SCOTLAND'S state-owned ferry owners were not overruled by ministers in awarding the ferry fiasco contract to Jim McColl-led shipyard firm Ferguson Marine, a senior Scottish Government civil servant has said.

Roy Brannen, interim director-general of the Scottish Government's Net Zero department, which oversees Transport Scotland, said former transport secretary Derek Mackay was "entirely responsible" for approving the sign off of the disastrous deal and that there had been no rush to do so.

State-owned ferry owner and procurement firm Caledonian Maritime Assets Limited (CMAL) objected to Inverclyde shipbuilder Ferguson Marine Engineering Limited finally winning the contract to build two lifeline ferries at the 11th hour in September, 2015, because it could not provide a full builder's refund guarantee to prevent any financial risk if things went wrong.

The ferries were first ordered on October 16, 2015, but are now delayed by at least five years while costs have soared from £97m to at least £250m.

The Herald on Sunday revealed that ministers provided a £106m carrot to ensure that the ferry contract could go through without the normal safeguards in the wake of CMAL concerns that it was being put at commercial risk if Ferguson Marine became insolvent or failed to deliver on the ships without the full refund guarantees.

Ministers sanctioned special financial support for CMAL with a crucial pledge that the ferry owners would not have to repay anything until after the vessels had been delivered.

CMAL would normally have been expected to pay off the loan over 25 years using revenue it generates from the fees they get from the lease of vessels like CalMac's ferry fleet and harbour access charges.


And they promised other public funding to cover other performance risks to ensure it did not lose out and further money to meet any debts to ensure CMAL remained in existence.

A letter from John Nicholls, then director of aviation and maritime at the Scottish Government agency Transport Scotland confirmed that ministers had approved the award of the ferry contracts to Ferguson Marine.

He wrote: "The Scottish ministers, both in their capacity as CMAL's sole shareholder and more generally, also confirm that CMAL is authorised to enter into the contracts and any associated documentation."

In end the taxpayer ended up out of pocket to the tune of over £80m when the Inverclyde shipyard firm went under - while the costs of the two ferries at the centre of the debacle continue to escalate.

Mr Brannen, who was announced Transport Scotland chief executive a week after the deal was signed, denied that CMAL had been overruled and that the company had been content to sign the contracts to Ferguson Marine.

Mr Brannen said: "CMAL were content to award the contract and were seeking approval from the minister to do so. That approval was given and responded to CMAL and the board accepted that and then signed a contract on I think the 19th of October or thereabouts."

During a Scottish Parliament public audit committee exchange, Scottish Conservative South Scotland MSP Craig Hoy said that CMAL advised Transport Scotland of the significant risks of awarding the contract to FMEL and stated the preference of going through the procurement process again.

He said Transport Scotland advised CMAL that Scottish ministers were aware of the risks and were content for CMAL to award the contract to FMEL.

He said: "It is quite clear, either the wishes were ignored, or they were overruled."

Mr Brannen said: "The information CMAL had raised in terms of their concerns, were presented to ministers in totality with advice going forward from the director. Ministers considered that advice and then responded accordingly to approve CMAL to award the contract, which they did."

Mr Hoy added: "So you are absolutely certain nobody was overruled or there was no threat to overrule anyone."

Mr Brannen replied "No."

Mr Hoy added: "You can be certain?"

Mr Brannen responded: "Yes. I'm certain, on the basis of the information that's been presented to the minister and what I've been able to review."

The civil servant was then asked what had changed to get rid of what were significant concerns from CMAL, he said: "It comes back to the documentation that went forward from the director of aviation to the minister that had all the considerations contained within it, including the mitigations that CMAL had managed to negotiate with the builder at that time to get themselves comfortable that they were able to award the contract.


"So if you read the exchanges, then it explains that, at the initial stage that no refund guarantee was too far adrift from where they needed to be. And at the point where the advice had gone up to ministers CMAL had managed to negotiate a position where they had both a refund guarantee for 25% and a final payment of 25%, so....the risk... was manageable."

Mr Brannen also stated that while deputy first minister John Swinney will have had to agree the budget in his role as finance secretary at the time, he had no role in signing off on the deal.

He said that CMAL had taken two months to get final issues resolved with Ferguson Marine in ultimately awarding the contract.

Asked about who signed off on the decision to proceed with Ferguson Marine. Mr Brannen said the decision was “entirely” for the transport minister – which as the time was Mr Mackay.

Asked whether Mr Swinney had any responsibility for the decision, Mr Brannen replied: “No. The cabinet secretary for finance would agree the budget, which he did, but he doesn’t have a role in signing off. The decision to sign off on CMAL awarding the contract rested with the minister for transport at the time.

"The DFM's role in this was to ensure that finance and the budget was available for the procurement. But the decision on whether to proceed with the procurement was the minister's."

It has previously been revealed in new emails that Mr Swinney was given a consultation about the deal after Mr Mackay gave the nod to the contract.

Mr Brannen, who has worked at Transport Scotland and the transport directorate since joining the then Scottish Executive in 1999, added that it was "right that there's a final check done on whether there's any other financial budget requirements".

He also confirmed that “no written authority was sought” by the accountable officer, a civil servant, from the minister regarding the decision to waive refund guarantees.

Audit Scotland has previously criticised ministers for failing to properly record the ministerial decision on the waiver, as they would expect written authority to have been obtained.

Mr Brannen said the Scottish Public Finance Manual set out that the accountable officer must only obtain such authority if he believed a decision was inconsistent with “proper performance of their functions”.