Ferguson Marine: Official doc reveals ministers don't know what state £250m ferry fiasco vessels are in

The Herald on Sunday has seen a February memo from the nationalised shipyard firm Ferguson Marine which reveals that state-controlled Caledonian Maritime Assets Ltd (CMAL), which owns and commissions the nation's ferries warned that without "full insight" over the plan for the delivery of the vessels it felt "unable to support the credibility of the programme for delivery and indeed determined it to be unachievable".

It has also emerged issues with short cables on one of the vessels that has caused a major headache for the project were not noticed for over two years and has cost the taxpayer nearly £1m on their own. 

READ MORE: Scots island suffers three months of ferry cancellation misery as angry communities appeal for ministerial action

Meanwhile staff at the yard were continuing to work a core four-day week from Monday to Thursday, despite the project already being over five years behind schedule. The remaining three potential working days are being covered by third party contractors and to a limited extent as overtime by weekday workers.

Ministers came under fire after the Herald on Sunday revealed damning March internal analysis from CMAL revealing the number of faults uncovered by Owner’s Observations Reports (OORs) that remain outstanding on the ferries has risen from 166 before nationalisation to 237 in March. Some 65% of them relate to safety, maintainability, or specification requirements.

Internal documents from nationalised shipyard firm Ferguson Marine admitted a serious risk that CMAL may not accept the vessels for the ferry operator CalMac’s lifeline services to Scotland’s island communities.

Finance secretary Kate Forbes responded to questions from MSPs last week about the issues by repeating a past update that Glen Sannox and Hull 802, which are currently still languishing in Ferguson Marine's Inverclyde shipyard, are scheduled to see service for island communities March and May 2023 and between October and December 2023 respectively. Both vessels are set to be over five years late while costs have soared from £97m to £250m.

But the Herald on Sunday can reveal that a sensitive internal Scottish Government document from just three weeks ago has advised the finance secretary,  business minister Ivan McKee and transport minister Jenny Gilruth that there is a key uncertainty over both the progress of the ships and even the costs.

The revelations come in a progress memo sent to ministers on April 28 from Mo Rooney, deputy director of the Scottish Government's strategic commercial interventions division.

It warns: "CMAL reports that the basis for some of the performance information provided by [Ferguson Marine] is largely generic and does not present the level of detail needed to determine the health of either project."

It adds: "Officials do not yet have a profile of costs for the delivery of [the vessels] and how this ties to key milestones and the programme for delivery. This will be key for [the Scottish Government and Ferguson Marine] to track progress of the vessels to ensure we are able to identify and highlight slippage and potential cost over-runs early. This information is expected to be ready by the end of May 2022."

It reveals that Scottish Government officials were working closely with Ferguson Marine to "gain financial assurance over the extra costs" to complete the vessels.

"Work is underway to assess the appropriateness of the assumptions underpinning the labour and material profiles..," it said.

It warned the ministers that CMAL consider that the progress over closing out OORs "remains slow" and that it considers that the "resolution of these is crucial prior to vessel handover.

The ministers were advised that "inefficiencies in production supervision, understanding of the remaining project deliverables, and repetitive rework remain substantial risks to be addressed if delay is to be avoided".

While ministers were told CMAL believed the yard and the build were "heading in the right direction" they were advised it "remains difficult to assess if the build is on track".

"CMAL would like to see faster progress on OORs, greater management of subcontractors, and greater coordination with the engineering function," the Scottish Government memo said.

READ MORE: Anger as short cables place new doubt over delivery of lifeline CalMac vessels

It said that the £205,000-a-year chief executive David Tydeman continued to "show willingness to engage with CMAL".

But a report on a February board-to-board meeting between Ferguson Marine and CMAL reveals the state of a breakdown in relationships between the two state-controlled public companies.

Written by the Ferguson Marine chairman Alistair Mackenzie, who stepped down as of April this year, it says: "The differing opinions on voracity of the projected programme resulted in both parties reporting (to the Scottish Government in particular) significantly different views on likely/projected outcome.

"It was agreed that this circumstance is unhelpful and that a joint effort is required to achieve general alignment of opinion of the parties."

Last week, Ms Forbes insisted that "good progress" was being made in clearing the OOR issues but ducked questions asking her to guarantee that the stricken ferries will be sailing with passengers next year.

But the April 28 internal memo to her said that the progress "remains slow".

It also reveals that access to enclosed spaces was restricted in March because they were awaiting the renewal of the required safety certification.

It further emerged that issues with short cabling which have caused further delay and cost to the project, were not not spotted for over two years.

The issues were spotted in December, last year, although ministers say they existed before Ferguson Marine fell into administration in August, 2019.

The April ministers' memo reveals that the reinstallation of what they called "legacy cabling had not yet begun.

READ MORE: Ferguson Marine ferry contract scandal: Jim McColl told by Derek Mackay contract refund pledges not essential

The 'bombshell' emerged after it was found on Christmas Eve that some of the electrical cable coils on one vessel Glen Sannox were too short to reach equipment.

After a survey it was found that 1000 of the vessel's 9600 cables were too short.

Former justice secretary turned Alba Party deputy leader and MP Kenny MacAskill said that the failure to act over the what were "major faults" was "shocking" and did not understand why there was no legal action undertaken.

"In a nutshell, they say the faulty work is pre-administration. But that seems incredible. Why wasn't it noticed in August 2019 if due diligence was done? Why wasn't it noticed before December 2021 when work was ongoing on the ships?"

He said he was told by sources that the design changes were to blame.

But Ms Forbes told him in a letter: "The administrators carried out due diligence as would be expected, however, as you are aware the cabling issue only came to light during yard survey work in late December 2021."

Earlier this year serious questions were raised over the viability of both vessels as it emerged key hull features had been left off seven years after the design was completed.

There was a failure to install a crucial ducktail on either vessel, even though previous owners of the Ferguson Marine shipyard said six years ago that they were required to meet official specifications affecting their green credentials and speed.

The ducktail, which runs the full width of the ship, is around eight feet wide and is designed to adds additional buoyance to the hull, allows for speed to be increased naturally, while making it more efficient by reducing resistance and allowing it to burn less fuel.

READ MORE: Abandon ships: Shipyard bosses fear £250m ferries won't see service amidst spiralling series of serious faults

The two new dual-fuel ferries, which were meant to be identical, were once hailed as a step towards a greener future for Scotland's state owned CalMac ferry fleet as they were to be the first UK-built ships capable of running off liquefied natural gas, or LNG, as well as conventional diesel.

But there has been concern that the new vessels will not meet the specifications set down by CMAL, with the possibility they could end up rejected.

A spokesperson for Ferguson Marine (Port Glasgow) said: “A permanent chief executive joined the business in February. He has implemented new programmes and schedules for both vessels, announced in late March, taking a highly pragmatic view based on the volume of outstanding work on both ferries.

"Importantly, this was done in partnership with CMAL in a move towards stronger collaboration, leading to more realistic and achievable timescales. The new chief executive has also facilitated the secondment of a senior vessels director from CMAL into the shipyard senior leadership team which is making a difference in cohesion and progress.”

A Scottish Government spokesman said: “The economy secretary has been crystal clear on the expectations of Ferguson Marine in terms of delivering the ferries, as well as turning the business around to be competitive."

“The Scottish Government is fully committed to completing these vessels and getting them out into service for our island communities.”

Ministers carried out a takeover after Jim McColl-led Ferguson Marine went into administration in August, 2019 following a dispute with CMAL - the taxpayer-funded company which owns and procures ferries for the Scottish Government - over the construction of the ferries under a £97m fixed price contract.

Ferguson Marine said there had been "unforeseen complexities" with the project, leading to soaring costs of the ferry contract.

Ministers believe they were acting in the public interest in taking control of Ferguson Marine, as it saved the yard from closure, rescued more than 300 jobs and ensured that the two vessels under construction will be completed.

A 2020 Holyrood probe into the construction of the ferries branded the management process a "catastrophic failure".