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.