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To the Cabinet Secretary for Infrastructure Investment and Cities – In the absence of Mackay will you please sign the bloody contract for the two ferries?? Part2

Financial issues

  1. The contract value is £96m. This is higher than the £80m included in the VRDP – which will be updated prior to publication – and the revised estimate of £90m included in CMAL’s 3-year Corporate Plan, which has already been published.
  2. This capital funding commitment will fall over 3 financial years to 2017-18 and has been submitted to Scottish Government Finance for consideration. The cost in 2015-16 can be covered from within the capital allocation to the Ferries Budget. The cost in 2016-17 will however require an increased capital allocation of around £20m.
  3. Capital funding will be provided by loans from Transport Scotland to CMAL, repaid with interest over an agreed period , usually 25 years. An initial business case was drawn up by CalMac to inform the recommendation to initiate the procurement by CMAL. This is currently being updated to reflect the increased capital cost. Over the estimated 30-year lifetime of these ships, the capital cost represents a small share of overall costs.

Presentational issues

  1. Subject to Ministerial approval and the clearance by SG Finance of the in-year and future funding commitments, CMAL will formally offer the contract to FMEL on 31 August which will be confirmed following the statutory 10 day standstill period. An initial announcement can be made to coincide with the formal offer, in agreement with the shipyard, rather than waiting for the 10 days.
  2. Given the significance of the award in respect of Scottish Government investment in the ferry fleet, retention and creation of jobs at a resurgent Ferguson shipyard and the scale of the costs, we will work with Press TS colleagues and CMAL to ensure maximum positive publicity from this significant announcement. We will ask Press TS to lead on a Communications Plan.
  3. It would be appropriate for Mr Mackay as Minister for Transport and Islands to lead on this announcement, highlighting the benefits to the islands as well as the jobs and training opportunities in Inverclyde.
  4. 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.

Recommendation

  1. We recommend that you approve the award of the two shipbuilding contracts by CMAL to Ferguson Marine Engineering Ltd.

Transport Scotland Ferries Unit 20 August 2015

Copy List:

Minister for Transport and Islands

DG Enterprise, Environment and Innovation
PS/Transport Scotland

David Middleton, CE, Transport Scotland
TS Directors

Alexander Anderson, Special Adviser to the First Minster

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