Audit Committee, 21 Feb 2006

Meeting date: Tuesday, February 21, 2006

Official Report 177KB pdf

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“Scottish Executive: The NorthLink ferry services contract”

Item 5 is a response to the committee's request for information on the NorthLink Orkney and Shetland Ferries contract. The response is from Eddie Frizzell and answers several questions that we asked. Do members have comments, observations or questions?

I have a comment rather than a question, because we have gone through the issue before. The letter talks about setting

"a cap on the amount of risk we are expecting the operator to bear"

and paragraph 8 says:

"At the heart of this issue is how much risk we expect the operator to bear".

It sounds as though there is no mechanism for avoiding the situation that occurred before. When the operator is meant to bear the risk of not providing a lifeline service to a community, it will not bear that risk, because somebody will always come to bail it out.

Does anyone from Audit Scotland want to respond? Eleanor Scott makes an observation. The difficulty is that the committee considers the operational question of issuing the contract and that comment is about policy, not how business should be conducted. However, the member is entitled to make the observation to the committee.

The contract is work in progress and we must check against delivery. The Executive seems to have accepted most of the points that were put to it, so the matter is down to delivery and action on those points.

I share that view. The purpose of writing to the Executive was to elicit further detail from the Executive's accountable officer about progress on awarding the contract, taking into account what Audit Scotland's report said. It is a matter of checking against delivery, because the process continues.

Does the Auditor General have any observations?

Just one reflection might help. Significant differences this time are that the period between awarding and starting the contract will be much tighter and that there is not the same uncertainty about the need for the new ferries and so on. With better information about the level of competition, which is now known, bidders should be better placed to make realistic bids. However, ultimately, the Scottish Executive's transport group must award the contract to a bidder that submits a compliant bid and must generally go for the lowest-cost bid, if it believes that the bidder is in a position to deliver the contract. The Executive is locked into that competitive environment.

If members are content, do we agree to note the response from Eddie Frizzell?

Members indicated agreement.

We are running 30 minutes ahead of my agenda schedule for once, so I propose a 10-minute comfort break, after which we will still be ahead of the game.

Meeting suspended.

On resuming—