On 30th September, Transport Minister, Derek Mackay, wrote to members of the Steering Group examining the future of the Gourock-Dunoon ferry. The Minister wrote to inform the group of his decisions on some key aspects of the next tender for the Gourock-Dunoon ferry service.
The Steering Group – consisting of independent experts, representatives of the industry, of the local authorities involved and of the local lobby group, the Dunoon-Gourock Ferry Action Group – was established by the previous regime to Mr Mackay’s and permitted to play an unusually central part in the process of retendering the ferry service on this route.
Once a vehicle and passenger service, currently – since the last contract let in 2011, a passenger only service – this is delivered by state-owned Argyll Ferries Limited, a subsidiary – with CalMac Ferries Limited – of the state owned parent group, David MacBrayne Limited.
The local action group has fought and lobbied hard to have the former vehicle and passenger service restored on a route that is twice as far as the shorter crossing across the Clyde to Dunoon, very successfully operated by the private sector company, Western Ferries.
This group will be disappointed – but not floored – by the Transport Minister’s communicated conclusions. This is because the Minister’s choice of option leaves open, to the deluded, the possibility of the emergence of a private sector operator with so much cash that they can afford to take a punt on tendering for this service a proposition on which they would be certain to lose their shirts – and then some.
Mr Mackay says to the Steering Group members that, in reaching his decision, he has considered the three options which had previously been set out:
- tender for a passenger only subsidy and encourage bidders to provide an unsubsidised vehicle-carrying service at their own commercial risk;
- specify a passenger-only service;
- tender for a vehicle-passenger service with only the passenger element subsidised.
The Minister goes on to say:
‘I have reflected on all three options in light of the issues previously discussed at the Steering Group and concluded that the next contract should be tendered on the basis of Option 1 – a passenger only subsidy and encourage bidders to provide an unsubsidised vehicle-carrying service at their own commercial risk. My decision reflects the Scottish Ministers’ policy commitment to support the introduction of a vehicle-carrying service between Gourock and Dunoon town centres within the application of appropriate EU procurement and State Aid rules.
‘I have, therefore, requested Transport Scotland officials to start to make the necessary preliminary arrangements in preparation for the tendering process to deliver on Option 1. That will include the identification of the appropriate procurement, finance and maritime technical resource to deliver on this exercise. I plan to convene another meeting of the Steering Group later this year to confirm the full details of the procurement approach and the timeline leading up to the award of the contract once these arrangements are known.
‘You will be aware from previous discussions at the Steering Group that replacement vessels will most likely have to be purpose built to meet the required specification, unless suitable vessels can be sourced on the open-market by prospective bidders. I can confirm that replacement tonnage will be a feature of the procurement of the new contract.
‘I can further confirm that the tender process and the award of contract to the successful bidder will be completed in the lead up to the expiry of the current contract in June 2017. However, on the basis of our current assessment, it is highly unlikely that the requirement to source/build new vessels will be in place by June 2017. That is likely to mean a short delay to the availability of alternative vessels. It is, of course, regrettable but I consider it worth taking the time to get the tender, contract and vessel specification right. To be clear, and for the avoidance of any doubt, there will be full continuity of service provision throughout this period of change. I am sure that you will agree that this approach will pay dividends in the longer term, particularly as we anticipate setting a longer contract duration of up to 12 years for the new service.
‘Although it is not possible to state with certainty the commencement date of service provision with alternative vessels until the outcome of the tender exercise is known, I can reassure you that we will be aiming to operate the service with replacement vessels at the earliest opportunity. Meantime, Transport Scotland officials will keep you fully engaged and informed on arrangements for the tender process and developments in relation to the sourcing or building of new vessels and potential dates for commencement of the new service.’
Noting the Minister’s assurance that ‘replacement vessels will be a feature [Ed: but not a requirement] of the procurement of the new contract’, we are intrigued as to how this might play out in practice:- in order to offer an equal playing field in potentially new tonnage to those bidding to provide a state subsidised passenger only service, against those – hypothetically – bidding to provide a commercial risk vehicle service on a boat where the passengers carried were state subsidised.
The Argyll Ferries operation, although subsidiary to its parent, CalMac Ferries, does not lease its vessels from the state asset holder, CMAL [Caledonian Maritime Assets Limited], as does CalMac in its operation of the major Clyde and Hebridean Ferry services network.
We are wondering if there might be a role here for the fourth hybrid ferry promised by former First Minister, Alex Salmond, to Ferguson Marine at Port Glasgow, now owned by engineering tycoon, Jim McColl, whose resourceful strategic intelligence and entrepreneurial energies are lighting fires of interest and enthusiam around the Clyde on the new future for the Ferguson yard.
The third hybrid ferry is in construction but the fourth has not been mentioned again. Might the pair be offered in the tender for the Gourock-Dunoon route – on commercial terms, to a hypothetical bidder proposing a commercial risk vehicle carrying service?
If this offer were not taken up, it would be an excuse for not following through on an order for the fourth hybrid – since the new CMAL fleet policy is heading in the direction of fewer larger vessels; and since, as Robert Trythall has already pointed out, Ferguson’s now have the pacifier of a publicly committed order for two new 100 metre ferries for CMAL
The reason for our repetition of the word ‘hypothetical’ in relation to anyone bidding to provide a vehicle carrying service at commercial risk on a boat carrying state subsidised passengers, is based on three inalienable imperatives:
- A prolonged marketing effort by Transport Scotland – to which the Dunoon-Gourock ferry action group was a party – failed to find a private sector ferry operator who could see any commercial sense in taking on Western Ferries while lashed to an inevitably far more expensive service on the longer route.
- An expensive feasibility study was commissioned from MVA consultants by Alex Neil MSP while he held the infrastructure portfolio. This study was intended to come up with conclusions that would sedate the local action group by finding the reassurance for potential operators that a competing commercial service on the longer route would be a profit maker. The best MVA could do was to say that such a service ‘could‘ be viable [as opposed to profitable] – but even then, only if Western Ferries took no competitive action. MVA also had to report that Western had made it clear to them that if their position came under such a threat, they would take ‘whatever action was necessary’. It has to be said that the MVA ‘study was- one of the most hilariously desperate attempts to do their paymasters’ bidding that we are ever likely to see.
- The 2011 tender for this particular service offered bidders the opportunity to offer to provide a vehicle carrying service at commercial risk on an appropriate vessel also carrying the subsidised passengers at the heart of the tender. No 2011 bidder put such an offer forward.
We note that in his letter to the Steering Group the Minister gently makes no reference to the evidence from the marketing initiative, the feasibility study or the market response to the 2011 tender invitation.
He is, though, prepared to throw to the local action group the sop of a repeated similar tender option that might throw up some bare chested commercial neanderthal willing to have a go.
Any state subsidy or suspicion of the disguised state subsidy alleged to have been applied for the vehicle element of a previous public sector service would immediately see Transport Scotland well adrift of EU competition law – a matter to which Western Ferries is known to be sharply alert. Moreover, it does not take more than a numerate primary school pupil to understand that a service having to cover a route that is twice as far and whose vessels would have to travel twice as fast as the efficient Western vessels to match its passage time, cannot hope successfully to compete commercially on the route.
Despite all of this – and one has to admire their persistence – the local ferry action group plugged on and were given substantial favours by government politicians keen to secure votes for indyref 1. These favours included the sacking of the former David MacBrayne Group CEO, Archie Robertson, whose overseeing of the installing of a passenger only ferry in 2011 angered local amour propre; and the action group’s representation on this very Steering Group, in which they were given unprecedented access to market responses [or the lack of them] to the propositions punted in those sessions.
The Dunoon-Gourock Ferry Action Group can take the comfort they are intended to have from the Minister’s trawling of potential new tonnage for the route; and his assertion that the next contract will be for a period of up to 12 years. This is long enough for bidders to recover the higher lease charges from new passenger tonnage and then add profit – but not from taking on a commercial risk vehicle service in competitive circumstances skewed heavily against them; and certainly not operating such a competitive service in a new hybrid, whose required crewing levels make costs demanding; whose weight, with the massive batteries she carries, is expensive to haul; and whose fuel costs are not what the green lobby imagine.