Rural Economy and Connectivity Committee

Meeting date: Wednesday, January 29, 2020

Official Report 769KB pdf

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Construction and Procurement of Ferry Vessels

Good morning and welcome to the Rural Economy and Connectivity Committee’s fourth meeting in 2020. I ask everyone to make sure that their mobile phones are on silent. I welcome to the meeting Stuart McMillan, who is attending for agenda item 1. I apologise for the slight delay in starting the meeting, which was down to the committee having some administrative requirements to meet.

The first agenda item is the continuation of our inquiry into the construction and procurement of ferry vessels in Scotland, in relation to which no members have previously declared an interest, and I assume that that remains the case.

This is the committee’s second evidence session in the inquiry. Today, we will take evidence from ferries experts, community groups and local authorities. I welcome to the meeting Dr Alf Baird, former professor of maritime business at Edinburgh Napier University; Roy Pedersen, author and consultant, from Pedersen Consulting; Angus Campbell, chair, and Eoin MacNeil, member, of the CalMac community board; and Councillor Uisdean Robertson, chair of Western Isles Council’s transportation and infrastructure committee.

Before we move to questions, I remind you that you do not need to touch the buttons in front of you when you are called to speak; the microphones will be turned on for you. Members will probably put questions to you directly, but if you want to come in, just catch my eye and I will bring you in. If a member poses a question and you all look away at the same time, the last person to look away will be the first person to answer the question.

On that basis, and knowing that no one will shy away from answering a question in the first place, we will move to the first question, which is from John Finnie.

Good morning, and thank you very much indeed for your submissions.

I will begin with a few questions for the CalMac community board, the first of which is for Councillor Robertson. Are you in a position to outline to the committee what impact the delay in the delivery of the two ferry vessels has had on island communities?

Our concern is that, when you start moving vessels around, that has an impact on the whole west coast community to a degree and, as a manager at CalMac once said to me, “All we do is move the row.”

Basically, our concern is about the delay. We should have had the two new ferries in 2018, and we should probably have been building an Islay ferry at the moment. The impact of the delay on our communities has been quite bad; it has been particularly bad on my neighbour Eoin MacNeil’s community in Barra, where they have probably had five episodes of being without a ferry for upwards of five days. That is a serious issue, and it is not only the economy of Barra that suffers. The delays in getting food supplies into shops mean that products are at their sell-by date; there are also issues with medical supplies and so on. In the summer, we have major constraints on some of the routes and ferries are full, and they are now filling up on shoulder periods.

The delay is a major concern for us going forward.

09:15  

There will always be difficulties, as there is with any system. Will you outline the extent of the impact of the failure to deliver the two vessels, which you said should have been delivered in 2018? Has it compounded matters?

It has compounded matters for our particular area, which is covered by the Little Minch services. The requirement was based on the figures that were looked at for 2018, which showed that the biggest demand was on the two routes into Arran and the Little Minch services. Those were predicted figures for 2018, but the problem now is that we are in 2020 and it will probably be 2022 or later before we get the ferries. On an island where people have invested heavily in tourism, the reality is that we are finding in the summertime that hotel and other accommodation is not being taken up because of ferries being full, particularly over the five months of the summer.

This question is for Mr MacNeil and Mr Campbell. How do CalMac Ferries, Caledonian Maritime Assets Ltd and Transport Scotland gather island communities’ views on the ferry service and vessel design?

It would also be interesting to hear from those two witnesses on the first question that John Finnie asked, because they might be able to give the views of other communities.

I can give you a view from my island of Barra. Uisdean Robertson is right—the impact is incredible. As he said, there have been five occasions on which we have not had a ferry for five days. I came out on the ferry last Friday and we have not had a ferry since then. At this time of year, the stores and the shops are empty and the medical supplies are drying up—those are not things to kid on about.

The biggest impact is not just commercial: Barratlantic Ltd could take all our shellfish out, but if it cannot get out, the shopping cannot get back in. That has a huge impact on the island community.

To follow up on that, the impact of ferries not sailing extends to all parts of life, from the lifeline services right down to people’s decisions about whether they can or will stay on islands. There is a lack of confidence, because the most recent ferries plan has clearly not worked—it has not delivered. People are questioning what will happen next as regards the delivery of ferries. I have a figure for Arran: the community there reckon that they will have lost about £20 million out of their economy by the time the completed ferry comes into service.

There is a fear among communities that it is less likely that there will be investment in ferries in the future because of the outcome of the current exercise, which has been so costly.

You asked about how communities fed into the process. There is a lot of community fatigue when it comes to responding to consultations from Transport Scotland in particular on what services we should have and how they should be shaped. As a community board, we hear time and time again that people do not feel that there is a purpose in responding, because things do not change. The type of ferry and the type of service that have been put in place are maybe not what communities are looking for or what serves them best.

The process on the two new ferries has just heightened that feeling of wondering where the ferry service is going. We all know that we need a major investment in six to eight vessels over the next number of years, but there needs to be direct community feed-in to the process in a much clearer and more open way and in a way that actually has an impact. That view comes from discussions that we have had right across the network, from the north to the south.

Community engagement is not just about asking someone for their views; it has to be meaningful engagement. What impact did community engagement have on the Stornoway to Ullapool route, for example? What could we learn from that?

As I have stated previously, I remember the first consultation on the Stornoway to Ullapool route, for which the Loch Seaforth was the chosen replacement. I think that everybody at that public meeting wanted two ferries to provide a more regular crossing. Although the option of two ferries came up on the board, the next 37 slides were all about one ferry. There was no mention of the fact that a huge investment in infrastructure would be needed to make that ferry work.

Most people would like the money to be used in the best possible way to provide more frequent services and to allow some ambition in the programme to enable the island economies to grow and have some capacity to build, not just for lifeline services such as health services, but for the economy and employment. That is all part of the circle of making the islands a good place for people to choose to live and keeping the demographics right.

Does the fact that residents do not feel that their views have been taken on board create a challenge for you?

Absolutely. As a community board, we are a fairly new concept, but we have sometimes had the same frustration in trying to get things done—for instance, we have spent two years talking about equalising the fare for off-island school transport to enable children to do extracurricular activities. Although two ministers have agreed to that, we cannot get it through the system. It costs two and a half times what a camper van pays to take children off to do art or music.

That is the sort of frustration that we feel as a community board about not getting our views into the system and not getting the outputs that we think that we should get at no extra cost to the taxpayer. In fact, if the community voice was listened to a bit more, you would save a lot more money.

John Finnie might have another question, but there are a couple of other members with questions on this topic, so I will come back to him.

Good morning, gentlemen. The purpose of the inquiry is to look at the current and future challenges and opportunities in how we procure vessels to meet the needs of the island communities that you have discussed. Part of that involves looking at the building of the two ferries that are delayed. I am particularly interested in what the communities asked for versus what is being delivered for them.

Colleagues will ask questions about the future relationship that you would like to have with Transport Scotland, so I ask you to park your opinions on what should happen next for the time being. I would like to go back in time a little and ask about the consultation that you were involved in, what you asked of CalMac, CMAL, the Scottish Government and Transport Scotland and whether the two proposed vessels were what you asked for.

Who would like to start on that? Off you go, Councillor Robertson.

I was intimately involved in the issue of the 802. There was absolutely no consultation at all with the stakeholders or the community with reference to 802. We were told, “This is what you’re getting.” There was no discussion with us at all. I clearly remember the engagement that we had with CMAL. When the chief officer and the director of vessels came to the community—they were always willing to come to the community to engage with us on the vessels—we were given presentations. The vessel looked very nice on the screen. You could move around the screen and see where the car deck, the petty area, the canteens and the lift were. Therefore, I assumed that every nut and bolt was sorted and that we knew exactly where everything was going.

We visited the yard in 2018 when delays were starting to happen. When we were taken around the yard, we were told that there had been a lack of space at the start and that there had been an extension—there was a new shed. I left that meeting in April 2018 with the feeling that although there was going to be a year’s delay, things were moving on.

However, there was no engagement at all with our community on the vessel design at the start. We would clearly have preferred vessels like those that we currently have, such as the Hebrides, which operates very well in our waters. We argued, “Why spend £50 million upgrading three ports and building this expensive ferry when you could probably have done less upgrading of ports and at the same time built maybe four ferries like the Hebrides, which is a proven vessel?”

Speaking on behalf of the community board, we have been in existence for only two years, so we were not involved in that. However, I can pass on what we hear from the community. It is a similar story of not having input into, for example, the size of the car deck or the number of passengers and how that will work, what services will be provided on board and how the freight element will work. As a community board, we have been saying that there should be flexibility and even a common design that could be adapted for different islands; for example, Islay has a real need to solve a haulage issue, and there are ways of doing that within the same hull.

It is a question of having engagement in the early part of the process so that the problems can be solved, rather than of having the ship delivered and then having to say that it does not do everything that we want, which is quite common.

The feedback that I am getting is that island communities are being told, “This is what you’re getting—make use of it,” rather than getting what works for them. Do any of the other panellists have a view on whether that was the right approach to take? Would we be in the situation that we are in if the Government had said, “Tell us what you need us to build and we will build it for you”? Would such a vessel have been delivered already?

For the Isle of Lewis vessel that serves us in Barra, there was no consultation, but she serves us well. She is quite a big vessel for us, but we still manage to fill her in the summer—the islands are getting busier.

However, it is a pity that there is not more consultation, because if there is one thing that the islanders know, it is whether a vessel is fit for purpose. Of the two vessels that we have at the moment as spare boats, the Isle of Arran is not fit for the Western Isles, as it is a six-hour sail in the Minch through heavy seas. She does not last well in that, and there are frequent disruptions in the service. At the moment, the community is questioning why two of CalMac’s largest vessels—the Isle of Lewis and the Clansman—are in dry dock at the same time, because that removes any kind of big-ship resilience for the longest routes, whether to Uist, Barra or further north.

I have a small question that, for the moment, is just for the community representatives, although I suspect that our academics will comment on what I am about to ask when we come to them later.

I would like to know what your views are on the tension between what we require of a vessel in winter, which would seem to be resilience and the ability to weather severe storms, and the primary requirement in summer, which is probably a capacity issue. Am I correct in my characterisation of summer and winter as having different priorities in the communities’ thinking? To what extent do you think that any design of vessel that we put in that will operate in both those seasons will always have to compromise in that respect?

It should be noted that even in the middle of summer, given the ageing fleet, there is a large number of breakdowns, which has an impact on the tourists.

Yes. Do forgive me—as a layperson, I sometimes simplify things beyond what is reasonable

From our discussions and our point of view, the answer to your question is that having the type of ship that can cross safely and be resilient in all weathers but which has the ability to provide extra frequency in the busier times is probably a better outcome than building a large ship that has more problems in bad weather. For instance, a very high ship will be affected more by the wind, which can result in more winter crossings being cancelled, whereas using two smaller ships that are more resilient in the bad weather would give us flexibility and provide the extra capacity that we need in the summer. That is the sort of answer that the communities have been looking for.

Sorry, but can you point us to any numbers? I understand the windage issue, but are there any numbers that we can look at that show that smaller vessels are more capable of dealing with extremes of weather? In the Pentland Firth, for example, the catamaran service is off more often and that type of vessel has a lower windage than a standard vessel. I do not hesitate to say that that is open to challenge—it is just my view.

I make it clear that I used to serve on ships, but I am not a ship designer. Eoin MacNeil mentioned that island people have a good appreciation of what is a good sea ship and what is not. The feeling is that too small a ship is not going to work for long trips in heavy seas but that there are also issues with bigger vessels. There is probably an ideal size of ship that would work as long as we had the flexibility to increase the capacity when necessary.

09:30  

I note your frustration that people from CalMac or CMAL come to speak to you and ask your opinion as a community, but that it appears that once they have heard your opinion, they go away and ignore it. Have you any idea why that is the case? Why do they consult you and then not listen to what you say?

There is a third leg to that, which is Transport Scotland. The three work together in that process. I often feel that, because we are dealing with specialist items and ships, there is an attitude of, “We know best. The public can’t have that sort of knowledge.” Therefore, our comments are perhaps not given as much validity as they should be.

We are not designing ships. What we are saying is that there are needs that should be met; there are ways of configuring ships; and there are services that are necessary. What matters is how we work together to meet those needs. The joint approach of involving the community from the very early stages and right through the discussions would reap great benefits.

That leads almost perfectly on to the next question.

There are different islands, different ports, different sizes, and there is a science to what a particular island route needs. We would all agree that ferries should be built to match island routes and to accommodate vehicle and passenger demand and the ports that they will serve. You have all suggested that communities are frustrated by being consulted but not really being listened to. How would you like to see Transport Scotland, CMAL and CalMac involve island communities in their decision making about the ferries that are required for a route?

A big step would be for them to come to the islands and discuss those matters, perhaps on a day in winter, or a day when they can get a feel for the problems that the community has. The boats that we have are either too big or too small; they either fit the pier or they do not.

We never really know where we are in the pecking order for getting a new vessel. The community cannot see the light at the end of the tunnel with the two new vessels. It will take two or three years to build them. Where is the next one for Uist going to come from? Where is the next one for Barra going to come from? We need a higher level of involvement. The CalMac community board is a good step towards that and it brings us a wee bit closer to CalMac, but CalMac has a contract, and, therefore, we should also have closer links to the Scottish Government.

Are you suggesting that somebody from Glasgow or Edinburgh or wherever comes to your island and does not know, or does not bring along someone from the company who knows, what is happening in that area? You are suggesting that somebody who has no clue what your island requires turns up to tell you what you need.

I do not necessarily mean that they tell us what we need. They want to gain an understanding, but what we find is that they parachute in and then disappear again pretty quickly. We have them only for a day, and that is not a long time.

It is astounding that someone who does not know what you need turns up to ask you and then does not listen to you.

We have been faced before with senior officers pointing out that they are working to a contract. CalMac works to a contract. Maybe we need to chap on the door of the Scottish Government itself. We have been trying to develop that.

I have a couple more questions, but someone else might want to come in on this issue.

I will ask a supplementary question that is relevant to the point that Richard Lyle made.

I am sure that people who have pored through all the documents will have seen the letter from Transport Scotland on 20 August 2015. On the approval of the tender advice that was given to ministers, paragraph 7 makes clear that CMAL and CalMac had still not decided on what the right thing was as far as the ship design was concerned, and that CalMac was arguing with CMAL about the design.

As Richard Lyle said, we have Transport Scotland ferries unit, CMAL and CalMac all feeding in to make a decision on the procurement of a boat that will be run by one, but not all, of them. Is that an ideal system, or should the body that will actually run the boat be more directly involved in the procurement, rather than going through other Government agencies? Angus Campbell, do you want to come in on that?

A look at how that three-legged system works is definitely long overdue. They come at it from different angles and, sometimes, you end up with a compromise that is the worst of all the worlds. There should be a mechanism for having some sort of project team that includes community involvement, so that we can work a new ferry proposal through from start to finish with the community view in the middle of that mix. There are conflicting interests at the moment in terms of what the various bodies bring to the table.

I would like to quickly bring in Roy Pedersen and Alf Baird on that question. We have three legs, all designing something that only one of them will operate. Is that a good system?

No, I do not think that it is a particularly good system. However, the difficulty is that, since CMAL came in because of the European tendering rules, there has been a long tradition of that within what we might call the CalMac system. The ratio between passenger and car capacity in the CalMac fleet is high and, in almost all cases, the passenger capacity is never reached. On the Little Minch service, for example, the MV Hebrides has a passenger capacity of about 550, but no sailing on that route has ever carried more than 312 passengers—and the time that it carried that number was exceptional. That means that the ship is more expensive to build and run, and has to carry a bigger crew, than is necessary, and that is the case throughout the fleet.

The issue goes back at least two decades, and possibly more. The current system simply perpetuates that bad design, and the new ships take it to the extreme.

Alf Baird, do you want to comment on that, briefly?

All I can say is that most of my research is international. I have studied ferry markets in Asia, the Middle East, North America, South America, Europe and so on. What is clear here, and what I have found globally, is that public sector procurement usually ends up in extra expense, extra cost, bureaucracy and too many organisations. The private sector, by contrast, simply goes ahead and builds a ship and knows exactly what it wants.

Meeting the needs of users is simple. They need three or four key elements: frequency, capacity, price and reliability. Reliability is built into frequency, and frequency depends on ships; that is, on how many ships you have. All the major routes should be served by two or more vessels, including Stornoway. That is right, as people have said, and that is the case globally. Some routes have four or five ships; Norway even has six in some cases. Having more ships means higher frequency, which means more capacity, and that can all be done relatively cheaply if the ships are specified correctly. However, that is where the public sector gets things wrong; it specifies the ships incorrectly. It does not specify the ships as the market would do; it specifies them according to the biases and opinions of the people who specify the ships. In this case, that comes from within CalMac. That specification then goes into the funding mechanism through Transport Scotland and into the delivery mechanism through CMAL. In global terms, all that bureaucracy is unnecessary.

I have been working with an operator in the Philippines who is replacing 30 ferries. He wanted to know what the optimal vessels would be so that I could do ship cost modelling and so on. Eventually he decided. Vessel number 15 was delivered this month and the total of 30 vessels will be delivered quite soon. That will all have been done within 10 years.

Norway is replacing 200 vessels every 20 years—15 a year. We struggle to replace five vessels every 10 years—and they are all wrong and wrongly procured. That is the difficulty.

I am sure that we will come back to you, Mr Baird.

Basically, size is a science. I have been on committee trips where I have tried to get my car on the ferry, but it was overloaded so I could not get it on and had to park it somewhere else. Islanders complain—quite rightly—if they cannot get off the island in time because they have not pre-booked. I understand that it is a science. We have to listen to the local community and to the local captains. It should not be someone from Edinburgh who comes in and tells them what they need.

We have heard it argued that a decision was taken to continue with the existing ferry designs, rather than scrapping the partially completed vessels and starting again, possibly with a different design specification, in order to deliver the completed vessels within as short a timeframe as possible. Do you have any comments on that suggestion from the perspective of the island communities that are currently waiting for the vessels?

I want to drill down into the islanders’ point of view first, as that was the question. We will come to Roy Pedersen later.

The timetable and seeing the ships completed is very important to the islands—albeit the ships that come out the other end might not be ideal. We still have a concern about the type of ship that will emerge from the yard after the process, how robust it will be and what the situation will be if problems with the build emerge when the ship is in operation. We are not in a position to say that it would be better to scrap everything and start again. We do not have the expertise for that—perhaps Mr Baird and Mr Pedersen do.

If we were to go back to the bones again, we would be looking at building ships that are more closely aligned with the community’s need. However, if the alternative means getting ships out the other end quicker, at least people would be glad to see ships come on the list as that would help with the capacity issues.

I have one more question. Several written submissions to the committee have argued that crews should be stationed on the islands, rather than living aboard ferries, and that such a change in policy, among others, would have important implications for the future design of ferries. At the end of the day, if the crew members are living on the ferry, it has to be big enough to accommodate them. What is your view on that suggestion and what impact might it have on island communities? The ferry is part of the island and the island is part of the ferry.

That would be a great idea and most of our community would agree. Having the vessel situated on our island would make a big difference, because she would be leaving, rather than coming to collect us to take us off the island. Where I stay in Barra, we are very much a maritime community, with a merchant navy tradition. We have several captains who work for CalMac and many other individuals who work for CalMac in different roles. To have 30 or 40 crew living on the island would be a great boost to the economy. We would be very much in favour of that.

Their families would also live there.

Yes, and it would also increase the pressure to build more houses more quickly and to grow the islands and their economies. That would be a great step in the right direction.

09:45  

In last week’s session, we learned that the cost to complete the two current vessels will be more than the original contract value to build them from scratch, and the shipping yard’s representatives were asked whether it might be more appropriate go back to the drawing board and redesign ships that meet the specifications of the island communities. What would be preferable to the island communities? Would you rather get a ship more quickly, even if it did not necessarily meet 100 per cent of your needs, or would you prefer to have a ship that will meet your needs for the next 20 years, but for which you might need to wait longer?

Who would like to answer that? It is a difficult question.

That is the stark choice that is faced.

Well, is it?

Those are the options.

The extended time period to finish the ships is as long as it would take to build ships from scratch. Generally, communities that do not have expertise are keen for ships to come into the fleet, because the situation with relief vessels has been bad—it has affected every part of the network in different ways, at different times. My instinct is to say that island communities would rather have some ships there. However, that is my personal opinion, and thinking about what could be done in that timescale and with that amount of money might bring a different answer from other people.

The issue is made more difficult when we consider that, according to the tender document, the tender that was accepted was the most expensive one of the seven that were received.

I declare my membership of the RMT—National Union of Rail, Maritime and Transport Workers—parliamentary group.

I have a question for Roy Pedersen. Nothing in life is simple, and there are consequences of any decisions that are taken. In your written submission to the committee, you talked about design—Angus Campbell also alluded to that—and the cost of installing accommodation for crew on boats. It is not readily the case that jobs would transfer to island communities if there were no on-board accommodation.

Given that it is a fundamental work practice—people have spoken about the maritime connections between the islands, and about people living on the boats—are you aware whether there has been any meaningful engagement with trade unions regarding looking at alternative models? That should have been done in accordance with health and safety legislation anyway.

If there are two vessels, it may end up that there is still the same number of crew, only configured in a slightly different way. There is a great reticence in some quarters, and certainly on my part, to see any diminution in the number of jobs that are available to seafarers.

I cannot speak about the links between trade unions and the management of CalMac, CMAL or others. However, as an example, the ship that operates on the Little Minch—that is the strait where services between Uig and Tarbert and Uig and Lochmaddy operate—has a crew of 34 people living on board. The ideal solution would be two ships that are not necessarily a lot smaller, but which are simpler and cheaper to operate, with crews of around 12 to 14 who would live ashore. When that is added up, there is not much difference in the number of personnel involved. If the crew were to live ashore in the community with their families and their kids were going to school, that would benefit both the community and the Scottish Government’s islands plan for growing the population.

The other benefit of crews living ashore is that a ship’s working hours can be extended, because people can work in shifts. That could mean that more people end up being employed. It could also mean a better service with more frequency. Much more capacity could be provided with two ships—especially for cars. It could also mean more revenue for the operator, which would more than offset the extra cost of the crew.

It is not necessarily about reducing the person power that is required, but about doing it differently and more efficiently.

This may be slightly outwith your remit, but I take it that you would acknowledge that that represents a fundamental and substantive change in workplace terms and conditions.

Sure.

You would presumably want maximum engagement on how to go ahead with that.

Presumably so. Bear in mind that, for the smaller ships comprising more than half the CalMac fleet, the crews live ashore. That is common practice. It is also common practice for the Shetland Islands Council ferries, and indeed all over the world. That is the way that it is done in Norway, for example.

Following on from John Finnie’s question, it was not always the case that the crew lived on the ship, was it? That has been the case only fairly recently. The crew used to be based on the islands or on the mainland.

It has been traditional since the beginning of steam navigation for crews to live on board. A tradition is being continued—albeit an antiquated one. In the days when ships ran from Glasgow to Stornoway or up the west coast to Islay and all over the place, the crews had to live on board.

Yes—I get that.

The round voyage could take a week. That tradition is being perpetuated, rather than the ferry being viewed as basically a bridge. That is what the ferry should be, and that is what ferries are regarded as in many countries—as part of the road system. The most efficient way to provide that is for the crews to live ashore, with their families. It is more family friendly to live ashore, for one thing, and it is more beneficial to the island communities. The terms and conditions and so on would obviously have to be negotiated and would have to be satisfactory, but I believe that the proposal could bring an improvement in working conditions for the personnel working on the ferries.

To carry on with that point, we should now take the opportunity to consider how we staff and manage ferries and how we grow island communities. I do not live on an island, but I get it. The kids will be able to see their dad or their mum every night.

Mr Lyle, I encourage you to ask a question, rather than make a statement.

I am sorry, but I need to say this. I think we need to consider a new plan for how we develop our ferry services in Scotland. Would you agree?

I would totally agree.

Thank you.

Thank you, Mr Lyle. Angus MacDonald has some questions next.

I should have declared this at the start. I refer members to my entry in the register of interests, which says that I have a non-domestic property in the Western Isles.

I wish to explore the consultation a wee bit further. I direct these questions to Councillor Robertson and to Angus Campbell, given his previous role as leader of Western Isles Council.

We have heard from Councillor Robertson that

“There was absolutely no consultation”

regarding vessel 802. It is probably fair to say that Comhairle nan Eilean Siar and other local authorities served by CalMac play only a small part in the specification of new vessels and the planning of future services. If that is the case, it is disappointing.

I remember when the Suilven was purchased, about 40 years ago. It had already been built in Norway, and it was purchased on spec, but the Western Isles councillors visited Norway and were fully engaged in the process. I suppose that it is debatable, but most people would say that the Suilven was an ideal ferry for its run.

We know that you are still awaiting the final report of the Outer Hebrides Scottish transport appraisal guidance assessment. Will you provide the committee with an overview of the findings of the STAG assessment and the role that the two new ferries are due to play? What impact has the delay in their delivery had on the roll-out of those plans and, more generally, island economies and communities?

The STAG appraisal is happening now. We have lost confidence in the system of consultation because, although we have had good engagement with CMAL, CalMac and Transport Scotland all along, the reality is that anything that we suggest as a requirement of the community generally does not get listened to. That has been the pattern and it is a frustration for us, which is why we feel that more cognisance of the views of islanders needs to be taken.

Currently, on the Little Minch services, we have a ferry—the Hebrides—that performs exceptionally well. In the past month, during which the weather has been particularly bad, it has performed very well. Our requirement on that route is to retain the Hebrides, as well as to get the new ferry, whenever it arrives. We are also looking for two vessels on the Stornoway-Ullapool route, a new ferry on the route from Lochboisdale to Mallaig, and a replacement for the Barra route. Quite a lot of investment is required to provide the services that we need. Going forward, it will be a worry for us to see what will happen over the next few years with regard to provision. Our capacity is extremely constrained during the summer in particular, and, as Eoin MacNeil said, we see no light at the end of the tunnel as far as that is concerned.

Going back to the question about vessels 801 and 802 and whether they should be scrapped, I was alarmed at a recent meeting in Harris when a retired chief engineer said that if rust has set in and there is water ingress, they will never be right. If the ferries are completed and we get them on the routes, that will be a major concern for us.

Of course. If there is a delay, it would mean that the yard would be idle for some time. I agree with you about the Hebrides—I am a regular user of it, and it is a hardy vessel that sails in most seas. It would be good to see it retained for some purpose in the Outer Hebrides.

The committee has heard calls previously and this morning for CMAL to adopt a different approach to ferry procurement, particularly relating to the size and design of new vessels. We will probably explore that issue later with Alf Baird and Roy Pederson, but are such calls supported by Comhairle nan Eilean Siar and other local authorities?

Yes. We are in regular contact with Transport Scotland and we have engaged well with the minister, as he is always available to discuss those elements. However, I would argue with the advice that is being given by officials. As my colleagues have said, I do not think that there is enough knowledge about the requirements of island living, frankly, including among Caledonian MacBrayne’s senior management. I would make them all live on an island for six months of the winter; then they might appreciate what island living is all about. There is a lack of understanding that the ferries are lifeline services. As far as I can see, most of the people who are making the decisions are more concerned about catching a bus or a train than catching a ferry.

Presumably, the purpose of the formation of the CalMac community board was to get all that information over to those people. If it has been in existence for two years, something is not happening properly.

As a council, we engage with Angus Campbell, chair of the community board, at least every two months, so we have a regular dialogue with the community board and I think that we are coming at it from the same direction. Our dialogue with the community board has been particularly good and very regular.

Angus Campbell, can you say what you do at the meetings and what you do with the information that you get from them?

10:00  

The original purpose in the ferries contract was to have a body such as the community board to feed information from the communities into CalMac. We do that, but the formation of a new body does not solve the problem of what happens to that information. That is our frustration.

Due to the nature of how ferries operate and how the contract for the new build was constructed, the community board has also had to talk to parties other than CalMac; we have had to talk to Transport Scotland and CMAL. In some cases, infrastructure belongs to other bodies, whether that be local authorities or piers. The creation of the community board does not turn on the tap that will solve the problem.

We have had an effect on timetables and similar matters, and CalMac has listened to us on the provision of services on board ferries. However, the fundamental issue that is continually brought up by communities is resilience: the need for new ferries and a better and more frequent service. We would be failing if we were not to highlight that as the main ask from our communities.

Can I clarify your point? You are saying that members of the community board are happy to talk about the services on the ferry—for example, whether it provides a food offering or tea and coffee—but not about the capacity on board.

The nature of the beast is that there is no simple method of taking information up the line, as was maybe envisaged when the community board was set up. We have had to adapt as we have gone along, with regard to where decision making is done on some of the wider issues. However, resilience is the fundamental issue that is coming back from the community.

I attended the presentation of the first meeting of the STAG forum at the comhairle, and the consultants clearly said that they were disappointed with the level of community feedback. They had come up against a wall of community fatigue. People were unwilling to feed back into the STAG assessment because they felt that they had done it all before and that that had not resulted in any change to what was provided.

The next questions are directed at Alf Baird and Roy Pedersen, who have been sitting quietly thinking about when they might come in—their time is now.

We have touched on the issue already, but could Roy Pedersen and Alf Baird expand on why they believe that there are cheaper and better alternatives to the design of the new ferries that have been procured by CMAL? What are those alternatives?

Both of us can talk about what we believe.

By way of illustrating the situation, I would ask why would one build a ship with a capacity of 1,000 passengers for routes—namely the Uig routes—on which there have never been more than 312 passengers on any sailing, with the average being half of that, and less than that in winter. You are building a ship that has a far higher specification, and which is far more expensive to build and operate, than is necessary.

This is the Rural Economy and Connectivity Committee, so you are interested in the economy and connectivity. Such a ship would be highly uneconomic and provide poor connectivity because it would serve two routes badly. If someone lives on Harris or North Uist, it is not possible for them to get to the Scottish mainland and back again on the same day, although that is a pretty fundamental requirement of any ferry service on a route that takes less than two hours. The timetable is different every day and people have to work out when they can get a ferry on a Wednesday or a Thursday, depending on when the ship is running.

If we were in a country where ferry services were run efficiently, there would be two vessels—at least two vessels, but let us say two—with one dedicated to Harris and the other dedicated to North Uist. The vessels and the crews would be based on those islands, and crewing would be around the 12 or 14 mark. That would give regularity and greater frequency. Shore-based crews give longer operating hours, because they can operate in shifts.

That would be a step change in the connectivity between the Western Isles and the rest of Scotland, and it could be done for a reasonable price. It would depend on where the ships were built, but it should be possible to do it for around the £25 million mark if the ships were built in the United Kingdom or Scotland, perhaps by Ferguson’s. They would be simple ships, with a passenger capacity of, say, not more than 250, which would be more than adequate to meet any requirement.

The difficulty on many CalMac services has been car space. Two ships would provide far greater vehicle capacity than the present arrangement or the 802. With the 802, massive investment in terminals will be required, because she will not fit the existing terminals. We are talking about not only the cost of completing the ship itself, because it will cost almost as much again to reconfigure the terminals with a bigger marshalling area, new linkspans and so on. Terminals need maintenance and renewal, but they would not need that extent of renewal if we went for a simpler type of ship.

My recommendation would be to scrap the 802. The 801 is another matter, but we should scrap the 802 and go for two simpler ships, which could be of a standard design that would suit most island routes.

I will stop there and hand over to Alf Baird.

I do not have much to add to what Roy Pedersen has said, apart from agreeing that the ships appear to be overspecified in a number of respects. The ratio of passengers to cars is way too high compared with a normal Ropax ferry, which has four or five passengers per car space. The ratio on these vessels is 10:1, which is double that. As a result, the crew capacity requirements are very high.

The on-board living accommodation means that, for their whole lifetime, each ship will be carrying around a hotel, which inflates the power requirement, the cost requirement, the emissions—everything. The ships, which are heavy displacement ships to begin with, will also be carrying a lot of ballast, because they are not stable hulls. Each ship will be carrying a lot of water.

For its whole lifetime, each ship will be carrying around a hotel, hundreds of tonnes of seawater and double the number of seats needed. There is a lot of wasted capacity and spend. The bottom line is that those who are specifying the ships have no incentive to look for lower-cost ships. They are specifying what is, in effect, a kind of mini-cruise vessel to run a utilitarian shuttle ferry—basically, a bus.

Mr Lyle made a point about crews living on board ferries. We do not expect pilots to live on board aircraft, train drivers do not live on board trains and bus drivers do not live on board buses—and people should not live on short-distance shuttle ferries. That is an archaic practice. As Roy Pedersen said, when we changed from the old steamers to roll-on, roll-off ferries and from longer routes to shorter connections, we should have thought seriously about working practices.

There could be a real transformation in the number of sea-going jobs here. In comparison with Norway, we are underdeveloped, in terms of the number of ferries. We should probably have at least 50 per cent more ferries than we have. That takes us back to the lack of capacity and the need for more than two vessels for every major route, with smaller vessels serving the smaller isles. We should not be serving smaller isles such as Coll, Tiree and Colonsay with major ships; that is like serving a small island with a jumbo jet. We have much more capacity than is needed on those routes. Those islands could have their own dedicated vessels.

In Orkney, where I live, it is normal practice for the crews to be positioned on the islands. Orkney Islands Council advertises every week for crew for different routes, and they have to be island based. That fits in with the need to provide emergency services out of normal hours and for different shift systems.

There is a need to transform the system to bring it into the modern age—it is not there yet. It is a case of not just replacing the fleet but upgrading and upsizing it to provide enough capacity to grow the economies that are being constrained because of the woeful lack of procurement capability.

We will obviously put those points to CMAL. However, why do you think that CMAL made those specific procurement decisions for the ferries? More generally, why does it continue to procure what you believe to be sub-optimal vessels?

That is a good question, which I have been asking myself for a long time. Alf Baird and I serve on what used to be called the expert ferry group and is now called the ferry industry advisory group. When the new ships were being conceptualised, I challenged the design, asked what the maximum number of passengers ever carried on the Uig route was—I did not get an answer at the time, but I knew pretty well what the answer was—and suggested that a two-ship solution was the better option, with two simpler ships. Heads nodded, but nothing happened, so I do not know the answer to your question.

Does Alf Baird want to come back on that?

I taught shipping economics for 10 years in Norway, where I still teach occasionally. The Norwegians pay a lot of attention to education on maritime transport and economics—there is a discipline called maritime economics. A basic awareness of global maritime transport trends, developments and research, and expertise in shipping economics, are lacking in the Scottish decision-making trio. They have a bunker mentality and cannot be convinced that there is a different approach.

In an arrangement in which CalMac specifies the initial vessel outline to fit the traditional requirements of the crew and so on, there is no real awareness or study of better options, and there seems to be no incentive to push for lower-cost, superior solutions. CalMac just goes for the same thing that it has always gone for. That is why Norway is quite happily replacing 15 ferries a year and has 40 on order for the next two or three years, whereas we sit with nothing.

I was particularly taken by Dr Baird’s written submission, the first sentence of which says:

“Publicly procured ferries in Scotland are typically up to three times more expensive than comparable private and public/private ferry procurement globally.”

I want to drill down into the tender that went in. The contract value for the two boats is £96 million. The August 2015 letter to the Scottish Government says that that figure is “higher than the £80m” included in the vehicle replacement plan and in “CMAL’s 3-year Corporate Plan”, which was published before the tenders went in. Therefore, the six shipyards that put in tenders knew in advance that the budget had gone from £80 million to £90 million.

I do not know whether you have seen the letter. In paragraph 6, it says:

“It was made clear to tenderers that the quality/price ratio for assessment of proposals was 50:50.”

In other words, it was 50:50 on specification and price. Ferguson’s bid

“was the highest quality bid received”—

in other words, it had the highest specification—

“but also the highest price”

of all six yards.

I will quote another paragraph from the end of the letter, which is from Transport Scotland to the cabinet secretary. It says:

“As with any procurement, a legal challenge from one of the unsuccessful shipyards cannot be discounted. CMAL have not identified any particular risks in this regard and, in any case, are confident that any challenge can be defended. That said, the relationship between Scottish Ministers and Ferguson’s owner is well known.”

Do you have any comment as to why you think that the highest bid of all—it was more than the Scottish Government’s budget—was made by Ferguson’s and was successful?

10:15  

That is a big question. One of the weaknesses of Scottish public sector ferry procurement is that it tends to announce to the world of shipbuilding yards and suppliers the price that it wants to pay. No commercial ship owner would ever do that. They would want the best bids; they would never announce the budget that they had to spend on the ferries.

The other aspect is that the CalMac specification is always unique: complex, overspecified, expensive, high powered and high emissions—it is non-standard. Every vessel in the CalMac system is different, so there are no economies of scale in production. Shipyards will always have to charge a high price for that type of product. It is like designing and building a unique car rather than just getting a Ford Fiesta or something.

The civil servants—and even officials at CalMac—often do not know the best and most efficient options globally, because they do not study the global situation; they are not necessarily trained to do that. They design something unique but tell the world the price that they are prepared to pay, so the whole procurement process is dilettante-esque and amateur—it is insane, in a sense.

Following on from that, I will now direct my questions to both Dr Baird and Mr Pedersen. Your evidence so far to the committee is astonishing. Correct me if I am wrong, but your views are that the contract is overspecified and too expensive. We can go into the reasons for that later, but those are the two things that you have said to us. We know that the Scottish Government will basically move on from the current two ships and start again from scratch. Will they commit the same mistakes in the second tranche as they have committed in the first tranche?

A series of big mistakes have been made. That happens sometimes. About two decades ago, BC Ferries ordered what it regarded as three state-of-the-art fast ferries, which were very expensive. The first one was tried a couple of times when she came on stream and was found not to work. All three were mothballed and eventually sold off. They hung around Burrard Inlet for about 10 years and were sold off at about 3 cents to the dollar. That was a big mistake. This is two ferries, so maybe it is not quite as big a mistake as BC Ferries made, but it is pretty big.

When you are on a losing run, it is good business practice to cut your losses and start again. It is the same when you are playing poker: it does not do to keep putting in good money after bad. Looking at the numbers, it seems to me, and I think probably to Alf Baird, too, that the best option is to stop and start again.

The evidence that we got last week was that the decision is just to get on with it, because that will be quickest—hence Jamie Greene’s earlier question—for the island communities, who want this ferry service. Do you think that it is wise simply to start the whole process again, as the Government is doing with the two new ferries for a similar £100 million cost, or are you saying that we should just forget that?

To complete the ferries in the given timescale would be difficult, because there are a lot of problems. It would take two years or more—we do not really know. You could build new ferries in that time. Andrew Banks in Orkney got the Andrew built in two years for £14.5 million, including delivery from Vietnam to Orkney.

Incidentally, Stewart Stevenson mentioned the windage factor on the Pentalina and the Alfred. In terms of resilience to weather, they actually perform better than the NorthLink Ferries ship the Hamnavoe. When none of CalMac’s ships sailed two or three weeks ago during the storms, the Alfred sailed and Western Ferries sailed.

I have one final question, if I may, convener.

You must be very quick, as a lot of members want to come in.

In my first question, I invited comment but did not get an answer. Six other yards put in tenders and Ferguson’s, with the highest specification and the highest price, got the contract. Do you have any idea why that happened?

I do not know the answer, but three things spring to mind. One is incompetence; another is vested interest; and the final one is corruption. If somebody else can think of other answers, they can give them.

I see that Alf Baird wants to comment. I have a list of people who want to come in so, perhaps he can come in later unless he wants to specifically answer that point.

One of the biggest surprises for me was that Ferguson’s does not build the complete hull length undercover, which is international standard practice and gets us away from the weather impact on steel. From a CMAL perspective, if I was ordering a vessel, I would be looking for a shipbuilder that could provide that. I have worked with naval architects in shipyards in different parts of the world where the full length of the hull is constructed undercover before it is launched.

I have a quick question before we move on. You have commented on overdesign and overspecification. If the Government truly wanted to give the contract to a specific yard, could it not have bought a design that was already used elsewhere in the world and got the yard to build that design, rather than getting people who do not have the experience to design something that they do not know about?

It is quite clear that CMAL uses different naval architects for different assignments. The problem with naval architects—with great respect to them, and to marine engineers—is that although there are a great many of them, there are relatively few great ones. The great ones tend to do repeat production of ships with superior hull form and bow shape, which they have developed over many years. Superior hull form and bow shape give a ship a tremendous competitive advantage because of its lower resistance to the elements and the water. That, in turn, gives lower power but higher payload. There are probably fewer than 10 great naval architects for ferries globally, and they work in, or closely with, the major shipbuilders of ferries—the Boeings of the ferry world, if you like. They are the people who do repeat production of standardised, proven ferry designs.

As I said, there are many naval architects but there are only a few great ones. The problem with the CMAL approach is that it tends to appoint different naval architects for different jobs, and it uses different shipyards for this, that and the next thing. They are all niche operators, but they are generalists rather than specialists. That is where we have a bit of a mismatch. The CMAL tender, together with the CalMac requirement, is always a unique, one-off, custom-built job.

To drill straight down into this, you are saying that if you want to build a Mini, you get the design of the Mini and you build what is there—you do not go out and redesign the Mini and then build it to a separate specification to make it more complicated.

That is right—

And it is possible to do that.

Yes. You just pick it off the shelf.

Thank you. A huge number of committee members want to come in. Stewart Stevenson is next.

I am going to ask some questions about dual fuel, but, before that, I have a question for Dr Baird about pricing. You have to publish your tender in the Official Journal of the European Union and I understand that you are legally required to publish a ceiling price and a floor price. Therefore, the whole issue of what you are prepared to pay cannot legally be withheld from the bidders—or am I incorrect in my understanding of the legal requirement?

That may well be correct.

So it is correct.

However, in recent times, CMAL has bought six ferries—five for NorthLink and also the MV Loch Seaforth—without a tender or any transparency around the price.

Are you saying that the ferries in question could have been bought without a tender? Would you have recommended doing that?

I am saying that it does not seem normal to me for ferry companies—even public bodies across Europe, such as the Estonian ferry companies and so on—to announce the price that they are willing to pay.

The Estonians have to publish ceiling and floor prices when they use the Official Journal of the European Union. Am I correct on that legal position?

I am not sure whether that is absolutely what they do. Certainly, in the shipping press that I study, I do not see prices being announced, apart from in Scotland.

Are you saying that contracts are advertised in the Official Journal of the European Union that fail to meet the legal requirement to provide a ceiling and a floor price?

It would not surprise me if there is a ceiling and a floor price, but what we usually see in Scotland is that the price is a given for the ferries.

Was that the case with the new ferries? I believe that it was not.

Everybody and their granny knew that the price was £97 million for two ships.

My granny has been dead for many years, but I can ask her. However, I put it to you, Dr Baird, that there was a ceiling and a floor price in the Official Journal of the European Union, as happens with other Scottish Government contracts, although that does not prevent a bidder from departing above or below those prices in their submission—you acknowledge that.

Yes.

Sorry, Stewart, but I must intervene. I take your point, but I think that what Mike Rumbles was trying to say is that there was a figure in the corporate plan for the purchase of ferries.

Correct.

Do you have any further questions?

Yes, I do. I had hoped that my questions for Mr Baird would be rather brief, to be honest. This topic should not take long, though.

There have been some issues around the new ferries using dual-fuel propulsion, which has been used elsewhere around the world. In relation to the issue of climate change, up to 2020, marine fuel is still 3.5 per cent sulphur. The worst other transport area is aviation, which uses fuel that is 0.3 per cent sulphur, while cars use fuel that is 0.1 per cent sulphur. Is there not a fundamental need to look at marine fuel in that respect? The International Maritime Organization has sought to move marine fuel to 0.5 per cent sulphur by 2020, but I understand that only 4,000 out of the 120,000 vessels are ready for that and that the fuel distillers are not ready for it.

In the light of all that, is it the correct decision to go for a dual-fuel option for the ferries, which saves some money but fundamentally has a much lower beneficial impact on the environment? I am not even talking about particulates, which are another complication.

The reality is that, for short-range ferry runs, which are what we see, the evidence from Norway suggests that most of the ferries are either battery hybrid or battery-powered and that liquefied natural gas is not attractive. LNG is more attractive for very long, overnight North Sea ferry routes, routes across the Bay of Biscay and other such routes, but it is not attractive for short-range domestic ferry routes. They are within the realm of battery-powered ships or diesel-battery ships generally.

Nevertheless, the unique CalMac design has double the power of what I would call a standard ferry. Western Ferries and Pentland Ferries have good examples of standard, utilitarian-type boats with half that power. They are efficient, high-capacity but low-powered vessels because of the hull designs and they do not necessarily have the add-ons that CalMac specifies. The CalMac fleet could be changed to diesel just now and could reduce emissions by 50 per cent quite easily, as Pentland Ferries has done, by using 3MW ships as opposed to 6MW or 8MW ships.

It would be fair to say, though, that the less-than-3-mile service that Western Ferries operates across the Clyde is a fundamentally different ferry service from, say, the service from Uig across to the Western Isles. That is just an observation. I will move on.

Do you agree with the International Maritime Organization, which says that LNG is the fuel that is best suited to new ships?

10:30  

It depends on the ship and run type. There are tankers, container ships, ferries, cruise ships, long runs, short runs and intercontinental runs. For intercontinental runs, ferries cannot run on battery power, but for very short runs—say, a 25-mile round trip—a ferry can run purely on 4MW of battery power. That takes the Arran, Mull, Skye and Mallaig services into the scope of pure battery power—all those routes could go to hybrid battery or battery power tomorrow.

Can you clarify where the LNG comes from? Who supplies that?

The south of England.

Zeebrugge.

Is that the engine or the gas?

It is the gas. I just wanted to check where the gas comes from.

For the record, can I make one thing clear? I think that Stewart Stevenson misunderstands my question. It had nothing to do with the ceiling and lower prices. I was saying that the revised estimate of £90 million, which is in the Government’s own paper, is included in CMAL’s three-year corporate plan, which has already been published. The evidence was therefore correct—that estimate was in the public domain before the tenders went in.

Our inquiry allows us to look at what we did, what went wrong and how we can fix it. Hindsight is a wonderful thing.

We are still stuck in the past, building ferries that do not suit us. What do you say to the comment that the ferries were meant to future-proof capacity? When I was on the islands, I heard complaints such as, “We cannae get our cars. We cannae get off the island.”

You suggest that we should make a standardised ferry that is like a Mini and not like a Rolls-Royce—a basic ferry that works for all our islands along the lines that have already been discussed—and that that standardised ferry could be built in Scotland. I want them built in Scotland, not in Vietnam. With the greatest respect to the Vietnamese, I want them built in Scotland, and a standardised ferry could be built here.

That has been offered. One of the best global designers—in my view—has offered, on a number of occasions, to design production-line, standardised ferries to be built at Ferguson’s. However, they could not do it so long as CMAL kept ordering traditional, high-cost, high-spec ships.

It can be done. The normal process in European yards has been to build parts of the ships—even hulls—in lower-cost countries and bring them back to the western European country to finish them off. Most of the add-ons—the engine, the propulsion system, marine evacuation, the bridge navigation system—can be sourced locally.

Have you ever watched a ship being built on YouTube? It comes in sections. It is amazing. You can see the timeline and speed it up. It is like Lego.

Please ask a specific question.

With respect, I want to make a point. Ships nowadays are not made by throwing up a rivet and banging it in. They are prefabricated. I have seen them cut and shut, too.

Your question, please.

Can we do things better?

Yes.

Not only can we do things as well as anybody else; we can do them better, but we need to bring in the best design competence for the hulls. We do not have the right naval architecture expertise in standardised production and in proven designs. That goes back to the hull form and the bow shape as being, largely, the competitive advantage. That is what we need to exploit. If a shipyard has no specific design advantage, it has no advantage globally.

We will move on to a new question, from Jamie Greene.

I want to follow up on something. I have questions on procurement, which I will ask later. I think that Emma Harper has some questions on the future, too.

It is good to look forward. We need to build more ships—that is a given—and we want to ensure a pipeline of work for Ferguson Marine. Why do you think that the decision was made to go ahead with the dual-fuel LNG model rather than the hybrid model that you have just described? What type of vessels would you recommend that we build in the future?

Fundamentally, the CalMac design or specification of ship is too high powered for a zero-carbon operation. However, if you were to specify a more standardised production-line-type vessel of the sort that we have in Orkney—for example, the Pentalina and its successor, the Alfred—you could have the same ship with capacity for 100 cars for half the power. That would get into hybrid battery technology fairly quickly. The reason why CalMac went for LNG is that LNG has the support of the IMO and so on—although that is mainly for long-range routes rather than shorter routes—and is one of the few options for higher-powered vessels.

Angus MacDonald has some questions on that, and so does John Finnie.

My questions are on procurement, so I am happy to come in after Emma Harper.

My question is on the point about fuel and propulsion, which is covered in your submission, Mr Pedersen. We are in the middle of a climate emergency, and you say:

“LNG has a slight edge in environmental terms in that it is a cleaner fuel than diesel, but it still produces CO2 when burned.”

You go on to talk about the round trip that is involved in delivering the gas to Uig and the CO₂ contribution of that. Can you comment further on that?

It is a roughly 1,000-mile round trip from the south of England to Uig to deliver the fuel. That will probably be carried by diesel lorry—it might be an LNG-powered lorry, but it will probably not be. I have not done the sums, but it is likely that hauling the fuel on that 1,000-mile trip will negate the relatively minor advantage of LNG.

The Scottish Government has declared a climate emergency, and it is important that transport systems work collaboratively. Is that the case for the ferry system? If we are going to have integrated transport, we must have regard to the total emissions rather than simply the specification of one vessel.

I totally agree with that. Another thing that one should take account of is that there are opportunities to make ferry crossings shorter. It has been done in the past and there are opportunities to do it in the future.

A ferry is a much less efficient way of moving vehicles than driving them along the road. In other words, we will release more CO₂ and other nasties into the atmosphere by putting vehicles on a ferry than we would by driving them along a road, so the shorter that one can make the ferry crossing, the better it is for the environment. We should look at opportunities to do that.

I have written several papers outlining how that can be done. Alf Baird and I did some work on Orkney on the options for taking a vehicle from Edinburgh. The best option is the shortest crossing, between Gills Bay and St Margaret’s Hope.

I have a short question about the role of Transport Scotland, which has responsibility for all aspects of transport in Scotland. Given Transport Scotland’s involvement in the process, are the overall emissions a factor that you would expect to be taken on board with regard to propulsion systems?

They should be. To be fair, the climate emergency has been rumbling in the background for a while and is now full-square on the agenda. There is a growing awareness of the need to address such issues.

For the avoidance of doubt, I was not ruling any options in or out, but we have to think about things holistically rather than on the basis of one individual ship.

Quite so.

The project review board concluded that continuing to build the two new ferries—even though it will cost us about £110 million—should be the intention. We kind of have the answer to this question, but I will ask it of both Roy Pedersen and Alf Baird: do you agree?

That the vessels should be built?

That the best decision is to carry on and finish the two ships at a cost of roughly £110 million.

Plus the cost of the terminals, which is a lot of money. No—I disagree.

I ask you to leave out the terminals for now, as they will be the subject of further questioning.

I will drill down into this a bit more. You suggested that we might finish vessel 801 but scrap the 802, as a kind of halfway-house solution. Can you explain that a bit more?

I put that in my submission as a sort of face-saving measure. Personally—if it was me making the decision—I would scrap them both. However, finishing one vessel might be a face-saving measure. I believe that an LNG supply is available in Orkney, so it might make sense for the vessel to be used on the Stromness to Scrabster route in place of the Hamnavoe, which is a gas guzzler: she has 8MW of power and burns dirty, heavy marine fuel. That is one suggestion, but my personal preference would still be to scrap the 801.

My suggestion was to redesign the vessels in a way that was more akin to what a commercial operator would do. That would involve specifying the passenger to car ratio down to about 4:1 or 5:1, meaning that we would not need 1,000 seats and 1,000 other bits and bobs. We could take away much of the à la carte restaurant dining stuff, the fancy carpets, the art treasures, the cabins for the crew, the hotel and everything. Then we would have a stripped-down, standard production-line vessel to some extent—with the downside that it would be dual fuel, with the added complexity and cost of that. It would still be using fossil fuels. I do not know whether it would be possible to take that down to lower-powered marine diesels, too.

There is a risk of the two vessels being built as they are, and not only will they be vastly overspecified, as is normal with CalMac vessels, but they will be running on fossil fuels for 30 years. I do not think that that is where we should be going. We are trying to move away from fossil fuels, and we can do it. I think that the only option is to strip the vessels down and build them as standard production units as much as possible, so as to reduce the cost, which I estimate could be halved.

Is that—

Sorry, Peter, but I would like to bring in Angus Campbell, because he has some comments about whether the ferries should be built.

My starting point was that we should include what the communities need and want in the ship design, and I am getting a bit concerned hearing about the driving down of standards and the type of ship. That conversation must take place in the greater community to ensure that we have ships that are fit for purpose. Although ships can be said to be overspecified, the community still deserves a certain level of service, and we should not throw that out the window in our discussions.

Everybody around the community board certainly wants the most green type of fuel to be used. The ideal solution would be for green energy that is produced on the islands to go into battery form to power the ships. That is not far away, and it would have a dual effect in benefiting the economies of the islands, too.

You obviously think that the fine dining is important for the people on board, but that is one of the things Alf Baird has suggested we do not need. Do you disagree with that?

I do not think that anybody is looking for fine dining, but ferries all over Europe have a certain standard of service, and we should not throw that out the window. I am not suggesting that the other gentlemen here are saying that, but the terms that are being used suggest that we could have a cheap form of transport that would give a very basic service. Some of the trips are long. All that I am saying is that there should be a conversation with the communities to ensure that, wherever we draw the line, an acceptable level of service is provided.

10:45  

Dr Baird, will you say more on your suggestion that we could use the hulls as they are but redesign the whole inside to have more cars and less seating?

The vessels are designed only for one-hour or two-hour routes, which is snack bar distance, not à la carte distance. If the Government wants to finish the vessels, it should go for a more streamlined and lower-cost option. If there is £110 million to be spent on ferries, the other option is to go to China and buy five. If you want to build them here, another option is to build four under licence with some of the best global designers. However, as the turnaround director and his review board suggest, to finish the vessels as they are is high risk, because there is a risk that they do not meet the deadweight and speed requirements and might still be rejected by the owner.

How realistic is it to completely redesign the inside of the ship along the lines that you suggest? One of the big problems that we learned about last week is that the ships were being built but there was no overall design. Stuff was built and then had to be ripped out because it was outwith the specification and so on. You are suggesting that we go back to basics and redesign the whole interior.

I understand that there is no finished design anyway, so in essence there is still a blank sheet of paper within a hull size. There is a hull size and a hull width, and the configuration that is put in it can be anything that you want. Ships are cannibalised, changed, adapted, extended and stretched every day, and the length, width and height can be increased. We know from Roy Pedersen’s studies and other studies that there is no need for 1,000 seats or 40 crew on those boats, and that all the related paraphernalia does not need to be carried. We just need to provide a Ford Fiesta, as it were, rather than a Jaguar.

On a completely different tack, what is your view on the nationalisation of the Ferguson Marine shipyard and its future role in providing new vessels for Scotland’s ferry companies?

I mentioned that there are only a handful of great naval architects of ferries, and any shipyard needs to have a close connection with one of those people. You can have as many naval architects as you want but, if the ships do not have a proven hull form and a bow shape that provide a competitive advantage, they will struggle. That is the number 1 factor in having a long-term competitive advantage.

State ownership of shipyards is quite normal. It is normal in France to some extent and in Italy, Finland and other countries for the state to have some equity in shipyards.

I will delve into that issue a wee bit, so that I understand it. You say that, if I was ordering a ferry and was going to give a yard a contract, I should have confidence that there is a great naval architect attached to the yard to design the ferry.

Yes—they are an advantage. The best ferry shipyards, such as Flensburger, Visentini, Austal and Incat, have the best designers in-house.

If the architect was not in-house and the yard did not have a close association with them, should I be nervous if I was ordering ferries?

Yes. The long-term sustainability of the yard would be in doubt, as would be the advantage of the yard in providing top-class tonnage.

The option for moving forward is a partnership with a known and high-class naval architect and designer. It would be a partnership, because I do not think that the yard would be capable of doing an efficient job on its own. You also need good management in the yard, and that is what has been questionable in the past.

Dr Baird and Roy Pedersen have both stated that, unless we reassess the type of ship that will be delivered for Scotland’s ferry service, we will go down completely the wrong route, and that, if Ferguson Marine is to survive in the long term, it has to recognise that point, as do CMAL, CalMac and Transport Scotland, because otherwise we will go down a blind alley. Is that assumption correct?

That is a fair description. We would be spending large amounts of money when it is not necessary. If it is done right, a bit of a guess is that a round figure of £100 million a year could be saved on the CalMac contract. If it is done wrong, it could cost an extra £100 million a year. That £200 million a year could go to our cash-strapped health and education services. My son-in-law is a teacher, and there are a lot of problems there.

We will not work out where the money could go, as it is not necessarily on the table. I will take follow-up questions from Maureen Watt, then a brief one from Richard Lyle and we will then move on to Emma Harper.

Would the gentleman who represents the communities who are served by CalMac like to comment? I am thinking especially about the tourist providers in those areas. They have seen a great increase in tourism; do they think that tourists will be attracted to the islands if they have to go on the bucket-type ferries that have been suggested by Dr Baird and Mr Pedersen? Would those ferries be suitable?

My island has benefited greatly from tourism, especially over the past five or six years. The numbers have increased; two new planes are serving us and are a great resource.

If we were to go to bucket-type seats on the ferries, the numbers would definitely drop. Road equivalent tariff has worked in our favour, but it has pushed the ferries and probably some of our tourist outlets to the limit. The community is adjusting quickly by, for example, bringing in electric bikes and hire bikes. It has been a great few years for tourism. A five-hour sailing needs a bit of comfort and more than a snack bar.

Angus Campbell will be next, and I will let in Roy Pedersen or Alf Baird—one of the two, to be decided between them—to say whether “bucket shop” is the right description of what they are suggesting.

A person in the tourism industry commented to me in the past couple of weeks that the ferry trip is part of the experience for visitors to the island. There is certainly a concern about where to draw the line, which is what I was referring to earlier.

Who is going to come back on whether the service standard would drop? Are you proposing a bucket-shop ferry, Mr Pedersen?

No—that does not describe it properly. It depends, and it is horses for courses. If the route is an hour or less, a fancy restaurant service is clearly not needed. A five or six-hour crossing is a different kettle of fish, so a reasonable standard of catering and comfort is needed.

I will bring in Richard Lyle, briefly.

We could have tourist class or business class, depending on the type of ferry that is wanted.

I was not here for last week’s evidence session. We have heard that a naval architect should be in a yard to make sure that everything is okay. Dr Baird, do you know whether there was an architect on the staff in Ferguson’s yard?

I was suggesting that there is only a small number of great naval architects in the ferry sector. That could be compared to aviation, where there is probably only a handful of great aircraft manufacturers. The reason for that is that they have the design competence. Probably one of the downsides of the people who were contracting those vessels is that they did not use the best available design expertise. I include in that the contractor and perhaps the yard—it is maybe a bit of both. I do not think that the naval architects involved were at the cutting edge of ferry design.

Before I ask about the lessons that could be learned, I want to ask about the issue of hotels on ships. Stena Line and P&O Ferries have big ferries that take two and a half hours to get from Cairnryan to Larne. P&O has many staff who are European Union citizens and who spend a month on the ship and then have a month off, so they require to stay on board for some time. For example, some folk live in Estonia but work on the ferries. What is the difference between those ships and the Scottish ferry fleet? Are you suggesting that we do not need hotel accommodation on the ships because they will have Scottish employees who reside in Scotland?

Most of the routes on which P&O Ferries and Stena Line operate are much longer than the routes in the North Channel, so they have much larger vessels. Those companies probably organise crewing arrangements for the entire fleet. From the Norwegian examples and other domestic routes, we know that, in general, much smaller vessels are used for short routes of less than three or four hours, with fewer passengers and cars, so it is not necessary to live on board. In fact, for years now, in Orkney and Shetland, crews have had to live on the islands—that is one of the conditions of employment. The RMT already accepts that in many cases, so there is no reason why it should not accept it in the case of, for example, Arran or Mull. Those are only one-hour crossings, so why should 40 cabins and all the crew—three times more than is needed—and facilities be carried on every voyage? That is where all the subsidy goes.

The bottom line is that the more we put into subsidising an inefficient system, the less new tonnage we get. Scotland is not producing enough ferries—compared with Norway, we are way substandard. We need to not only replace ferries but increase the ferry fleet, which is underdeveloped. The crewing system that Emma Harper has explained is largely responsible for an underdeveloped system that is constraining island communities.

Fundamentally, the job of ferries is not to increase employment at sea but to improve the economic wellbeing of the communities that the ferries serve. We need to put the system’s objectives at the forefront. As well as having a green energy system, we need to enhance the lives and socioeconomic reality of people in those communities. The creation of employment at sea is a side benefit, but that is not the fundamental objective of ferries, although it is what is driving their design.

It takes two and half hours to cross the Irish Sea, and many employees on the P&O line—

There have been previous attempts to have shore-based crews. Sea Containers used to run vessels with smaller numbers of crew and provide shore-based accommodation such as guest houses. That was in quite remote areas such as Stranraer, but it has been done. Some cross-channel operators also used shore-based crew, so it is not the case that all crews live on board. Of course, those are flags-of-convenience vessels, which tend to access lower-wage crews. We are not comparing like with like; we are talking about a completely different type of arrangement.

What lessons, if any, could Transport Scotland, CMAL and other stakeholders learn from how ferry services and vessels are specified, procured and operated in other northern European countries? We have heard that Norway does that really well. There are differences, including Scottish infrastructure and how the tides affect the water in Scotland, but we can learn from other countries.

That is right. We should look at international best practice. In a nutshell, the Norwegians and Australians do it very well. They take different approaches but, if we more or less copied either approach, we would get pretty close to what is required.

There are differences between Scotland and Norway. In some places in Norway, there is no tidal range, but there is more in north Norway. In general, Scotland has a greater tidal range than Norway, but that is not a particularly difficult situation to overcome. The linkspans are longer in Scotland—that is all.

11:00  

We have been through this already today, but the Norwegian model includes simpler vessels; less passenger accommodation, because it is not required; simpler passenger accommodation, especially on the shorter routes, but more comfort on the longer routes; and more frequent services with shorter crossings where possible. That is the Norwegian way. If we were to emulate that philosophy, we would get a better service for less money.

Should we do things differently when we are planning future specifications for ferry replacement? Should we tender in a different and more planned way?

The ferries review a decade ago made recommendations to tender routes in the same way as the Norwegians do. That would mean having smaller bundles and operators making a commitment to invest in tonnage. The onus is then taken away from Government officials under the tripartite system and placed on operators.

Private operators do not bid for Scottish ferry services, because they would be committed to using the CMAL fleet. In essence, that fleet is the cost structure of the operation, so there is no way that private operators can differentiate their bids. They would be using the same fleet, crews and cost structure, which cannot be changed. That means that we do not get innovation in the bids. Even a decade ago, the private operators that we had in workshops said that they needed smaller bundles. We would have small geographic bundles of routes, with maybe three or four routes served by five or six vessels, or maybe more in the same bundle, and put the onus on the operators to provide the tonnage.

There is no other asset vehicle like CMAL in Europe—it is a unique vehicle as a monopoly provider of ships. The operator has to take the ship that it gets. It is a bit like buying a Ford, where you can have any colour that you want, as long as it is black—you are getting that product. There is therefore no scope for innovation in the procurement process.

This is a bit outwith what we have been discussing but, if the procurement process was more in the normal European vein, it would involve long-term concessions with small bundles of routes, with half a dozen or eight vessels per bundle and plenty of relief cover, so that we do not have the fallacy of the relief ship, which does not really exist anyway in the current system. That is the way to get modernisation and that is why Norway has provided 200 new vessels in the past two decades while Scotland has produced a handful.

Jamie Greene has a follow-up question, and then I want to ask a couple of questions before we conclude.

Could I also ask a question?

Yes, there will be time for other members to ask questions.

The discussion has been fascinating. One of the difficulties that the committee has with an inquiry of this nature is that, to look forward, we have to look back. We are already seeing a merry-go-round of blame. We have a workforce that is doing what it is told and building what it is told to build; a yard that is building a design that it was given; a client that is giving ships to an operator that operates the franchise within the constrictions of the ships that it is given; and Transport Scotland, which can build ships only according to the budget that it is given by the Government, and so on.

The picture that is emerging is of a very complex structure to procure, build, design and deliver ferries in Scotland. If we could learn some fundamental lessons from the past decade or two, what would you do differently? What could we immediately do differently to ensure that we get a new fleet of vessels to serve our island communities?

There is probably a long list of things that Roy Pedersen and Alf Baird want to mention, but I ask them to mention just two simple things that could help us.

You could develop a simple standard design for application on the shorter routes in Scotland and put out a contract to get those ships built using an accredited naval architect and designer in a joint venture.

There has to be that kind of vision, using a standardised approach and the best competence. The people who decide on the ferries that we get do not have the best competence to do so. They do not have the knowledge or the vision or, for some reason, they are limited in other respects, perhaps politically.

The RMT has to be brought into the equation. There could potentially be a lot more jobs. In essence, Scotland needs to produce at least five new ferries every year to even get close to what Norway provides. We are struggling to provide one every two years, or 10 per cent of what Norway is doing.

Richard Lyle asked about the naval architect at Ferguson Marine. The answers that we have had on that issue have been important, but it is important to put on the record that Mr Andrew Alexander was the chief naval architect at Ferguson Marine. He was invited, had accepted the invitation and was due to appear before the committee today. After listening to the evidence from our witnesses, it would be appropriate for the convener to consider inviting Mr Alexander again, because he might want to give us evidence on the design of the ferries.

In answer to your question, which is not directed at the panel, the committee may wish to reflect on that possibility after this meeting. I have noted your comment.

I am afraid that time is running out. I have a couple of quick questions to finish.

In the tender documents that Mr Rumbles and I referred to earlier, I see that Transport Scotland wrote to the Scottish Government to say:

“on the basis of the information available to us at this point, the risk of major infrastructure requirements to accommodate these vessels ... is considered to be low.”

I am now confused about why Roy Pedersen said that the vessels were quite big. In addition, some of the evidence that I have heard indicated that some of the infrastructure assets belong to the island communities and that they were having to build them. Is that correct? Is the requirement for major additional infrastructure to accommodate the vessels considered to be low?

I disagree with that; I consider the requirement to be high.

Councillor Robertson, do you have a view on that matter?

The pier at Lochmaddy in North Uist is owned by the council, the one in Harris is owned by CMAL and the one in Uig is owned by Highland Council. Our preference was for vessels the size of MV Hebrides. Although some infrastructure work would be needed, it would be nowhere near the order of the £50-odd million that is required now.

Should consideration of the infrastructure to accommodate the vessels have been an integral part of the contract for their construction and build?

Absolutely.

I see panel members nodding their heads.

That consideration would include the fuel storage facilities for the LNG, which have not been mentioned at all. I am not voicing an opinion on whether that is the right fuel or not, but there is no mention of that. Should consideration have been given to that?

Yes.

In response to the question that Mr Finnie asked about LNG, I believe that there have been discussions between CMAL and Mowi in Kyleakin, which uses LNG.

Indeed. When we were at the plant there, I believe that there were discussions about LNG and the storage that was being used, so I think that you are right.

I am afraid—

Convener, can I point out that the relevant constituency member, Stuart McMillan, has been here for the past two hours, and it is custom and practice in this committee that, when another member comes along, they are allowed to ask questions. I suggest that Mr McMillan be allowed at least a few minutes to ask questions, as the local member.

This evidence session was due to finish some time ago. I have given—

It would be the first time—

Mr Lyle, will you please listen to me? I have given as much time as I can to committee members to ask questions. Unfortunately, our time is at an end. It is up to the convener, in the same way as it is up to the Presiding Officer in the chamber, to decide where the questions should come from. At this time, I am afraid that I have made the assessment. The management of time—

This is the first time that I have found that a member has come along to a committee and has not been allowed to ask questions, and I record my dissent in regard to your comments.

I understand. I am sorry. This conversation has gone as far as it is going. I am afraid that we are out of time.

I thank the witnesses for giving evidence. If you want to add anything to what you have said, the committee would welcome written submissions.

11:10 Meeting suspended.  

11:16 On resuming—