Report: Sturgeon added to ferry scandal by jumping gun over contract
NICOLA Sturgeon contributed to the CalMac ferries scandal by prematurely announcing the preferred bidder before a deal was nailed down, a scathing report by MSPs has concluded.
Holyrood’s Public Audit Committee questioned the First Minister’s decision to name the Ferguson Marine Engineering yard on the Clyde while fraught negotiations were still ongoing.
The Committee said the public announcement, which saw rival bids stood down, may not have been “necessary or indeed appropriate” as key details had yet to be agreed.
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It said the announcement “almost certainly weakened” the negotiating hand of the state ferry procurement body CMAL as it finalised the contract with Ferguson Marine, leaving it little option but to stick with the firm despite misgivings.
The eight-year scandal has led to taxpayers and island communities being “badly let down”, it said.
Former yard owner Jim McColl has in the past claimed that Ms Sturgeon was “grandstanding” when she made the preferred bidder announcement at the Port Glasgow site on 31 August 2015.
He said she did it to upstage then Tory Chancellor George Osborne, who was announcing a £500million UK Government investment in Faslane Naval Base the same day.
The Committee said Ms Sturgeon was aware at the time that CMAL was concerned about Ferguson Marine being unable to provide a full refund guarantee that would have protected taxpayers in case the £97million fixed-price order for two CalMac ferries went awry, but did not give any hint of that in public.
The deal proved a disaster.
Ferguson’s and CMAL fell out over design changes, delays and money, and the yard went broke and was nationalised in late 2019 after eating up £45m in emergency loans.
The two boats, known as hulls 801 and 802, were meant to be serving Arran and Skye by 2018.
They are still being built and are not expected to be in service until late this year and 2024.
The costs have trebled to almost £300m and could yet rise more.
The Committee’s inquiry report did not comment on Mr McColl’s opinion as to why Ms Sturgeon made the preferred bidder statement when and how she did.
However it highlighted CMAL chair Morag McNeill saying in her evidence that she was told “the public relations machine was getting into gear, that the public announcement was going to be on 31 August and that the First Minister would be doing that”.
The Committee also said it was “unclear” why Ms Sturgeon led on the announcement, when then transport minister Derek Mackay was originally supposed to do it, nor why the FM’s press release failed to mention there were “significant negotiations to be concluded”.
READ MORE: Yousaf admits share of blame for CalMac ferries fiasco
It would take another six weeks after Ferguson Marine was announced preferred bidder for the deal with CMAL to be settled, despite the ferry body having growing reservations.
The Scottish Tories said Ms Sturgeon should “apologise to the Scottish taxpayer for the reckless waste and secrecy that has surrounded this fiasco”.
The 124-page report is the most comprehensive account so far of the troubled deal, and builds on equally damning findings published by the Auditor General for Scotland last year.
Many of the criticisms of Scottish ministers past and present were opposed by the SNP MSPs on the Committee, Colin Beattie and Willie Coffey, and inserted by Labour convenor Richard Leonard and Tory MSPs Sharon Dowey and Craig Hoy.
One section of the report says: “Given that it was clear that considerable negotiations were still required, we question the First Minister’s decision to publicly announce the preferred bidder.
“In light of the contradictory views on offer, further explanation should have been sought by ministers before the final decision was taken.
“The committee is not convinced that such a public announcement was necessary or indeed appropriate for this project, especially at that time, given the considerable work and negotiation that was required before CMAL could take a decision to award the formal contract.
“We believe that this almost certainly weakened CMAL’s negotiating position with [Ferguson Marine], particularly as important details of the contract were still being worked out.
“It also remains unclear why the First Minister led on the preferred bidder announcement and why the First Minister’s press release and associated social media communications did not reflect that there were ‘significant negotiations to be concluded’.”
The Committee also said Ms Sturgeon's launch of hull 801, also known as the Glen Sannox, in November 2017 was premature, although this was driven by Ferguson’s desire to free up space to build hull 802.
Mr Leonard said: “The people of Scotland have been badly let down by this project.
“There have been collective failures at Government and agency level from the start. It has been dogged by a lack of transparency; by ineffective governance arrangements; by poor record keeping within the Government; and by baffling communication failures.
“It is vital that lessons are learned.
“That means much-needed reform of governance arrangements for future vessel projects.
“But it also means a change in the way the Government and its agencies conduct themselves and are accountable to Parliament and the people.
“That is a challenge for the Permanent Secretary and the new first minister.”
The Committee also condemned former transport minister Derek Mackay for writing to Inverclyde SNP MSP Stuart Macmillan in early 2015, months before the contract was awarded, telling him Ferguson’s might be able to avoid providing a refund guarantee based on precedent.
The yard took this as a “green light” to bid without one, even though it was mandatory.
Given this was during a live procurement exercise, the Committee said Mr Mackay “showed poor judgment” and his action “compromised the integrity of the procurement process”.
The Committee also expressed “serious concern” at then infrastructure secretary Keith Brown’s failure to answer key questions about his role in the awarding of the contract.
It said some of his evidence “only became available to us after three requests”, adding: “This lack of co-operation is disappointing and obstructed our scrutiny.”
READ MORE: Ferguson's shipyard wins £97m ferry contract
The MSPs were clear that a great deal of blame attached to Ferguson Marine, and said it agreed with a previous report that its decisions had contributed greatly to construction problems, and that it rushed work merely to hit milestone payments.
The committee said the now defunct firm failed to comply with aspects of the contract and deliberately built sections of the vessels “either out of sequence or not according to the proper specification as a means of triggering milestone payments on the contract”.
It also said new management at Ferguson’s failed to draw on the experience of its staff.
The Committee recommended greater transparency and improved record-keeping by the Scottish Government.
It said it was “particularly concerning” that no full record exists of a meeting between Ms Sturgeon and Mr McColl from May 2017, when the yard had severe cash flow problems.
There is only an email discussing the contents of the meeting but no full minutes.
The Committee said “a permanent civil servant should have attended the meeting between [Mr McColl] and the First Minister in May 2017. There is a risk that the attendance of a special adviser only could have blurred the lines regarding the purpose of the meeting, given that a part of their role is to provide political advice and assistance to Scottish Ministers.”
The Committee said it remained unclear how large amounts of public money were spent when Mr McColl owned the yard.
The Auditor General is still investigating the procurement process for the contract, following claims of bias made in a BBC Scotland Disclosure documentary.
Tory MSP Graham Simpson said: “This bombshell report shows up a series of failures on an unprecedented scale.
READ MORE: Nicola Sturgeon denies disastrous CalMac ferries deal was 'jobs for the boys'
“Worse, it suggests the SNP Government has learnt nothing from them, and is still trying to dodge the consequences. The committee highlights ‘a significant lack of transparency and accountability’ and says that ‘serious allegations about the procurement process’ must be fully investigated.
“They complain that Keith Brown’s lack of co-operation obstructed their scrutiny of this deal and are highly critical that three requests for information had to be made before he gave an answer that cast doubt on previous evidence. They also cast serious doubt on the accuracy of the testimony of disgraced former transport minister Derek Mackay. The First Minister is also strongly criticised for having prematurely announced a preferred bidder, and for inadequate record-keeping.
“It beggars belief that, even after this exhaustive attempt to get to the bottom of this murky business, we still do not know who made the final decision to sign off on this deal. But it is clear that a lack of transparency and a rush to make announcements for political purposes compromised the integrity of the procurement process. And that SNP members were still trying to conceal information right up until publication.
“This sorry business is one of the most disastrous and shameful legacies of Nicola Sturgeon’s period as First Minister.
“She should take the publication of this damning report as a final opportunity to apologise to the Scottish taxpayer for the reckless waste and secrecy that has surrounded this fiasco, and most importantly to islanders, who have been betrayed at every turn by her SNP Government, and deprived of a lifeline service.”
Scottish Liberal Democrat MSP Willie Rennie said: “Islanders, shipyard workers and taxpayers have been badly let down by the Scottish Government’s mishandling of ferries.
“The Scottish Government is still trying to skirt the consequences of their actions. Despite the protests of SNP members, there is sharp criticism of the First Minister, former economy secretary Keith Brown and disgraced former transport minister Derek Mackay.
“From shoddy record keeping to a lack of transparency over who made the final decision to sign the deal against advice, this has been a sorry saga from beginning to end. What’s worse is that it risks damaging the reputation of Scottish shipbuilding going forward. It is an insult to islanders, taxpayers and the workers that no SNP minister has ever taken responsibility and resigned.”
The Scottish Government said it would study the report before issuing a full response, but said many changes were already in place.
"This includes working with the shipyard’s senior management team to improve governance and accountability and revising processes for vessel procurement.
"The Scottish Government is committed to transparency and has proactively published more than 200 documents on its website. We have co-operated at every stage of the PAC inquiry, as well as those previously undertaken by the Rural Economy and Connectivity Committee and Audit Scotland.
“Ministers have apologised for the delay to the ferries and the distress and difficulty caused. We are committed to their completion, securing a sustainable future for the yard and supporting our island communities that rely on this type of vessel on a daily basis.”