the Clyde estuary and Hebridean ferry services in which Serco may play the part of a basking shark, swimming with its mouth open but leaving the odd side snack afloat for local players to grab.

Interesting times.

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20 Responses to Northern Isles ferry contract sends signals to west coast

  1. Is it not the case that Shetland businesses were critical of Northlink’s service a few months ago, when it was down to one ship as each of the three went to Birkenhead for overhaul, and the winter weather further disrupted services? In the past Northlink used their CalMac connections to provide a ship for the Scrabster – Stromness service on occasion, avoiding the need to pull one of the Shetland ships off the Lerwick service.
    While Serco might only run the Woolwich ferry, in the past they’ve held the council contract to manage the Islay-Jura link.
    The idea of reducing speed to save fuel has been punted before – by the government – and withdrawn in the face of user objections.
    Keith Brown’s trumpeting of ‘improvements to the journey experience’ sounds very hollow coming from the government transport minister who has so far shied away from facing up to the shambles that is SPT’s maladministration of the Kilcreggan – Gourock ferry contract.

    ‘Cherry picking’ was always a central objection to breaking up the Calmac network for separate tendering.

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  2. Pingback: Argyll News: Northern Isles ferry contract sends signals to west coast … | Today Headlines

  3. Is this the same SERCO who manage the sickness for the councils and police forces and are now embroiled in the disability changes?

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  4. serco are a cowboy outfit ,only interested in money ,wait until after the next general election in 2 years and you shall see the northlink staffs pay and conditions stripped , i can also see the calmac routes unbundled for the friends of the snp goverment to profit from,why did the snp delay this news until election day ? they just cant be trusted .i believe northlink were making all these changes for the next contract if they where awarded it .

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    • There is no obvious reason why NorthLink could or would not have made these changes. They are state owned and will do as they are told.
      There is something obviously synthetic about giving these improvements as the driver of the change of contract.
      This sheer oddity of it is one of the contributory factors that lead us to see the decision as signalling a government stepping back from state ownership and preparing to unbundle the west coast routes.
      The irony here is that this is subject to an EU directive and the expert view is that the euro/eurozone will not survive a year – and it that proves correct, the EU will go.

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      • There’s also the question of how the contract was written by the government; it may be that Serco offered the service improvements as an ‘extra’ to what the specification required. It would be interesting to know what improvements Northlink offered, and also how their price compared with that of Serco.

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        • at the end of the day ,serco has shareholders who want a return on there investment ,northlink being owned by us would give any profit back to the goverrment .

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  5. Serco Marine Services is most certainly NOT a ‘cowboy outfit’. Furthermore, it is not, and never has been a policy for Serco to ‘strip’ pay and conditions. Serco is committed to ensuring that a high quality service is delivered on behalf of the taxpayer. To achieve this end, experienced and dedicated staff are retained at all times.

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    • Serco formed a joint venture, legally a LLP, with the pathology directorate of a large NHS hospital with which I was previously associated.
      I was previously a sub-contractor to that NHS unit (providing IT support to a legacy computer system), and all parties wanted me to support the changeover of computer systems, but Serco were very difficult about recognising me and paying my final invoices (ok now).
      I know that some staff in the pathology directorate were very unhappy about the details of the TUPE offer which was made to them; several senior staff left to go elsewhere, and I understand that many staff availed themselves of an opportunity to retain – in full – NHS terms of employment. (Of course, the latter opportunity couldn’t apply to any new employees, who would simply be employed by the LLP and not by the NHS.)
      .
      I am sure it is not Serco’s policy to strip terms and conditions. But that sometimes can be the perception, at the working level.

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      • We understand that there is a statutory minimum of positions to be filled on each speciifc size and type of ferry. We do not know whether NorthLink employed more than that or worked to the statutory number. If they employed more, then those jobs may be at risk under a different regime; and shore based jobs are clearly more vulnerable. A cynical question is whether the Transport Minister’s mention of ‘improved ticketing arrangements’ is a disguised note of warning to some shore staff.

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        • Since the contract is organised by the government for a service requiring massive injections of public cash, surely the ‘normal rules’ dictate that a change of operator with continuation of the same level of service requires wholesale transfer of existing staff at the same conditions of employment?

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          • This is what we understand – but evidnently TUPE allows for ‘offers’and, post-transfer, nothing can be guaranteed a little down the line.

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  6. The shift of the northern ferries from quasi-state to private operation is perhaps less radical than it seems, given that they had been operated by P&O before that (the co-founder of that shipping company was a Shetlander). What might happen in the future could be a lot more controversial; Serco used to run the Manchester Metrolink tram system, but it’s now in the hands of RATP – originally just the Paris city public transport undertaking, and still state owned. Down in England, as a result of electricity privatisation, a lot of people are customers of EDF – the French state electricity authority. So the British drive for privatisation can result in re-nationalisation, in these cases by France. Bizarre indeed, and it could happen to ferries.

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      • Talk of the devil – just this morning received through the post an offer from EDF Energy (Electricite de France) to switch to them and get ‘energy from low-carbon generation’.
        I could have sworn ‘the Hydro’ (aka Scottish & Southern Energy) produce extremely low carbon electricity in this part of the world, but EDF tell me that theirs is 3.9% from renewable and 61.8% from nuclear generation.
        That’ll include those state-run nuclear plants on the Rhone south of Lyon that had the choice of shutting down or melting down during the extreme heatwave a few years ago. Now’s the chance to renationalise our electricity service, but I think I’ll stick to the Hydro.

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  7. The BBC is now saying that the new Northern Isles ferry contract with Serco has been put on hold due to a legal challenge from another bidder – Streamline – who’s claiming to be more competitive. Heaven forfend that the government is as cack-handed as SPT in framing ferry contracts.

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  8. Pingback: Argyll News: Streamline challenge on Northern Ferries tender underlines paralysis of MacBrayne group | For Argyll

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