£130m of taxpayers’ money ‘lost’ by shipyard

Ferguson executives can’t explain where it was spent

BOSSES at the nationalised shipyard firm Ferguson Marine have admitted they cannot trace where £128.25 million in public money meant to be used to build two lifeline ferries was spent.

Inquiries over the company into the ferry building scandal by Scotland’s Auditor General Stephen Boyle have failed to uncover what happened to the money.

He said existing records relating to transactions were “not organised or categorised”.

Public spending watchdogs at Audit Scotland have admitted they were unable to trace how a Scottish Government £30m loan to shipbuilding firm Ferguson Marine Engineering Limited (FMEL) was spent.

At the centre of the continuing row is the awarding of the contract to tycoon Jim Mccoll’s FMEL and the soaring £340m costs and delays of over five years over the completion of the ferries which remain at the Inverclyde shipyard.

David Tydeman, chief executive of the now nationalised Ferguson Marine (Port Glasgow) told The Herald they have not sought to evaluate old files because they “do not add value to the planning or budgeting work still needed to complete the vessels”.

It comes as the SNP’S deputy leader Keith Brown said he had “nothing further to add” after coming under fire by MSPS in a ferry inquiry for ducking questions about issues over the awarding of the controversial ferry contract to FMEL.

Mr Mccoll, one of Scotland’s richest men, who had acquired Ferguson Marine assets out of insolvency in 2014, saw the shipyard firm fall into administration in August 2019 and nationalised by the Scottish Government.

It followed a dispute with Caledonian Maritime Assets Ltd (CMAL) – the taxpayer-funded company which buys and leases publicly owned Calmac’s ships on behalf of the Scottish government over the construction of the muchdelayed ferries under a £97m contract. The bill for the ferries has now reached around £340m.

When Mr Mccoll’s FMEL entered administration in August 2019, it had received £83.25m in milestone payments from CMAL and £45m in loan payments from the Scottish Government – yet the vessels were largely incomplete.

MSPS on the public audit committee launched an inquiry after a damning report from Audit Scotland about the process of awarding of the ferries contract and the subsequent arrangements for delivery.

Its probe found that ministers went ahead with the contract despite the concerns raised by CMAL over the lack of financial guarantees that placed them at risk.

The auditors’ examination of the issues said there was no documented evidence to confirm why Scottish ministers were willing to accept the risks of awarding the contract despite the concerns.

The Auditor General Stephen Boyle made inquiries as MSPS sought to establish where FMEL

spent the £128.25m of public money but got no joy from the state-controlled shipyard company.

Mr Boyle said FMEL spending had been outwith the scope of his previous examination as it did not include private sector organisations.

He then explored his “rights of access” to the records now the shipyard firm was nationalised at the end of 2019 to become Ferguson Marine Port Glasgow (FMPG).

He said: “Ferguson Marine Port Glasgow (FMPG) has advised us that it holds FMEL’S records, as required by the Sale and Purchase Agreement between the two bodies.

“FMPG advise that these records exist in both digital and hard copy forms, but they are not organised or categorised. The Sale and Purchase Agreement does not require FMPG to review these records and FMPG has informed us that it has no plans to do so.”

He has told MSPS: “FMPG is therefore not aware of what information exists and indeed whether this information will explain how FMEL spent the £128.25m.”

Audit Scotland, in its inquiries, had looked into what happened to a £30m loan provided by the Scottish Government to FMEL.

But the watchdog said that while consultants Pricewaterhousecoopers was providing the Scottish Government with reports on FMEL spending, they did not go into detail on where the money went, so were “unable” to trace exactly how that money was spent and what progress was made on the vessels as a result.

Watchdog officials say that without a builder’s refund guarantee in place, there was no link between the payments that CMAL was making and the quality of the build.

Mr Boyle has previously said that the lack of a link between milestone payments and quality or progress was the industry norm for shipbuilding contracts but was said to be at odds with other large public sector infrastructure contracts.

In response, Mr Tydeman said he understood that the files and other information that related to the stage payments paid to FMEL for the construction of the two vessels rested with CMAL.

“We have not sought to evaluate the old FMEL files, because they do not add value to the planning or budgeting work still needed to complete the vessels, which is where we are directing our efforts for earliest completion,” he said.

One ferry user group official said that the FMPG response was “baffling”.

He said: “Surely there is a public duty to get to the bottom of precisely how this money was spent, considering that we are still waiting for these ferries to be delivered.”

It comes as the SNP’S deputy leader said he has “nothing further to add” after coming under fire by MSPS in the inquiry for ducking questions about issues over the ferry contract.

Richard Leonard, convener of the Public Audit Committee, which launched an inquiry into the events surrounding the award of the contract for two lifeline ferries in October, 2015 has previously raised “concern” over Keith Brown’s responses over the scandal.

The committee has been examining public spending watchdog Audit Scotland’s findings, that included that the £97m order was given to Ferguson Marine without the normal builder’s refund guarantees, which would protect the vessel procurers CMAL if anything should go wrong.

Mr Brown, the justice secretary who served as infrastructure secretary with responsibility for ferry services while the contract was awarded to Ferguson Marine, has come under fire from the committee convener for the level of answers he has given about his knowledge surrounding the contract. Mr Leonard wrote to Mr Brown saying the committee expressed “concern” over his responses to various questions, including that he had failed to explain what information former minister Derek Mackay shared with him about the status of the procurement of the ferry vessels, and specifically whether he raised any concerns before going on annual leave during the summer of 2015, before the contract was finally awarded.

Mr Brown responded saying: “I have, as requested, reviewed my responses to the three questions put by the committee and I am content that those responses are accurate and that I do not have any further information to provide.”

He reiterated a previous

Scottish Government stance that ministers were not aware of the potential issues with the contract at the point the decision on the preferred bidder was made in August, 2015.