Scotland’s last civil shipyard may not be “commercially sustainable” in the longer term, the Competition and Markets Authority.
The Competition and Markets Authority has warned about the potential risks of state control over the way ferries are built in Scotland.
They warned of the dangers of government-owned Ferguson Marine being awarded work without a competitive tender process, saying “it is unlikely to make it a commercially sustainable business” and “it may also have a negative impact on the wider industry”.
According to the report:
“In planning the procurement of further vessels, the Scottish Government should consider its role as a market maker both in relation to publicly owned, operated or controlled ferries but also on the breadth of maritime services, from shipbuilding and refurbishment through to potential customers in aquaculture, fisheries and off-shore oil and gas.
The CMA’s view is that nationalised companies should be operated on an arm’s length basis and procurement by public bodies including state owned companies (such as Caledonian Maritime Assets Ltd (CMAL)) should be conducted on a level playing field, with both private and state-owned companies able to have opportunity to engage in the market and supply vessels. The procurement of vessels for operation of ferries in Scotland may pose some additional complexities given the legal and structural separation of asset owner and operator, but these should not prevent an effective procurement exercise being conducted in future.
Awarding Ferguson Marine newly commissioned work without a competitive tender process is unlikely to make it a commercially sustainable business. It may also have a negative impact on the wider industry.”
The Scottish government took the Ferguson Marine yard into public ownership after it collapsed with debts of £49 million. The yard has been in the news recently due to issues with ferries being built there.
MV Glen Sannox was built for the Ardrossan to Isle of Arran crossing. She was originally expected to enter service early in 2018. However, construction delays led to her launch being put back to November 2017, with the ship then expected to begin operation in winter 2018/19.
In 2018, new Cabinet Secretary for Transport Michael Matheson said it had been confirmed that the ship was to be delivered in June 2019, followed by two months of crew familiarisation and sea trials. Further dispute over the contract overrun led to the shipyard going into administration and being nationalised by the Scottish Government.
A report produced after nationalisation indicates that Glen Sannox should be handed over in the last quarter of 2021 and that completing the two ferries is likely to increase the total cost to over £207M. The second vessel, Hull 802, was supposed to be delivered to CalMac in the autumn of 2018 for use on the Uig-Lochmaddy-Tarbert triangle, but that has also been delayed.
Additionally, the firm was also hoping to be able to work on the new Type 31 Frigates being built by Babcock at Rosyth but that looks to be in doubt due to current delays with the ferries. Babcock’s consortium beat a BAE-led team and another led by Atlas Elektronik UK to clinch the £1.25bn deal for five ships.
According to the Financial Times in their analysis of this news in light of Babcock consortium partners H&W and Fergusons both going into administration in recent months:
“The Babcock consortium includes Thales, as well as H&W and Ferguson. Under the original proposal, the plan was to assemble the vessels at Rosyth using blocks built by H&W and Ferguson. It remained unclear if the role of H&W and Ferguson in the consortium would be affected by their predicament.”
However, should this not be possible, it should be noted that Babcock CEO Archie Bethel insisted Babcock had won the bid on the basis of the work being done “100 per cent at Rosyth”, adding that with the exception of France’s Thales, “none of our members were risk-sharing”.