Secret advice warned FM that cost of ferry fiasco could soar further

Ministers have come under fire over secrecy over the costs of nation's ferry fiasco - as it was confirmed it entered into ten gagging clauses with external private companies in relation to the state-owned shipyard firm Ferguson Marine.

The non-disclosure agreements (NDAs) revelation has come as ministers have been criticised for refusing to spell out the extra costings involved in continuing to complete one of the two ferry vessels, which they admit is not value for money.

A Scottish Government due diligence review supported by a secret analysis by consultants Teneo said it would be cheaper to scrap the ship still being built at Ferguson Marine and place a new order elsewhere. It is understood the Teneo report is subject of a non-disclosure agreement.

READ MORE: Alarm as Ferguson Marine indicate new ferry fiasco delay & cost rises

Scotland's ferry services have been dogged with issues with the delivery of the Glen Sannox and Glen Rosa vessels still not online after being due to be available for passengers in first half of 2018 when Ferguson Marine was under the control of tycoon Jim McColl. With both due to serve Arran, they are getting on for six years late and the last estimates suggest the capital costs of delivery could have more than quadrupled from the original £97m cost.

The wellbeing economy secretary Neil Gray gave a rare written authority in May to plough ahead with supporting the delivery of the two ferries at Ferguson Marine in May, saying it is the "platform upon which future success can be built".

He said that non-delivery of the ferries at nationalised Ferguson Marine (Port Glasgow) would put the very future of the yard and the jobs it supports "in jeopardy".

It heralded the sanctioning of an extra £72.6m in capital spending on the ships. That was made up of £15m approved in December, last year and a further £57.6m for 2023/24.

Just before Christmas there was a further indication of further delay and extra costs on the ferries in a quarterly update by Ferguson Marine chief executive David Tydeman which was described as  "extremely concerning" by the well being economy secretary.

It has now emerged that advice given from the Scottish Government's directorate of economic development, seen by the Herald, and sent to the First Minister and Mr Gray provides a warning from Teneo that extra costs would be anticipated over and above that which was considered in the value for money assessment.

The advice given in May states: "The strategic outcomes sought when [Ferguson Marine] was taken into public ownership were to ensure completion of new lifeline ferry services (vessels 801 and 802) and secure a sustainable future for the shipyard, thereby retaining jobs and key commercial shipbuilding skills in Scotland and strengthening national resilience.

"Whilst the delivery of [the ferries] has been hampered by delays and budget overruns, their importance in terms of essential service and network resilience remains extant and has arguably strengthened given the increasingly ageing ferry fleet and well publicised challenges in securing temporary replacement vessels (cost and uncertainty)."

The advice marked 'official sensitive - commercial' states that costings provided by the chief executive David Tydeman that were subject of the due diligence had been "interrogated rigorously both by officials and external commercial experts (Teneo)" because of "historic concerns about the accuracy of forecasts".

It said that while the delivery of Glen Rosa was not value for money "Teneo also consider that based on [nationalised Ferguson Marine's] track record there is a potential for this gap to widen further in the months ahead".

But the First Minister was told by Kate Hall, the Scottish Government deputy director of strategic industrial assets Deputy Director Strategic Industrial Assets, that a full funding decision was "urgent" because Ferguson Marine had already incurred costs.

She said: "It is advised that there is no specific number allocated in the request given the uncertainties of the potential final cost.

"However we believe it is important that there is no 'blank cheque' for the vessels and therefore, as part of the correspondence, we have set out a strengthened approach to the monitoring and control of costs and delivery schedules with external commercial advisers providing quarterly reports on progress and projections.

"This would sit alongside the structure with [state-owned ferry and port owners] CMAL as technical advisers and ensure that ministers are sighted on the ongoing financial position and if any previous agreement, such as the written authority, had to be revisited."

The value for money study by consultants Teneo, which cost the taxpayer £620,000, has remained under wraps - with not even an edited version allowed to be seen.

The extra public costs involved in going ahead with the second vessel against starting afresh continue to not be divulged, despite multiple requests, leading to fresh criticism over public accountability.

Also being kept under wraps is a report by consultants First Marine International (FMI) that was also considered into operations at Ferguson Marine as part of wider work to evaluate the shipyard’s productivity which supported the analysis of proposals for continued investment.

The Scottish Government has said that disclosure would "impact on FMPG’s ability to compete for and win new business and thereby jeopardise the commercial future of the yard. It would also potentially compromise the commercial interests and intellectual property of our advisors".

Both studies were being used by both Scottish Government and the state-owned shipyard firm yard to gauge future investment and improvements to the yard in a bid to ensure it can be competitive.

A ferry user group official said that there remained "deep concern" over Scottish Government accountability notwithstanding the desire to see the ferries finally set sail.

"The Scottish Government seem to be digging a bigger and bigger hole for themselves over the delivery of the ferries, and hiding the real costs when it is clear they are fully aware that the bill will continue to go up and up over and above what is already accounted for is disturbing."

The extra cash requested by Ferguson Marine for this financial year which began on April 1, had been under due diligence since September last year.

The Scottish Government has previously come under fire for ferry secrecy by refusing to publish the full details of the full contract between Ferguson Marine and government-owned ferry owning and procurement agency Caledonian Maritime Assets Ltd (CMAL) into the building of the stricken vessels.

Mr McColl, the former owner of Ferguson Marine – before it went into administration in August 2019 and nationalised by the Scottish Government – said it showed it was not a fixed price contract and he was entitled to ask for extra money to fulfil it.

Vital pages were removed from the document before they were finally published by the Scottish Government. These include crucial financial details about the contract, guarantees, payment details, permissible delays and cost liabilities.

The full contract was finally published by the Scottish Government in July, but only after Mr McColl submitted it to the public audit committee.

A Scottish Government spokesman said: “The Scottish Government remains committed to being as open and transparent as possible in relation to decisions around Ferguson Marine (FMPG) and vessels 801 and 802.

“The due diligence concluded that the value for money criteria were met for Glen Sannox. In setting out the decision to issue a written authority to enable work on vessel 802 [Glen Rosa] to continue, there was clear, cross-party acknowledgement that this was the appropriate course of action - not least as it presents the fastest possible route to getting vital new ferries into service.

"Any updated projected costs are set out by the [Ferguson Marine] chief executive in his quarterly updates to parliament."