The report on the study of the feasibility of introducing a passenger and vehicle ferry service between the town centres of Dunoon and Gourock, carried out by consultants, MVA at a cost to the taxpayer of £50,000, was published yesterday morning, 3rd July.
It is less a feasibility study than a letter to Santa on behalf of some noisily demanding children.
It is full of absurd and unchallenged assumptions and many, often funny, internal contradictions as the consultants struggle with the gap between the evidence and the conclusions their paymasters wish to see them deliver. This could not be a declaration of certain feasibility – which is evidentially insupportable and might make it hard to find an excuse for not making a major financial commitment on a false premise. What has been required is a vague hint of the ‘just about feasible with a following wind, a tidal current and no obstacles in the water ahead’. As with much cooking, this is all about a controlled simmer.
The report includes unbelievably simplistic performance graphs. A series of these take the four business scenarios adopted – of static demand, of gradually ‘recovering’ demand, of ‘trend’ growth [eg: early and strong growth] and of continuing decline – and visually demonstrate that:
- ‘static’ is a straight horizontal line over time;
- ‘gradual recovery’ rises from this baseline at a steady angle half as steep as ‘trend’ growth;
- ‘decline’ drops progressively below it.
Whoever would have believed that? But it takes £50,000 for such a revelation these days.
The sole purpose of this exercise has been political – to stall the chronically dissatisfied natives until after the 2014 Independence Referendum, rather than risk the loss of any more votes.
It would be all too easy – but an inappropriate response to a helpless document – to take it apart, line by line. The commentary below is therefore restricted to some key conceptual and structural weaknesses in the study.
The MVA ‘feasibility’ study
Astonishingly, the consultants have performed no needs analysis whatsoever to support the feasibility of the service they are studying. The absence of this essential element makes it all too clear that the potential service is not about need but about an unneedy ‘want’.
As we have shown earlier from a full analysis of data on carryings and of the total service provided by the current publicly subsidised Argyll Ferries passenger service and the Western Ferries vehicle and passenger service, the reality of the Dunoon route is of heavy over-provision in respect of its evidenced needs.
With no need case even attempted here, this single lack invalidates the entire study.
The report’s projections of market share for the potential new service on the route are based on nothing more substantial than summoning the necessary commercially credible estimates on the back of prayer.
It comes to the conclusion that, subject to a great many ‘what ifs’ and errant assumptions on financial performance – like the design and weight of any new boat, the timescale in which the economy returns to growth, any aggressive competitive response from Western Ferries – this service would indeed be feasible.
Each of these examples of ‘what ifs’ and errant assumptions [and there are others] would alone be capable of destroying the feasibility of this type of service.
The consultants even admit that they have simply ignored the possibility of a competitive response from Western Ferries. They have not factored this in because they say they cannot be sure it would actually happen – although they confess they have been told by Western that it would do whatever was necessary to protect its commercial position.
Feasibility means different things to different people
The report is very quick – as was the Deputy First Minister in her covering letter [linked below] to interested parties – to lay down a crunch caveat.
Both report and letter say that, while the study’s definition of ‘feasibility’ is that a feasible scenario is where projected incremental revenue can be shown to be higher than projected incremental costs – commercially attractive feasibility may be a different issue.
This is seen – rightly – as being a matter for the market, for each potential operator in deciding whether or not to tender for such a contract.
The elephant in the room here is that, in the tender for the passenger service contract won by Argyll Ferries in 2011, bidders were free to offer a combined passenger and vehicle service, with only the passenger element subsidised. Of four shortlisted bidders, only Western Ferries was prepared to offer that service.
This was, in practice, a market test and the market as a whole saw no realistic commercial return on investment in a punt on providing an unsubsidised vehicle vehicle service lashed to a subsidised passenger service on the proposed route.
Western was not a typical bidder in the 2011 instance, of course. It is in the unique position of already being in operation on one of the services between these two destinations. Unlike any other potential operator, it is in a position to negotiate with itself on competitive responses to any other operation of its own on the route.
The measure of the dishonesty of this study is that it concludes that the next step, following its declaration of ‘feasibility’ as it has defined it, is to consult potential operators to test market interest in providing this service.
They already know the answer. There is no interest from the market. They know this not just historically from the Argyll Ferries tendering process but from the process of this feasibility study itself – the unpublished part of it, that is.
The consultants, as we understand it, were instructed by the Dunoon-Gourock Ferries Action Group representatives on the study’s steering body, to establish market interest in operating the service on the town centres route. When they reported negative results from such approaches, they were told that such information could not be included in the study – and it is not mentioned.
This is deliberate suppression of key evidence known to both Transport Scotland and to the Dunoon-Gourock Ferries Action Group. It could not demonstrate more clearly that the Dunoon ferries campaign is about vanity; that all the local campaigners really need is face saving; and that the Scottish Government’s purpose is political placation.
The study is a wonderfully transparent dance of the seven veils, disguising strategically but hinting at the possible fulfillment of desires – later – to maintain the interest of those for whom its dance has been commissioned – the Dunoon ferries campaigners.
The consultants will now be paid more to consult the ferry operators sector on any possible private sector interest in this route – which they have already done, to get an answer they already have.
And we will all pay for this too.
The decoy bait – taken already
In its conclusions, the report trails bait to entice, distract and occupy the Dunoon-Gourock Ferries Action Group campaigners.
It suggests that the major obstacle to commercial feasibility is the requirement to pay berthing and pier dues for each visit of each boat to each of the destination harbours of Gourock and Dunoon. Berthing dues are based on the gross tonnage of the boat concerned; and pier dues are paid on each passenger and each vehicle carried.
The fees are paid to the owners of the Gourock and the Dunoon harbours – to the Scottish Government via its wholly owned company, Caledonian Maritime Assets Ltd [CMAL] in respect of Gourock; and to Argyll and Bute Council for Dunoon.
The Ferries Action Group has taken the bait and is already on the campaign trail – the text of their Press Release is given below in full – ignorant of the fact that both the Scottish Government and Argyll and Bute Council, however willing they might be to offer special rates on these fees, face two insurmountable difficulties in following through.
Both are required to prove best value criteria in their fiscal management; and were the Scottish Government to be seen to offer such an inducement to an operator of a state subsidised service in competition with an existing private sector operator – as Western Ferries is – competition law is a very big stick with a deeply bruising impact.
Western Ferries, of course, owns both of its own ferry terminals and linkspans and so operates on a different financial management premise.
There are many confusions and inaccuracies in this report, which indicate that its primary purpose is to quiet the Dunoon ferry campaigners until after September 2014 and the Independence Referendum.
For instance, the report refers to financial operations in a hypothetical new service from 2015 onwards – yet the current contract with Argyll Ferries runs until 2017 – and Transport Minister Keith Brown has publicly declared that the Scottish Government has no intention of truncating that contract.
This study has a single dominant focus – Western Ferries.
It describes how Western Ferries operates – a markedly well managed company with a high level of strategic capability – and uses this as its own template for how best a competing state-contracted competing service might conduct its business.
Running through the report is the mantra of ‘Western Ferries’.
What is its market share? What was its market share when Cowal Ferries operated a vehicle and passenger town centres service? What is its fares structure? What sort of ticketing arrangements does it employ? What service frequencies does it provide? How does it schedule its services?
And the big one: ‘What would Western Ferries do if the Scottish Government enabled the introduction of a competing vehicle and passenger service on the Gourock-Dunoon route?’
As the study says, Western have made it clear that they would present a robust response to any threat to their own market. Anyone who imagines Western is bluffing is deranged.
They have created the Hunter’s Quay to McInroy’s Point route – the shortest one. They have the maritime intelligence to commission boats that provide the preeminently reliable ferry service on the Clyde. They own their own linkspans. They have a four boat fleet and have ordered two new boats which are in construction at the moment. They are profitable – yet uniquely accept SPT free travel concession cards from passengers. They run a responsive operation with their fourth boat generally available to step in at short notice to run an unscheduled 15 minute sailing frequency in times of unusual demand. They are a lean, knowledgeable, fast response, reliable, well found and well managed service.
Of course they would fight in law – and they would win. Of course they would compete on the water – and they would win.
The consultants simply do not want to contemplate this. They admit that even one of many possible responsive actions by Western could remove the slender feasibility of the potential service. So they just don’t talk about it.
They admit that there is not much of a new market to be created for the route – and indeed the report pays no attention to growing the market for the route, accepting it as essentially a commuter and convenience service for residents.
The study says of the new service it pronounces to be feasible: ‘The large majority of revenue would come from a transfer from Western Ferries’, meaning that the success of any new state subsidised service could only be achieved by planning to take market share from this successful private sector operation.
Any competition law case taken by Western in the improbable event of a start up of such a venture could only celebrate the provision by the state of this sort of evidence.
The consultants even talk wistfully of the possibility that Western might have to ‘retrench’ – something obviously seen as the dream outcome.
The surreal situation revealed by this study is that we have a report commissioned by the Scottish Government with taxpayers money, whose finding of feasibility is secure only if a state-provided and partially subsidised service were to be able to force a successful private sector operation into ‘retrenchment’.
Supposing they managed this – it’s actually inconceivable but suppose?
Where would be the sum advantage to Dunoon and Cowal; to its ferry services which, as they stand are unparallelled in the UK in the luxuriance of their provision; to Dunoon’s local employment situation; to the taxpayer, currently sheltered by the private sector responsibilities carried by Western?
And what message does it send to entrepreneurs in advance of a hypothetical Scottish independence that the Scottish Government is, for its own political ease, appearing to contemplate action that it admits would force an impeccable example of private enterprise into ‘retrenchment’?
And all of this is put forward with no trace of a needs analysis to support it.
Footnote: An FoI request from For Argyll to Transport Scotland for information on the background to this study was refused on the grounds that the study was in preparation and could be compromised by such a release of information. With the study published, we have now asked for the release in short order of the information we had requested some time ago.
Documents: Below is the report itself, three responses to the feasibility study report, each short, each worth reading for different reasons – and our research results revealaing massive over-provision to Dunoon, published almost a year ago on 1st August 2012.
- Gourock-Dunoon town centres ferry feasibility study: Gourock Dunoon feasibility study – Report FINAL – 1 July 2013
- The Deputy First Minister’s covering letter to interested parties: Gourock Dunoon feasibility study – final report – DFM cover letter – 1 J… [Note the caveats.]
- Western Ferries Press Release on the study: Wester Ferries News Release_feasibilitystudy [Note Gordon Ross's dismissiveness: 'In essence, Transport Scotland has just spent £50,000 of taxpayers’ money to commission a modern day ferry-tale.']
- The Dunoon-Gourock Ferries Action Group Press Release: Dunoon-Gourock Ferries Action Group Press Release on feasibility study [Note that in the public meeting which this group is organising on the report for 7.30om on 11th July in Dunoon's Queens Hall, the main interests for the platform party are actually not confirmed but only 'tbc'.]
- For Argyll research article on ferry provision to Dunoon: Research reveals shock insights into reality of Dunoon ferry service provision.