The bizarre blame game over the completion of two dual-fuel ferries lying at the ill-fated Ferguson Marine yard in Port Glasgow returns to the Scottish Parliament this month. The powerful rural economy committee says it will be examining 'the construction and procurement of ferry vessels in Scotland'. A very worthy idea, which some might say should have been attempted several years ago.
MSPs can expect a barrage of claim and counter-claim about the responsibility for the state of affairs at Port Glasgow, where two vessels remain far from finished, amid cost-overruns, company failure and a workforce that must wonder what might happen to them next. The committee will hear evidence from various experts, officials and Caledonian Maritime Assets (CMAL), the body which procures ferries on behalf of the Scottish Government.
However, no evidence has been called from Ferguson Marine, the company that took over the struggling Ferguson yard in 2014 but collapsed into administration itself last autumn amidst a bitter row with CMAL. Just before Christmas there was a concerted effort to pin all of the blame on Ferguson and Ferguson alone.
Rarely in Scottish business has a company collapsed amidst the bitter recriminations witnessed over the Port Glasgow yard. What is more remarkable is that the bitterest denunciations have come from the Scottish Government and one of its agencies, CMAL, which owns 31 ferries operated by Caledonian MacBrayne and another five run by Serco to the Northern Isles.
Just five years ago Clyde Blowers Capital chairman Jim McColl – one of Scotland's highest-profile business figures – was being lauded for his rescue from administration of the Port Glasgow yard. As Ferguson Marine, the company invested in new facilities at the yard, which has lurched frequently from success to disaster – and through several ownerships – since the 1980s.
Before Christmas, Scottish finance minister Derek Mackay used the progress report by Tim Hair, a 'turnaround director' drafted in to study the situation at Ferguson after its effective nationalisation, to attack the previous management in Parliament. 'It is difficult to over-emphasise the disastrous impact that the absence of proper management processes had on the yard,' the minister told MSPs. 'That has implications for the condition and progress of the ferries that are being constructed in the yard and for the scale of the challenge that lies ahead to put right the failures of the previous management team.'
His comments – described as 'outrageous' by one Ferguson Marine source – left no room for equivocation. They are based on the insistence by CMAL that it carries no blame for the ballooning costs and delays, and also on a damning report by Mr Hair, a Gloucester-based consultant brought in to supervise the yard's interim management.
Hair alleges that the root cause of the delays were a 'lack of project management, particularly critical on 801/802 which are complex ships where no one person has understood and controlled the overall programme'. Hair continues that an absence of proper project planning had led to out-of-sequence manufacturing and no useful management information. He says Ferguson had not fully understood customer specifications before design work was undertaken. In addition, vessel 801 has been in the water at Port Glasgow for two years and not received proper care, according to Hair. Its sister ship remains on the berth at the yard, suffering the effects of 'rainwater ingress'.
Hair's report says £110m will be needed to deliver the two ships, several years late. He has initiated a seven month 'remediation' programme to sort defects and kick off the delivery programme. That is on top of the £83m paid previously to Ferguson before it slid into administration.
The Clyde Blowers group, which owned Ferguson, is unlikely to take that criticism lying down. Its chairman, McColl, is likely to press for the parliamentary committee to hear evidence from the Ferguson side. His team bitterly contests Hair's conclusions. For example, where the turnaround expert says there was no proper project planning, Ferguson management says it used a well-tried visually-based system, based in a Port Glasgow 'war room', that was reviewed twice daily.
Certainly, it is difficult to imagine a company as experienced as Clyde Blowers having no project management systems. The engineering conglomerate operates businesses worldwide from a Lanarkshire HQ. The turnaround of Weir Pumps and its subsequent sale to an American rival was remarkably successful. Jim McColl, whose name is synonymous with Clyde Blowers, is among Scotland's leading entrepreneurs and a former management consultant himself.
Seldom have two sides been so bitterly entrenched. Last week, CMAL chief executive Kevin Hobbs remained unrepentantly blunt, stating: 'The previous senior management team at the shipyard failed to understand what the dual-fuel ferry contracts required. A report has been published that lays bare serious failings. The report describes a lack of project management and project planning and control systems, as well as weak engineering processes and controls. As a result, substantial rework is required to both vessels which has contributed to the significant cost and time overruns'.
Hobbs even disputes the Ferguson Marine description of the dual-fuel ferries as 'first in class', meaning that they were the first designs of their kind. The CMAL CEO added: 'Globally, hundreds of vessels have been built and delivered with dual-fuel systems in the last decade. MV Glen Sannox (Hull 801) and Hull 802 are the first LNG ferries to be built in Scotland. However, building LNG ferries is commonplace in Europe, including Ro-Ro passenger ferries, cruise ships and tankers. Shipyards in Norway, Italy and Turkey are currently building vessels for other European ferry owners and operators'.
CMAL vehemently denies the former yard management's claims that it was responsible for nearly 100 design changes initiated after work had begun, causing delays and additional costs.
The Hair report says work was done out of sequence. One Ferguson source blames this on an initial failure on the part of its client (CMAL) to decide on the type of propellers that should be fitted to the ships. Ideally, hulls 801 and 802 would have been built side by side, from the stern up. The former management team complained in an earlier report – commissioned to set out their case for more money in 2018 – that they had been forced to start work on 801's mid-section because of the delay. Access issues caused by that work meant that 802 had to wait.
Apart from the Hair report, there are two other papers to consider, both of them instigated by Ferguson during earlier attempts to beat back what it claims was CMAL's intransigence.
The Ferguson side claims that CMAL had accepted earlier that it had been responsible for nearly 100 changes to the original brief. CMAL now disputes this point. Ferguson also claims that CMAL's alleged dithering over the size of engines and types of propellers lost several months of valuable construction time after the awarding of the contract in autumn 2015.
By 2017, the two sides were barely on speaking terms. CMAL's Hobbs was writing angry emails to his counterpart at Ferguson, Gerry Marshall. On 7 July, he declared himself to be 'astonished' at Marshall's submission of a lengthy list of changes, which had arrived with associated costs appended. Hobbs said he and Jim Anderson, the CMAL director who was the main contact between the two organisations, would be going through it 'with a fine tooth comb'. For good measure, there was a heavy hint that Ferguson could expect no future work from CMAL.
Three days later, on a Monday at 9.04am, Hobbs sent Marshall an ultimatum to withdraw the claim by 5pm that day, or face legal action. Ferguson management claim this clashed with the spirit of the contract, whereby so-called 'Variations to Contract' could be negotiated. They claimed that CMAL had already agreed in principle to variations worth £770,000 for Hull 801, with another sum under discussion for its sister-ship.
McColl claims that there was another ultimatum – intimated to him by finance secretary Derek Mackay – made by the CMAL board, which according to Mackay had threatened to resign 'en masse' if he took Ferguson's side in the dispute.
The Ferguson situation now is being presented as a symbol of strong, interventionist government, with a minister stepping in to save jobs and preserve the last commercial shipyard on the Clyde from yet another visit to death's door. Newspapers have published photos of Mackay outside the yard, thumbs up, surrounded by grateful workers. The references – the Clyde, jobs, traditional industry – are all there for the spin doctors.
Perhaps when all this is over a nationalised yard will build more ships for a government agency, CMAL, to be operated by another public company, CalMac Ferries. Alternatively, orders will go to the cheapest bidder and Ferguson will return to crisis as UK capacity is rationalised once again.
Here we have a government paying out more than double the original stated cost to complete two ferries that were hailed as state-of-the-art when ordered in 2015, yet whose technology is dismissed now as nothing new by the public agency that commissioned the order, CMAL. Meanwhile, ferry users – islanders and tourists – wait for that modern fleet they have been promised.
The rural economy committee will be hearing one version of events when it convenes at Holyrood this month. It may take much longer for the whole story to emerge.
Photo at top by Maurice Smith
