CalMac directly awarded £3.9bn ferry service contract

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

A new £3.9bn contract to run Scotland's west coast ferry services for the next 10 years has been directly awarded to the state-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 current contract for the Clyde and Hebridean Ferry Service, already operated by CalMac, 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 legally.

The previous eight-year contract for the heavily-subsidised ferry service was worth £975m.

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, a division of roles which was prompted by concern about 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 now beyond their expected service life.

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

Transport Secretary Fiona Hyslop said the direct award to CalMac signalled a new public service model rather than treating it as a commercial contract.

She said this would lead to change that better served the needs of island communities, and she denied it would be seen as a reward for failure.

She told BBC Scotland News: "There are over 170,000 sailings. There have been cancellations, some for technical reasons, some for weather reasons, but the vast majority of CalMac's sailing are delivered very well indeed.

"If you talk to islanders the support for the frontline services of CalMac staff is very appreciative."

CalMac provides services to about 50 ports with a fleet of 35 vessels

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

He said: "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.".

The Clyde and Hebridean Ferry Service contract 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.

Hyslop said it was the government's intention to continue putting the Northern Isles services out to competitive tender.

Wider reform call

Trade unions have backed the direct award of the west coast routes with the RMT union calling for a "People's CalMac".

The unions have, however, been critical of the government's approach to ferry procurement which has left CalMac with ageing vessels prone to breakdown.

The GMB union also contrasted the direct award to CalMac with the recent £160m small ferries contract that went to tender and was won by a Polish firm rather than the nationalised Ferguson shipyard in Port Glasgow.

GMB Scotland general secretary Louise Gilmour said the government should now merge CalMac and CMAL to encourage a more joined-up approach focused on supporting both ferry services and Scottish industry.

"Our islands' need for reliable and modern ferries can drive a healthy and secure shipbuilding and maritime sector," she said.

"It seems an obvious ambition with significant economic benefits and one that should not be beyond Scotland's capabilities to deliver."

The Scottish Conservatives said the direct award provided continuity but that CalMac would continue to struggle unless the government provided it with a resilient fleet.

The party's transport spokeswoman Sue Webber said: "Islanders have been betrayed by the SNP time and time again, and any ferry provider is only as good as the fleet it has to work with."

Scottish Labour welcomed the direct award but said "SNP mismanagement" had caused years of ferry chaos. Transport spokesperson Claire Baker backed reform of "confused governance structures".

For the Liberal Democrats, economy spokesperson Jamie Greene questioned the decision to award the contract without a competitive tender.

He said: "The big concern people have with this direct award is that without a competitive tender process, there is no way to hold the incumbent operator to account on its many promises to improve services."

Only three new large vessels have joined the CalMac fleet since CMAL took over ferry procurement 18 years ago, but a number of new ships are currently on order.

The long-delayed MV Glen Sannox built by the Ferguson shipyard entered service in January and work is continuing on its sister ship MV Glen Rosa.

Four other large ferries being built by a Turkish shipyard are also delayed but the first of those, MV Isle of Islay, is due to be delivered this summer with the other ships arriving at six monthly intervals after that.

A contract for seven electric-powered small ferries was awarded to the Polish firm Remontowa in March, with the first of them due for delivery in 2027.

Procurement for three more small vessels is expected to begin later this year.

The CalMac name and brand, including the red funnels and lion rampant logo, is actually owned by CMAL but is licensed to whoever operates the Clyde and Hebridean Ferries Service contract.