CalMac directly awarded new ferry service contract

The Scottish government said the service would now be focused on a "public service model"

The contract to run Scotland's west coast ferry services in future has been directly awarded to the existing publicly-owned operator CalMac Ferries Ltd.

The Scottish government said the service would now be focused on a "public service model" instead of being run on a commercial basis.

The latest contract for the Clyde and Hebridean Ferry Service (CHFS) had been due to expire last September but was extended by a year.

Ministers had indicated that a direct award, without a competitive tender, was their preference, but they needed more time to ensure this could be done without a legal challenge.

No details of the contract's value or duration were given, but the previous eight-year contract for the heavily-subsidised ferry service was worth £975m. One estimate has suggested a subsidy of £3.7bn over 10 years would be required.

CalMac is the UK's biggest ferry operator and has held the most recent contract to run the routes since 2016, serving 50 destinations.

But the firm has struggled in recent years to maintain services with an ageing and increasingly unreliable fleet which it leases from another government-owned firm.

Since 2007 the ships and some of the harbours it relies on have been owned by Caledonian Maritime Assets Ltd or CMAL, in a move designed to comply with EU competition rules.

Delays in replacing the older vessels, in part due to the problems with two new dual-fuel ferries ordered a decade ago, have stretched the service almost to breaking point, with many vessels beyond their expected service life.

Transport Secretary Fiona Hyslop says a new public service model will improve services

Transport Secretary Fiona Hyslop confirmed the direct award in a written parliamentary answer, saying it signalled a new approach to ferry services.

She said: "This direct award fundamentally changes the ethos of the service by shifting from a commercial arrangement to a model more focused on the delivery of a public service engaged on the particular needs of the communities it serves.

"I fully expect the direct award to be a catalyst for positive change across the Clyde and Hebrides network, based on a more efficient, flexible model of delivery that fully reflects community interests."

'Unbundling' debate

The contract for the Clyde and Hebridean Ferry Service routes is offered as a single "bundle" which the government says has the advantages of protecting less profitable lifeline routes and delivering economies of scale.

Critics of that choice have argued that unbundling certain routes and allowing competitive tender would encourage efficiencies.

The Northlink routes to Orkney and Shetland are currently operated by privately-owned Serco, with the government setting fares and service levels and paying the firm a subsidy to make up the difference between costs and revenue.

CalMac chief executive Duncan Mackison welcomed the emphasis on treating the Clyde and Hebridean routes as a public service.

"During the extension period for the current contract, we recognised the need for change and are already driving change through the expansion of local teams, enhanced community engagement and improved responsiveness to local requirements," he said.

"This work will allow us to hit the ground running when the new contract starts and, with six major and seven small vessels joining the fleet between 2025 and 2029, our capability to deliver a resilient, reliable service for all across the Clyde and Hebrides will grow."