Meeting date: Tuesday, August 25, 2020
Meeting of the Parliament (Hybrid) 25 August 2020
Agenda: Time for Reflection, Business Motion, Topical Question Time, Ferguson Marine, Business Motion, Children (Scotland) Bill: Stage 3, Children (Scotland) Bill, Parliamentary Bureau Motion, Decision Time
- Time for Reflection
- Business Motion
- Topical Question Time
- Ferguson Marine
- Business Motion
- Children (Scotland) Bill: Stage 3
- Children (Scotland) Bill
- Parliamentary Bureau Motion
- Decision Time
The next item of business is a statement by Fiona Hyslop on Ferguson Marine. The cabinet secretary will take questions at the end of her statement, so there should be no interventions or interruptions.14:45
Presiding Officer, I will make a statement on progress at Ferguson Marine shipyard in Port Glasgow.
In response to the Covid pandemic and to protect public health, Ferguson Marine implemented robust measures and delivered a managed shutdown of the yard on 27 March 2020, which involved a move to home working where possible. In line with Scottish Government guidelines, Ferguson Marine began the site preparation phase of restart during the week of 1 June. The yard resumed outdoor working on 8 June and the launch of the air cushion barge was used to pilot physical distancing controls with a team of 32 people.
Work on the ferries resumed on 29 June with a similar-sized team. The team has since been increased, using staggered start times, to around 130 people, which is approximately 50 per cent of the workforce. The team is supported by a skeleton crew of supervision and technical staff, with other employees working from home where possible. Although no work was possible at the yard, extensive work was being done from employees’ homes, notably on design, as the Ferguson team is working closely with engineers from International Contract Engineering on the detailed design of the ferries. That work continues.
Projects that are critical to turn around the business also continue to progress. Those include finance and budgeting systems, implementation of the materials requirements planning system and the new quality management system, all of which are making good progress. The Covid-19 safety measures that allowed a return to work at the yard could only have been implemented with trade union support, and I am pleased to record that the trade unions were happy to agree that robust safety standards were in place. Nonetheless, all employees who can work from home will continue to do so unless they have been specifically identified as being essential to be on site.
I recognise the disproportionate impact that Covid-19 has had on Greenock and Inverclyde, and I am committed to ensuring that all decisions on the Ferguson Marine restart take account of not only the need to keep the workforce safe but the needs of the wider region. I also recognise the importance of the 350 jobs that Ferguson’s provides—jobs that are essential to Inverclyde. Across Scotland, Ferguson’s supports a further 350 jobs through its supply chain—that is a total of 700 jobs. Critical among those are the 26 apprenticeship opportunities that the yard offers; they are critical for the youngsters themselves and for the future of shipbuilding at Ferguson’s and in Scotland.
The yard has done everything possible to limit the impact of the closure on the delivery of the two Scottish Government-funded ferries under construction. Significant progress has been made in planning and design and projects underpinning the turnaround of the business.
Regarding progress on vessels 801 and 802, I am pleased to report that, despite the Covid emergency, the Glen Sannox entered dry dock on 10 August. The vessel had very heavy marine growth on the hull due to the time spent at the quayside, and I can report that 42 tonnes of mussels were removed from the hull of the vessel. A major risk factor was the condition of the hull paintwork, but despite the heavy marine growth a joint survey with the owners concluded that the paintwork is in good condition. The main work for the dry dock has now commenced; the bulbous bow has been removed and replaced and the starboard door is being installed. I am pleased to be able to place before the Parliament an updated report on the schedule for delivery and associated costs.
To date, the Covid response has left the yard either closed or on restricted working for nearly six months. The estimated cost related to the Covid lockdown is £3.3 million, which will be treated as an exceptional item and not a project cost. That cost comprises £1.6 million of payroll costs—in other words, staff wages—and £1.7 million of facilities costs, which are in effect the cost of the yard.
The cost of the project to deliver the ferries is unchanged at £110.3 million. Within that envelope, there has been an increase in the cost of electrical installation, which has been offset by savings elsewhere and a reduction in the contingency. The delivery of the Glen Sannox is now planned for a date in the range of April 2022 to June 2022. The delivery of 802 is now planned for December 2022 to February 2023.
Beyond the work on the vessels, significant progress has been made on building a more robust business at the yard. Good progress has been made in rebuilding the morale of the workforce, and communications with the workforce have improved. There has never been any question about the quality of the workforce, and I would like to thank all the members of the workforce for all their efforts to get the yard back to work.
The yard is addressing a number of legacy issues. Planning and work sequencing have been upgraded. Further improvements in design control and the supply chain will allow many of the barriers to effective working to be removed. We expect physical distancing policies to have an effect on productivity, but we anticipate that that will improve as the yard adapts to the new working practices.
I am pleased to report that several key vacancies have been filled by permanent appointments that will reinforce the professionalism that Tim Hair, the turnaround director, brings to the job.
I have appointed a new board of directors to the business. The new board will provide the leadership that is required to take the yard into the future. Members of the board bring the diverse range of skills and experience that is needed to support the turnaround of the business and completion of the ferries.
Key to the future is ensuring that there is direct workforce representation to the board. The workforce voice must be heard and listened to, and the workforce must be actively involved in discussions on how that can best be achieved. I have asked the board to establish a workforce liaison committee, which will be made up of a cross-section of the workforce. The committee is designed to engage with the board and to encourage the workforce to engage more effectively across the different areas of the company. Trades union representatives can attend each board meeting to address the board on any issues on which they feel that it is necessary for them to do so. They will be accompanied by the chair of the workforce liaison committee. That will be a standing item on the agenda. The board’s commitment to fair work practices is central to the successful turnaround and future sustainability of the yard.
The future of the yard goes beyond the completion of hulls 801 and 802, and management capacity is being built to enable a focus on winning new work. Ferguson Marine has received approaches to bid for work, which is an encouraging sign that market confidence in the yard is starting to return to where it should be. The yard’s approach to winning work will be based on its strengths and capabilities, targeting vessels that are sufficiently complex to optimise capacity and the skills of the workforce.
The Scottish ministers are exploring the potential benefits and challenges around the direct award to Ferguson’s of future contracts for Scottish Government vessels. A direct award is not a given, for a number of complex legal, financial and structural reasons. We are investigating what might be possible, but we are clear that demonstrating improved efficiency and completing the turnaround that we initiated last year will be key to the yard securing work, public sector or otherwise.
The year has been hugely challenging for the business. In line with what has happened to much economic activity across Europe, the Covid pandemic has essentially closed the yard for six months. Despite that interruption to business, much has been achieved. The turnaround director has significantly strengthened the senior management team, I have appointed a new board to help to drive the business forward, trades union representatives have direct access to the board and a workers liaison committee is being set up. Vessel design has progressed significantly, and the dry-dock inspection of 801 demonstrated that the paintwork is sound.
Work to complete the ferries can now proceed at full speed, and I believe that we can look to the future of Ferguson’s with confidence.
The cabinet secretary will take questions on the issues raised in her statement. I intend to allow around 20 minutes for questions, after which we will move to the next item of business. It would be helpful if members who wish to ask a question would press their request-to-speak buttons.
I thank the cabinet secretary for advance sight of her statement, which does not take us much further on. It does not tell us much that is new. We still know that the cost of the ferry debacle is around three times what was originally forecast. The ferries will be five years late. It is a shambles. I understand that Covid-19 has had an impact; of course it has. I also express my thanks to the workforce at Ferguson’s. They deserve thanks from us all. But this is a shambles.
The statement is interesting for what it says, but it is also interesting for what it does not say. It does not say anything about the costs mentioned in a story that appeared over the weekend. That story suggested that when the former Cabinet Secretary for Finance granted a £30 million loan to Ferguson Marine he knew that the shipyard was in financial difficulties and that the loan would create a path to nationalisation. The Parliament, however, was told that the purpose of the loan was to help the shipyard to diversify.
What did the Government know when Ferguson Marine was given that loan? What did it know about the company’s financial position when that loan was granted?
I thank the member for praising the workforce. It does not help that workforce to hear what is happening at the yard being denigrated.
The enquiry that is taking place in the Parliament will address what happened and many of the issues that Graham Simpson has raised. My job as the economy secretary responsible for Ferguson’s is to make sure that the company is in a position to complete the ferries, to secure the yard and, most importantly, to secure the future of the 350 workers at the yard and the 350 workers who are part of the supply chain.
Those who know me and have worked with me as a cabinet secretary know that I will be as open and as detailed as I can, as will the Government. The information that the Herald newspaper had is not new. It is not a revelation. The Parliament had that information back in December, in the detailed report published by the Government to give that information. If the member wants more information about the loan, I refer him to paragraph 137 of the written statement that the Government provided to the Parliament and to its committee on 12 August.
It is not unusual for Governments to look at support for businesses, either in the form of an unsecured loan, as for the £15 million, or as a secured loan, as for £30 million. The information about those two loans was supplied to the Finance and Constitution Committee on, as I recall, 24 April 2018 and 27 June 2018. The committee could decide whether it wanted to know whether those loans were secured or unsecured.
I return to the update that I provided. The turnaround director that we appointed has produced a response and an update to the Parliament to ensure that we know about the route forward for the two ferries and the improvements that are taking place at the yard. Those improvement will give us the satisfaction of delivering the ferries, which would never have been produced under the Conservatives, who wanted to have the vessels built in South Korea.
My job is to make sure that the yard has a future. It will have a stronger future if the Parliament gets behind and supports the workforce, and the future work that we want to secure for the yard.
I thank the cabinet secretary for advance sight of her statement.
The ferry fiasco strikes at the very heart of this Government’s incompetence. Contracts for the two ferries were signed in 2015, and the First Minister told us then that there was a fixed price of £97 million for delivery in 2018. More than four years later, in December 2019, we were told that the additional cost to complete the two ferries—over and above what had already been spent—was estimated to be between £110.3 million and £114.3 million, with delivery of one ferry by the end of 2021 and the second by October 2022.
Today, we are told that there are further costs of £3.3 million, albeit that they are Covid related, with delivery dates now as late as June 2022 for one ferry and February 2023 for the second. Those costs are Covid related, but the overall price tag has doubled since the contract was signed, and it is nearly five years late.
For the benefit of any doubt, will the cabinet secretary confirm the total bill for the two ferries—not the additional costs but the total cost? Who does she believe is to blame for this fiasco? We know that it is not the workforce, who should be on the board and not just attending the board meetings. Does the Government take any responsibility whatsoever for this scandal?
I thank the member for his support for the workforce. My responsibility is to come to Parliament with an update. We have had a Covid interruption. The matter has been of interest to the Parliament and it continues to be so. It is important that we know what the changes are. There have undoubtedly been changes because the yard was closed because of Covid. I do not think that the accusation that the Government is responsible for the disruption is accurate or needed.
I have gone through the changes and reflected the significant improvements that have taken place in the past six months, since the previous update was provided to the Parliament, and that is what I am reporting on today. We will let the committee hold its inquiry into the past; I am looking at where the yard is today but also—and most importantly—at where it can be tomorrow.
The member asked about the figures. As I indicated, the build figures have not changed since the update six months ago. There have been some increases for electrification, but they have been offset by savings that have been made elsewhere.
Given the project management in particular, but also other things that have been introduced by the turnaround director, I am confident that we can make sure that the ferries are delivered. The most important thing is to support the communities that are reliant on the ferries. I share the member’s frustration given that those communities wanted the ferries to be delivered earlier.
We understand that there have been disputes between CMAL and FMEL. There were issues and concerns as far back as February 2016. For example, the quarterly report from CMAL to Transport Scotland for February to April 2016 shows that, even then, there was a delay of seven weeks to the hull structure drawings by FMEL. That involved the bulbous hull that has now been replaced, as I reported in the update. That is a significant development. Graham Simpson obviously does not know much about shipbuilding if he does not realise that the changes and developments that have been taking place in the dry dock over the past six months are significant and are important to the completion of the ferry.
Let us get behind the workforce. I am sure that Mr Smyth wants to do that, but let us give them confidence that they have this Parliament behind them.
I thank the cabinet secretary for her statement and I reiterate the thanks of my community and my constituents for saving the yard and the jobs in my community. Given what the Tories and the Labour Party are saying today, they seem to think that it is a waste of money.
In her statement, the cabinet secretary spoke about the 26 apprentices. Can she provide further information on any further apprenticeship schemes that the yard will be considering for the future?
One of my first appointments as economy secretary was to visit the yard in February, just before the lockdown. I was extremely impressed by the confidence that the trade union representatives and the workforce have in the apprentices and the future of the yard, and by their support.
The yard set out to recruit 24 apprentices this year in several of the trades in the shipyard. The calibre of the candidates was excellent and the yard has expanded the programme to add two extra apprentices on a technician route that is intended to take them into the engineering department at the end of their apprenticeships. That brings the total to 26, as I mentioned in my statement. Next year, the yard hopes to be able to expand the programme to offer graduate apprenticeships.
Jim McColl, who is still an economic adviser to the Scottish Government, has predicted that the total cost of delivering the two ferries will exceed £300 million. If he is proved right, will the cabinet secretary resign?
I am not sure that predictions will be as accurate as the well-meaning Mr McColl may have set out. It is nowhere near where we are. It is an exaggeration, and it is wrong to try to impose a prediction when I have just made a statement to members that talked about efficiencies and said that, despite the pressures, the yard is focused and is on a mission to complete those ferries in a far more efficient and productive manner than had been the case previously.
As I am sure those who have visited the yard know, project management was an issue. Work that was done on the basis of the concept design rather than the basic detailed design will have cost money. We all know that the cost had increased. We can see the reasons for that, for example building on concept design rather than the basic design, as we have seen in relation to the need to replace the bulbous bow. The ordering and sequencing of some of the project in the past will have cost money.
That is not the way forward. As I have set out, the way forward is shown in the update report, which members have received and can study. It has shown the improvements that have taken place, even in the past six months, as a result of the implementation of the plans that were put forward by the turnaround director. I have confidence in that, as I hope the Parliament can. I understand the scepticism, because of what has gone before, but my job is to make sure that the plans can go forward, with confidence.
I welcome the cabinet secretary’s update. Had the Tory internal market been in place, Ferguson Marine—and, indeed, Prestwick airport—would no longer be in business, due to the loss to the Parliament of state aid powers.
My constituents are keen to know not just when the Glen Sannox will be delivered, but when it will begin to serve the Ardrossan to Brodick route. Will the cabinet secretary advise?
The delivery of the MV Glen Sannox is planned for between April and June 2022. It will sail on the Ardrossan to Brodick route. As members know, that will relieve pressure elsewhere. It is important that we support that development—I know the importance of reliable ferries, including for tourism, which we need to get back on track.
We need to make sure that we have the ferries delivered on time, and not to forget that, although the work supports the yard and the jobs to which I referred, the purpose of the ferries is to support our island communities. I want to make sure that Arran, whose very vibrant economy is based on tourism, can return to that, with the support of the new ferry, and with the other support which has been taken forward by Fergus Ewing and the Scottish tourism recovery task force.
The workforce has already been badly let down by the Scottish Government. Will the cabinet secretary guarantee to protect the jobs and apprenticeships that she talked about in her statement? In the interests of transparency, will she also come clean on the total cost of the ferries and, given the length of time that communities have had to wait for those, will she now start planning the renewal of the rest of the fleet?
That is a very important question. My colleague Paul Wheelhouse is looking at the development of future ferry services. That is important for going forward and looking to the future.
I have given the update on costs. The cost envelope has not changed, so we will be holding the yard to account on that.
On Rhoda Grant’s points on jobs, there has been an increase in the number of people who are employed at the yard, as detailed in the update report which I have published today—again, that should give confidence that there is a future there.
On skills, I reported the view of the yard that it wants to increase the number of apprentices—in particular, of graduate apprentices.
I hope that those explanations will reassure the member. I appreciate her question.
I thank the cabinet secretary for early sight of her statement. However, to my constituents, who await many replacement ferries, it is just more words. I appreciate of course the efforts of the workforce.
In preparation for the Rural Economy and Connectivity Committee work on the issue tomorrow, the Scottish Parliament information centre produced a briefing, which states:
“It is worth noting that the loans provided by the Scottish Government to Ferguson Marine were not contractually linked to the ferry contract, as Scottish Ministers were not a party to the vessels contract or directly involved in the contract dispute”.
We are also told that CMAL did not know. However, ministers are responsible and accountable for public money in governance. The political oversight is the flaw in this whole sorry saga. Given that the delivery milestones were clearly not met, where was the loan funding spent?
On the first set of loan funding, I refer the member, if he has not had a chance to read it—I am sure that all members of the REC Committee will have read it—to the written statement that was published on 12 August and sent to the committee. Paragraphs 137 and onwards of that statement talk about the commercial loans. The first commercial loans were to provide working capital to ensure that, as an account managed company, Ferguson’s had support for the continued work. He will also know, having studied this, that there were serious issues about cash flow for the company. Paragraphs 139 and 140 set out what the different loans were for. The second loan was to ensure the stabilisation of the company and the development of the yard, and to enable the diversification into other contracts and markets that we would want to see. The full explanation that the member seeks is in the written statement that was provided to the committee. I remind members that my statement today is about the future and what has happened in the past six months but, obviously, there is the on-going committee inquiry, to which the member has referred.
I am sure that the minister accepts that it is reasonable to ask questions about what is now a four-year delay to two ferries and the impact on long-suffering passengers. The Government orchestrated the ownership of the yard on two separate occasions. I know that the minister does not want to look back, but what lessons has she learned for the future from this episode of construction being over budget and delayed, and passengers waiting even longer?
I absolutely agree that there are lessons to be learned. That is why we welcome the inquiry that is taking place, which will look at the situation and how it developed.
Coming into post at this stage, I can reflect on some of the issues. Certainly there are issues around governance, and I am sure that the committee will make recommendations on that as part of its inquiry. I concluded that, given the public nature of Ferguson Marine (Port Glasgow), it needs governance of the nature of a board. I have appointed that board since coming into post and its members are in place.
Many members, particularly REC Committee members, have visited the yard and have seen that some of the work has been out of sequence. I referred previously to issues such as build being produced potentially to meet milestones and therefore cash-flow payments—we know that cash flow has been an issue. Doing that on conceptual design, not on basic detailed design, is also an issue that should be looked at. There are undoubtedly a number of issues to be considered, but I hope that, as I said in my update report, we can focus on where the yard goes next.
Accountability is what the Parliament is about, and if the inquiry can give perspective and make recommendations on some areas, there will be lessons learned. However, what is most important is that we reflect on the fact that we have saved the yard and the jobs, and we are making sure that the ferries will be built. In other circumstances, had we taken different decisions, there would be no yard or jobs and those ferries would still not have been built.
As the cabinet secretary appreciates, the delays to vessel 802 at Ferguson’s have been a source of frustration, if I may put it so understatedly as that, to my constituents in Harris and Uist. The vessel will be very welcome indeed, although as the cabinet secretary will appreciate, the vessel not of herself solve CalMac’s capacity problems. Can the cabinet secretary say more about the Government’s ferry procurement intentions beyond the two vessels currently being built at Ferguson’s?
I understand that my colleague Paul Wheelhouse will say more about that to the committee tomorrow, which the member will clearly have an interest in. We obviously know about the impact on communities of the delays in delivering the ferries, which I have referenced previously, and on the CalMac crews operating the existing fleet. That is a point that Mr Wheelhouse discussed with the unions last week. We continue to mitigate that impact with investment in fleet resilience. The member will be aware that the funds that we have made available have been reported on several times already to the Parliament. I reiterate that CMAL continues its search on the open market for any second-hand tonnage that might become available.
In addition, we are progressing with further investment plans on fleet replacement—the new Islay vessel is expected to go to tender early next year—and work is on-going on the vessel replacement and deployment plan, for which Mr Wheelhouse is responsible, as I said.
The reality is that Scotland needs at least a dozen new vessels to service our island communities. Given that the first two new vessels are already nearly five years late, how confident can our island communities be that the Government will deliver on a pipeline of new ferries? Since the Scottish National Party Government took ownership of the yard, how many new contracts has it signed?
The yard has delivered on the ferries and vessels on which it has been contracted to deliver. As I said in my statement, it has also been approached for new work. On the demand for new vessels, Paul Wheelhouse is taking that issue forward as part of the vessel replacement and deployment plan, as I said.
As far as lessons are concerned, an issue that has come through loud and clear in all the evidence that I have seen is standardisation, which would help in relation to future procurement of vessels.
There are issues to do with whether we can embark on direct procurement. Throughout this period, we have been consistent in ensuring that, whatever the shape or form of the yard’s ownership, we are state aid compliant. The need for that applies to publicly owned companies as it does to other ownership models.
The member makes an important point: as part of our plans for the future, we need to make sure that we have the ferries that are required. Lessons that we can learn from the past, such as lessons on standardised design, will help.
The cabinet secretary knows that, under previous management, materials were stored off site in poor conditions, in an unmanned location. Will she say how the relocation of stock is going and whether the inventory and new stock control procedures are in place?
The member is reflecting on the serious concerns that there were before about the state of the inventory and where it was being held. An inspection of the inventory started prior to the Covid lockdown, but it was considered that the inspection was not essential during that period. It has now restarted—I provided information about that in my update today. It is important that the inventory is secured in an improved state and that there is better stock control than there was previously.
The systemised project management approach will help in the delivery. The efficiency changes that I mentioned are set out in detail in the update report that was published today.
This is a long-running saga, and a lesson that we should already have learned is that meaningful engagement with the workforce has been key to the transition to public ownership and to making progress with the vessels.
The interim board had worker representation, and GMB Scotland was disappointed that the cabinet secretary’s first act was to remove worker representation from the board. A workforce liaison committee is a blatant attempt to get round union representation. Have the cabinet secretary’s proposals for the board been negotiated with the recognised trade unions, or is the Government simply imposing its preferred way for workers to be represented? Are not the workers entitled to full board membership and to decide who represents them on the board?
I think that the member is confusing the project review board with the board of governance that I have established. The project review board was brought in to ensure that we could plot the way forward so that there was a plan for when the turnaround director made the changes about which I have just updated the Parliament. The trade unions have been very supportive of the approach of the turnaround director and what has happened over the past six months.
On 9 July, I spoke to local trade union representatives and the GMB to explain the process of what will happen with the new board of governance and its terms. If trade union members were to be members of the board, they would have the associated fiduciary responsibilities and liabilities. Trade union representatives, as endorsed by the local workforce, will attend each meeting of the board to raise any issues that they want to raise. That is in addition to the workforce liaison committee, which will embrace a wider group of workers at the yard, not only those that are on the workforce of the yard itself. Depending on the choices that the workforce makes, those two groups might be made up of the same people.
I will continue that productive relationship with the workforce, and I hope that, in explaining the difference between the project review board and the board of governance, I have given the member a satisfactory answer to his enquiry.
As someone who project directed his first multimillion pound project—one of many—some 40 years ago, I note that inadequate project management appears to have been a primary factor leading to the commercial failure at Ferguson Marine. What steps can be taken to minimise the chance of such difficulties arising again, and what lessons in project management are there for other civil engineering projects, and other engineering products in general, that are placed by the Government?
The on-going committee inquiry will consider different issues, including project management. The member is correct to draw attention to that. Ferguson has contracted a team of specialist planners from Alliance Project Controls to upgrade its planning systems. It has introduced proper project planning controls into the work of the Ferguson team. Significant progress has been made and the yard will implement the new planning regime in September 2020. The introduction of project management systems is well under way, and credible monthly reports are now being produced. Ferguson has extensive process improvement work under way.
There are seven disparate systems required to run the business, and the system integration task is a major challenge. A head of business improvement has been appointed to lead the implementation of the inventory control system that I referred to in answer to Maureen Watt’s question. That is another key change project. Process mapping is under way; that is designed to provide an effective quality management system with clear and understandable business processes.
I am sure that all Scottish businesses could learn lessons from Ferguson’s approach and what it has managed to do in the past few months.