Responses to Scottish Government’s Information Day on potential Gourock-Dunoon ferry service

The Scottish Government hosted an Information Day in Edinburgh on Friday, 18th October, targeted on private sector ferry operators potentially interested in tendering for a hybrid commercial risk / state subsidised service between Gourock and Dunoon.

Transport Scotland, the relevant wing of government, says of the event:

‘We continue to work with the Gourock Dunoon Ferry Services Steering Group to find long term solutions for the town centre route. Following the publication of the MVA feasibility study, we are engaging with potential operators for a vehicle and passenger service on the town centre route where only the passenger element is subsidised.

‘The purpose of engaging with the market is to share information about the route with potential bidders as well as collect sufficient robust market intelligence to determine how the Gourock-Dunoon ferry service could be tendered for in future.

‘The information day on Friday 18th October was the first step in this engagement process.

‘Presentations were made by Transport Scotland, Argyll Ferries [Ed: the incumbent operator of the passenger service on the route] , MVA Consultancy [Ed: authors of the recent feasibility report on the proposed service], the Dunoon Gourock Ferry Action Group, Argyll & Bute Council and Inverclyde Council [Ed: the local authorities with respective responsibility for Dunoon and Gourock].

‘There were numerous questions asked by the potential operators and a lively exchange of information and opinion.

‘We are now going to have a series of meetings with each of these potential operators, and any other potential operators who express an interest, to discuss their views on the service.  Those discussions will include consideration of how the next contract should be tendered and the likelihood of them bidding to provide a vehicle service as well as a passenger service.

‘Once we have received feedback from operators we will be in a better position to discuss and consider a way forward with the Steering Group. We aim to conclude those discussions and map out a clear course of action by the end of the year.’

The signals sent from the event

The ferry operators attending the event were CalMac/Argyll Ferries [Argyll Ferries is a subsidiary of Caledonian Macbrayne, wholly owned by the Scottish Government]; and three private sector ferry companies, Western Ferries; Clyde Marine; and Serco, the current operator of the ferry services for the  Northern Isles.

This limited response from the private sector will have been a disappointing response for the Scottish Government and for the Dunoon-Gourock Ferry Action Group.

It suggests that the widespread wisdom is that there is no commercial foundation in what is being proposed.

There are no other potential operators in the wings

For the record, there are no other potential operators of the proposed service waiting in the wings.

The Dunoon Ferry Action Group themselves, in an admirable attempt to recruit commercial interest, met with an outright negative from one of Scotland’s most successful entrepreneurs, whose business portfolio includes ferry services.

We ourselves, in advance of Friday’s session, contacted the UK’s major ferry operators who could have been expected to be interested in any attractive commercial proposition for another service. From the Isle of Wight, to the Isle of Man, to the Pentland Firth to Fife, they had no interest in this proposition.

Our interest was to test our own business analysis. We are theoreticians not ferry operators so, although we had subjected our analysis to robust interrogation, we needed to know if experienced ferry operators saw a form of opportunity to which we had been blind.

They had not. Their absence from the event was not coincidental.

So which ferry operators present were serious about this service?

The answer to this is, for different reasons – none of them.

The tender the Scottish Government proposes to launch before the 3rd October 2014 is for a vehicle ferry service run at the commercial risk of the operator between Gourock and Dunoon town centres , with passenger carryings on the same boat supported by state subsidy.

There is no  business case of any kind for the proposed service, competing with the established private sector, unsubsidised Western Ferries service whose costs are substantially lower than anything any competitor could manage on the town centres route. [See ‘A certain loss maker’ below.]

With much higher costs, no operator could conceivably compete with Western on prices or service frequency – operating four services an hour during the daily rush periods.

That rules out the public sector, Scottish Government-owned companies of CalMac and Argyll Ferries – who could not undertake such a commercial risk; and the tender, as currently intimated, reflects the private sector nature of the proposed operators anyway.

The public sector David MacBrayne Group companies, CalMac and Argyll Ferries, will have been there on Friday essentially as a ‘duty’ appearance, to provide information to potential private sector operators on the route.

Of the three private sector companies present, Serco’s real interest is in the massive contract to come for the west coast Clyde and Hebrides ferry services [CHFS], operated by CalMac. It would have been present as a means of maintaining the goodwill of the Scottish Government to advance their later cause.

Serco’s track record in the integrity of their delivery of public sector services in non-ferry service contracts, is  now under investigation. It would have no interest whatsoever in the certain loss maker which is the proposed service – unless a covert deal was done where they took the hit on this one in return for getting the bonanza of the west coast services contract. Perhaps, if these routes are indeed unbundled – and CMAL has already prepared the basis of the legal contracts for the leasing of boats in an unbundled scenario – Serco might trade a loss on Gourock-Dunoon in return for getting its pick of the west coast routes?

Western Ferries will have been there out of commercial savviness in keeping tabs on the developing scenario – and cannot have failed to be aware of having been the high-vis elephant in the room.

As the 40 year old successful provider of a popular, service-focused and profitable private sector vehicle and passeneger service on the route – between the outskirts of both towns, Western have a position to protect in this; and have signalled that they will do so robustly.

Clyde Marine will have been there because they’re local and would want to show goodwill.

But Clyde Marine, like Argyll Ferries and Western Ferries, as the three bidders for this service last time out, did not choose to take up the option in that tender to offer a commercial risk vehicle service to carry the subsidised passenger service.

They all tendered a passenger only service on the town centres route – an option which does not exist in the tender version proposed this time.

If none of the three of them saw any business case for the vehicle service element last time out, what’s changed? Why would any of them do it now when they wouldn’t consider it then?

And why would anyone expect Western not to launch a crunching pre-emptive competitive strike before any newbie service had got a boat away from the Gourock pierhead?

Western has just invested in two new boats for the route. Is it seriously going to sit on its hands and let another operator, with a partially state-subsidised service, try to sink it?  The essence of Westerns’s situation is that they have no choice but to protect their business and the jobs of their employees, most of whom are local.

The MVA report predicted that any new service could expect to achieve a 56% market share penetration – which, if correct, would kill off Western Ferries’ business.

‘If correct’ is of course the threshold criterion here. The methodology of this entire feasibility study is, to be diplomatic, less than robust; and the suggestion that the proposed new service might take a 56% share of the  vehicular traffic market is insupportable on the evidence, even at the level of a chat over a pint.

A certain loss maker

Western runs a route half as long as the one proposed, with four fuel-efficient boats, two of them brand new, on a 20 minute service frequency, early to late daily, seven days a week, 365 days a year.

It owns its own linkspans so it pays no harbour or berthing dues.

The proposed service is twice the distance of Western’s route and would have to be travelled at a fuel-hungry speed of twice Western’s, in order to match its service frequency.

The Scottish Government will be under sharp scrutiny from the EC to ensure that it offers the operator no improper financial cushion for the vehicle service via any manipulation of the subsidy for the passenger service.

That operator will then have to bear the greater cost of providing ferries capable of carrying vehicles and the heavier fuel usage from their weight – as opposed to lighter specialist passenger ferries.

They will have to pay substantial berthing and harbour dues at each of their two termini.

They cannot be competitive on fares.

So what will have been the topics for discussion on Friday?

An educated guess would indicate that the MVA Consultants’ feasibility study for the route will have had to be foregrounded; since it managed to conclude that the proposed service ‘could be feasible’.

There must have been some hilarious frissons when  the MVA representative had to eyeball the Western Ferries representative in saying that this flaky conclusion had only been possible by failing to factor in any possibility that Western would take any protective competitive action whatsoever, were such a service to be introduced.

We wonder if there will have been overt or covert friction between some members of the Dunoon Gourock Ferry Action Group and Western Ferries – with the Action Group’s ambitions for this unnecessary service made redundant by the success of the Western operation? The potential confrontation factor here will have been very real.

We expect that Transport Scotland will have sat back and left it to the Action Group to engage in the promotion of its imagined commercial attractions of the route. The Transport Scotland delegation may have majored on looking thoughtful, perhaps taking notes to avoid blush-making eye contact with the three people in the room who actually knew anything about running private sector ferry services.

There will have been a double value to Transport Scotland in letting the Dunoon-Gourock Ferry Action Group lead. It will have gratified the Action Group members to take the stage; and letting them front it up will have saved some of Transport Scotland’s fragile credibility in this excursion.

The David MacBrayne Group reps will have offered helpful information from Argyll Ferries and CalMac’s experience on the route, pitched to impress their paymasters with their loyalty. They will have been covertly taking the measure of the Serco rep. It is CalMac’s core business on the Clyde and Hebridean ferry services – which it has pledged to defend with vigour – that the currently troubled privateer is circling.

Argyll and Bute Council reps are likely to have made it known that the council might be prepared to consider reducing the harbour and berthing dues it collects at the Dunoon linkspan, which it owns. The council has mooted this possibility before – but has not thought it through.

It would have the auditor looking at such a waiver of due fees; and allegations of discrimination if it did not reduce the harbour and berthing fees by the same amount at each of its other piers and harbours.

And if it waived a hefty percentage of fees for its entire harbours portfolio, council taxpayers would see to the end of a collection of undistinguished careers in local government at the earliest opportunity.

As for Western Ferries – Friday is likely to have been a confirming experience, underlining its hard earned superiority on the Dunoon Gourock route, with a service informed by a genuine community service ethos – local employment, low prices, regular reinvestment for the future from a responsible as well as profitable, well managed outfit.

What next?

Well that’s really in the hands of the Dunoon Gourock Ferry Action Group.

While Transport Scotland will be talking to the operators present, on a private one-ro-one basis over the next month or so, this cannot affect the lack of any credible business case for what is proposed.

All that might happen would be the laying of foundations for a backstairs deal with Serco in relation to the later Clyde and Hebridean ferry services tender – and anyone who imagined that Western would not take a legal blow torch to any such planned manoeuvre would have to be very naive indeed.

The reality is that what happens next is actually all down to the Dunoon-Gourock Ferry Action Group.

If they persist in what is a certain lost cause in trying to get a second vehicle and passenger ferry service on the route, they will see the current unreliable passenger ferry service for their town become a long drawn out status quo.

If they switch focus now to pressing for the right boats to deliver the passenger right service to the specific destination they want – with the right terminal facilities in support, avoiding the third world cattle-holding stations the public sector prefers – the Action Group can achieve something well worth having for the town.

Such a service could be tendered before next October. Transport Scotland is clearly geared up to go to tender then – it might as well tender for a winner.

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Related Articles & Comments

  • A well written report Newsroom. Your suggestions of what may or may not have taken place, will no doubt be public knowledge by the end of 2013, which is a mere 10 weeks away. Serco may be one company that may be interested, but they have to balance their books like anyone else. Interesting times ahead.

    Like or Dislike: Thumb up 7 Thumb down 6

    DunoonLad October 21, 2013 7:29 pm Reply
    • Serco wouldn’t touch this with someone else’s barge pole; there are no vessels to run the route and no staff with wages or T&Cs to be squeezed.

      Like or Dislike: Thumb up 7 Thumb down 3

      db October 21, 2013 10:01 pm Reply
    • As usual newsroom bends things by quoting the MVA report as saying the vehicle service ‘could be feasible’.

      In fact the reports states; “This study has therefore demonstrated that, given the assumptions made and analysis
      undertaken here,a passenger and vehicle ferry service IS feasible.”
      [ see section 9.1.10 http://www.transportscotland.gov.uk/files/documents/reports/j278759/j278759.pdf ]

      I am not surprised that Serco are interested in what is Scotland’s busiest vehicle ferry route particularly when the competition turns such a massive profit margin from poorly located ports.

      If Serco have wider ambitions for ferries in Scotland, as it seems they do, then Dunoon Gourock would make sense.

      Like or Dislike: Thumb up 2 Thumb down 2

      ferryman October 27, 2013 2:54 pm Reply
      • You might have added the rest of that paragraph, Robert, instead of being selective as usual.

        “It could attract the level of market share, and therefore generate sufficient incremental revenue, to cover the various incremental costs of delivering the service. This core finding is subject to the uncertainties explored during the sensitivity testing, but the study does provide an evidence base which could be used to inform discussions with potential operators. Ultimately, it is their judgement and level of interest in this proposition that will determine the feasibility of a passenger and vehicle service between Gourock and Dunoon town centres.”

        Note the use of the word ‘could’… and the assumption that there would be no defensive response from another operator.

        Like or Dislike: Thumb up 1 Thumb down 1

        Jim Williamson October 27, 2013 3:34 pm Reply
      • The MVA report did conclude, in these words, that the proposed service ‘could be feasible’.
        It also said what you quote above – where the crunch matter is the reports’s own words which you helpfully include but appear not to have understood
        The report qualified this remark heavily, saying that the proposed service is feasible: ‘given the assumptions made and analysis undertaken here’.
        We ought not to have to point out yet again that the assumptions MVA made were, by their own admission, that the service ‘could be feasible’ assuming that Western Ferries took no protective competitive action; and that if it did, the service would not be feasible.
        MVA said that they had not factored in the impact of any such protective competitive action from Western; ‘because we could not be sure that it would happen’.
        Yet Western has made it clear that it told both MVA and Transport Scotland officials that it would do everything necessary to protect its business and its employees’ jobs..
        Moreover, the research and anaysis undertaken by MVA, such as it was, included enquiring of various ferry operators as to their potential interest in delivering such a service.
        They were not interested in this. Their responses were included in a draft of the MVA report but removed from the text of the final version by the express intervention of the Dunoon-Gourock Ferry Action Group, members of the steering group overseeing the production of the MVA report.

        Like or Dislike: Thumb up 1 Thumb down 1

        newsroom October 28, 2013 12:18 am Reply
  • Amazingly the action group have been very quiet following the meeting. Perhaps the reality of the situation is at last hitting home.

    I suppose they will accept a better passenger service and claim victory.

    Like or Dislike: Thumb up 9 Thumb down 5

    Peter Wade October 21, 2013 9:12 pm Reply
  • I find it hard to believe how much time, money, and energy has been wasted on the
    obsession with a vehicle ferry service between Dunoon and Gourock. Since WF
    became established the priority has been for a good and reliable passenger ferry, ideally to
    a design which could also be used on other routes. It doesn’t have to be a
    lightweight twin-hull job … though that seems to be the way development is going …
    a resurrection of the Maids might be a start for the thinking.

    Hot debate. What do you think? Thumb up 9 Thumb down 6

    Arthur Blue October 21, 2013 10:02 pm Reply
    • Don’t forget – even the Maids, good as they were, could be very lively and were condemned as being unfit, “glorified motor boats” by the predecessors of the DFAG who wanted big paddle steamers retained on the route. A sense of entitlement combined with a lack of sea legs seems to be in the genes.

      There’s been a need for someone to get a grip of this for decades now; I’m afraid Ms Sturgeon is showing no more nous or leadership than anyone who went before. In the meantime, millions upon millions are frittered away.

      Suitable high speed boat or through buses on Western. Those are the only realistic options in the near future. It speaks volumes on Transport Scotland and SPT that things are as they are.

      Like or Dislike: Thumb up 5 Thumb down 3

      pm October 22, 2013 9:24 am Reply
      • And as discussed here before, when the Secetary of State tried to replace the Cal-Mac service with Western’s Highland Seabird, Western’s ferries were described as no more than “tubs” , and the idea was dropped.

        Like or Dislike: Thumb up 5 Thumb down 0

        DunoonLad October 22, 2013 1:00 pm Reply
  • Watch the C.C. tomorrow for reactions from the DFAG, and supporters! They will see many positives in the companies that attended, and the C.C. Editor will no doubt have a triple positive exclusive spin on it. Surely Serco has the funds and ability to order new purpose built ships for the route, or is that not what they do? Also they could employ cheap crew, with poor t & c’s from the outset. The Maids I am sure were eventually scrapped due to their high running costs. There is always the chance that Newsroom have got this completly wrong, or have a source in the right place?

    Like or Dislike: Thumb up 8 Thumb down 4

    DunoonLad October 21, 2013 10:41 pm Reply
    • How true. Despite the story appearing in the observer and here, it will be another Courier EXCLUSIVE

      Like or Dislike: Thumb up 8 Thumb down 5

      Peter Wade October 21, 2013 11:17 pm Reply
      • CC subscribers must be well annoyed now that the big stories are ‘exclusive’ free reads.

        Like or Dislike: Thumb up 8 Thumb down 2

        Patsy October 22, 2013 9:06 am Reply
        • And the Courier has had no new “news” since last Friday?

          Like or Dislike: Thumb up 4 Thumb down 1

          DunoonLad October 22, 2013 1:03 pm Reply
          • You know what they say no news is good news

            Like or Dislike: Thumb up 6 Thumb down 0

            Peter Wade October 22, 2013 1:48 pm
    • Does anyone still read it? Charging money to read a blog is pretty ambitious; having been a regular reader I’ve not been back since the paywall appeared.

      No operator, Serco included, is going to splurge money on new vessels for a 6 year contract; the cost of financing vessels cannot be covered by the revenue earnt in that time, 10-15 years are needed(assuming the route can wash its face).

      Like or Dislike: Thumb up 10 Thumb down 1

      db October 22, 2013 12:37 am Reply
      • The Northlink contract is only for 6 years, but the ships that Serco are using were already available to lease. The Clyde service would probably need new build ships.

        Like or Dislike: Thumb up 3 Thumb down 1

        DunoonLad October 22, 2013 5:47 am Reply
  • Newsroom’s glee at the apparent “no-interest in providing a service”, seems only to be outdone by the number of responses from the “told-u-so” brigade.
    I am prepared to wait and see, and in hope, that there will be a proper service provided from Dunoon, and that that might not also be with better boats but also with vehicular carrying ones.
    Dont Gloat until there is no Boat!!

    Like or Dislike: Thumb up 3 Thumb down 3

    john October 22, 2013 2:20 pm Reply
    • It’s not a matter of gloating about anything John. I am sure the majority of people want to see a reliable town centre service in place. The point (if you have missed it) is that commercially or otherwise, there is no need for a vehicular service to sail to the town centres, and there is no need for two vehicular services, especially with the reliable, frequent service Western provide. Yes, some don’t like them because they are a private service, but, as has been stated here, their fares are somewhat lower than comparable, subsidised services. Dunoon should be pushing for a modern high speed service to proper landing facilities, bringing us into the 21st century. I, and others I am sure, would be glad to read your reasons, why a vehicular service should return to the town centre route. Other posters seem to think it is ” our right” to have the service re-instated, with no other reason given. Your comments, would be interesting to read.

      Like or Dislike: Thumb up 9 Thumb down 2

      DunoonLad October 23, 2013 6:52 am Reply
  • Its obvious there is no commercial logic to the route and it will be loss making but that is not the point. No Calmac route has a commercial logic and they loose money if you look simply at whether the revenues cover the costs and generate any return. That is why they receive subsidy. The subsidy is the price the Government is prepared to pay to deliver a public service.
    If Scottish Government wants to provide a publicly specified service to Dunoon then it has to determine how much it is prepared to spend in subsidy to make it happen.

    Like or Dislike: Thumb up 4 Thumb down 2

    Jerry McIver October 22, 2013 9:37 pm Reply
    • Jerry, I understand that the current subsidy paid to Argyll Ferries is £1.4 million per year. Is that amount considered to be appropriate, or indeed a necessity?

      Like or Dislike: Thumb up 3 Thumb down 1

      DunoonLad October 22, 2013 10:28 pm Reply
      • £1.6 million per year, in fact, or putting it another way, for every £1 received from the fare payer, Argyll Ferries receive a further £2 from the taxpayer. Meanwhile, just along the road, another company shows you can actually run a first class ferry service at a profit.
        http://www.david-macbrayne.co.uk/Downloads/Annual-Reports/Annual%20reports%202012%20-2013/Argyll%20Ferries%20Ltd%20Annual%20Report.pdf

        Like or Dislike: Thumb up 5 Thumb down 2

        pm October 22, 2013 10:40 pm Reply
        • Cowal Ferries who ran the Streakers to Dunoon received over £3.163.000 in 2010 in subsidies. If you think back, given the subsidy, either the Fares on the Streakers should have been massively cheaper than Western’s fares, or the route was really expensive to operate. They seemed to make an £18.000 profit on the run. Would this actually mean that the subsidy would be £18.000 less, as surely the only way there would have been an actual profit, would be if the (profit) would have to have been more than the subsidy paid? Or am I totally confusing the figures?

          Like or Dislike: Thumb up 3 Thumb down 0

          DunoonLad October 23, 2013 3:27 pm Reply
          • No, you’re correct, DL. The small profit would have been the surplus from operations after Cowal Ferries were paid their £3.2 million subsidy (described as “deficit grant” in the accounts).

            The agency staff costs of £1.5 million were presumably crewing costs. The direct employee costs of £518,000 seem to be for the 20 employees under the heading of “Shore Terminal” which must be for ticket desk staff, etc. Additionally, there is a charge of £267,000 for “Administrative Expenses”, which I take to be the cost of management services provided by Calmac. A further staff charge of £295,000 was paid to CMAL for pier personnel.

            That all adds up to £2.6 million in wages alone, £800,000 more than the total received in fares.

            That means that, hypothetically, even if they had been operating with no berthing charges, no vessel chartering fees and free fuel, they would still have managed to chalk up a loss before subsidy of almost £1 million per annum.

            Like or Dislike: Thumb up 3 Thumb down 0

            pm October 23, 2013 5:02 pm
      • Is it a necessity? Nope. This couldn’t be argued to be a lifeline route by any definition because of the other options to cross that are available.

        Is it appropriate? Depends on what value Scottish Government puts on pacifying local interests, thats the bottom line. £1.6m might be a price worth paying. Usual political answer is to keep throwing money at a problem until it is no longer a problem. On this basis alone, I’d not be surprised if the end result is new boats and a subsidy level a fair bit higher than now.
        Total waste of taxpayers money.
        The better answer would be to kill the route and only consider stepping back in if Western fail.

        Like or Dislike: Thumb up 6 Thumb down 1

        Jerry McIver October 23, 2013 7:45 pm Reply
        • “Depends on what value Scottish Government puts on pacifying local interests, thats the bottom line.”

          The thing is many of those making noises now for a town-centre/town-centre car ferry, used to travel via Western even when they had a Calmac car ferry.

          Like or Dislike: Thumb up 7 Thumb down 3

          Jim Williamson October 23, 2013 8:43 pm Reply
  • @pm – what a gross misuse of taxpayers money! This was incompetence at it’s worst, and the DFAG and others actually supported this set up. Some of the management costs are understandable in a large company, but it’s no wonder that Western were highlighting the massive subsidy that was paid year after year for decades. Whatever your political views, the Scottish Government should be given a round of applause for halting this gravy train in its tracks.

    Like or Dislike: Thumb up 6 Thumb down 4

    DunoonLad October 23, 2013 7:22 pm Reply
    • “Whatever your political views, the Scottish Government should be given a round of applause for halting this gravy train in its tracks.”

      Except they haven’t – yet. They’re still trying to find an operator to run it even after several failed tendering exercises (three, I think).

      Like or Dislike: Thumb up 6 Thumb down 4

      Jim Williamson October 23, 2013 8:45 pm Reply
  • Four complaints made by the Dunoon Ferry Action Group to the Public Service Ombudsman, about the tender which led to Argyll Ferries placing unreliable passenger boats on the route, have not been upheld. However, the ombudsman instructed Transport Scotland to increase the reliability of the service as ‘a matter of urgency’. Full report here : http://www.spso.org.uk/

    Like or Dislike: Thumb up 3 Thumb down 1

    DunoonLad October 24, 2013 7:41 pm Reply
    • Which of course they have. The impending deployment of the Coruisk, the replacement bus service and the MVA report.

      Like or Dislike: Thumb up 3 Thumb down 2

      Peter Wade October 24, 2013 9:37 pm Reply
  • Is that all that’s likely to happen Peter? No replacement ships on the horizon then? Courier finally returned today, with no ferry update so far.

    Like or Dislike: Thumb up 0 Thumb down 2

    DunoonLad October 24, 2013 10:22 pm Reply
    • Who knows. But the SNP can at least show that they are trying. Given the rhetoric from the SNP to date, if they could have done anything more before now, don’t you think that they would have done it?

      The MVA report was in the end just a time filler and with meetings with operators to follow, will there be anything new coming from them given who attended the meeting last week.

      Like or Dislike: Thumb up 3 Thumb down 1

      Peter Wade October 24, 2013 10:41 pm Reply

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