Official Report 557KB pdf
Welcome back. Our third item of business is an evidence session with Ferguson Marine (Port Glasgow) Ltd. Today’s session is our final opportunity before dissolution to examine the progress of the delivery of MV Glen Rosa and discuss current issues relating to the MV Glen Sannox. We will also consider the announcement that the Scottish Government plans to directly award to Ferguson Marine contracts for four further vessels. From my point of view, this is a culmination of 10 years of looking at the Glen Rosa and Glen Sannox ferries, none of which has been particularly great as far as delivery is concerned.
I welcome Duncan Anderson, chair; Graeme Thomson, chief executive officer; and David Dishon, chief financial officer. Thank you for attending. My notes say that I have to congratulate Duncan on his appointment as chair. I am not sure whether the congratulations will last for more than a year, but we will see.
Duncan, you have an opening statement.
[Inaudible.]
We cannot hear you yet. Hold on. Let us just wait until I get the nod.
Is that better?
Yes, it is definitely better, because we can hear you. Off you go.
Thanks, convener. As you pointed out, I am the recently appointed chair of Ferguson’s. I joined as a non-executive director in March last year. Although we are here to talk about the ferries Glen Sannox and Glen Rosa, it is probably also worth my pointing out, as a new chairman, the potential of this shipyard on the Clyde. With an effective modernisation programme and improved build processes, it could be a leader in the industry. It may not seem like that now, but it is entirely possible.
The past management of vessel construction has involved mistakes, largely due to the use over several decades of poor or outdated shipbuilding techniques. The staff have remained hard working and dedicated to their jobs—which is remarkable, in my view—despite having been driven to those poor practices and without a clear future for the yard prior to recent announcements. That said, the governance and management of those workers’ tasks have been very poor indeed, and it appears that we have built the ships twice. The logical sequencing of workbacks and processes was historically poorly thought out and poorly implemented. That has been and will be our main challenge with Glen Rosa until its delivery.
We seek to dismantle those poor practices and implement new ones, while keeping the processes and tasks clear for the workforce. With the appointment of a new senior management team, I have seen considerable changes in the yard and much improvement. However, decades-old problems and neglect of support for commercial shipbuilding in the United Kingdom cannot be repaired in months—it will take years.
There is a shortage of trained and experienced workers and subcontractors in the shipbuilding business environment in general. Across the UK, the shipbuilding sector has brought in a considerable amount of foreign labour to compensate for that. Ferguson’s shipyard, however, remains committed to training and developing the young people of Inverclyde and beyond.
The processes and the on-board build management for Glen Rosa have improved a great deal in recent months, but we remain in recovery mode for the build, with a hull that has been in the water for too long and machinery that has been dormant in the vessel that should have been commissioned a long time ago.
That said, we are getting over those challenges. We are powering up the switchboards as we speak, and we are close to full engine commissioning as per the recent schedule, so the last of that long-term legacy is being overcome. We look forward to delivery in the fourth quarter of this year as we move into our modernisation programme.
We also look forward to working on the new vessel projects that were recently announced in the Parliament. We will turn FMPG into an efficient and profitable shipyard that supports both the local community and the resurgence of commercial shipbuilding in Scotland, and into a business that people can be proud of again.
Thank you for the opportunity to make that statement, convener. Graeme Thomson, David Dishon and I are happy to answer any questions that the committee may have.
Excuse me, but I will start off by saying that that is the fourth time I have heard that speech. I heard it when I went to Clyde Blowers, I heard it when I listened to Tim Hair and I heard it from Graeme Thomson’s predecessor. Those speeches were almost exactly the same.
In the previous parliamentary session, the Rural Economy and Connectivity Committee charged Ferguson Marine with updating it on the build of the Glen Rosa and Glen Sannox. That issue has been passed on to this committee, which is the logical successor committee. I have to say that the reports that have been delivered to this committee have, over a period of time, become progressively weaker, thinner and more off timescale. In fact, that resulted in this committee sending a letter on 2 April 2025 to Ferguson Marine—David Dishon dealt with that letter. We got a holding response telling us that Graeme Thomson would be in post and that we could not get a full report until then because it would be unfair on him. There seems to have been some speculation in the press about who authorised and suggested that response.
We then got a response on 13 May last year. That letter was written by you, Graeme Thomson, once you had had a chance to get your feet under the desk and to work out what the situation was. I would suggest that the report in your letter was fairly upbeat. You said that the work would be on time, and, in the third last paragraph, that costs would increase to £172.5 million, with a £12.5 million contingency. We were then told this January that costs would increase to £197.5 million and that delivery would not be on time.
Graeme, what am I to believe? Everything changes. It seems like quicksand. Having looked at the vessels for 10 years, I have to say that my frustration is huge. Will you explain why your letter of 13 May was so fundamentally wrong on price and on the delivery date?
First, I would say that, in the letter of 13 May, I diligently reviewed the schedule and costs, aware of the appetite and keenness for a response on where the schedule and costs had got to, which the committee had requested. The aim of my review was to check the logic, the flow of analysis and the way that the budget had been developed. As I had been in post for eight days, that approach had a logic that I could follow and understand and was, I think, appropriate—at the level that was appropriate for the eight days that I had been in post—allowing me to say that I was satisfied that the work that had been done was sound, based on the information that I was presented with. Therefore, I had confidence that that was a good, rigorous process.
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Subsequently, as I became familiar with the yard—I spent months working in the yard—it became evident that systemic and latent issues prevailed in the business and needed to be addressed. I have made a number of changes, which I am happy to talk about separately, to address those issues.
However, fundamentally, what has now caused the schedule to move is the fact that, when we went into the dry dock, as we planned to, in July and August 2025, we identified excessive and beyond recognised corrosion in the stern tube and on the hull. Those were brought about mainly by the ship having been stagnant in the water for so long, which I understand is an issue in itself, and the quality of the cathodic protection that we put around the vessel at the time. We identified that we had to take recovery action. The window for that was not available in the dry dock that we had in July and August, so we had to assess the full scope of the work, understand how it would fit into a future schedule, which we would have to develop, and then align the availability of the specialist subcontractor to address the issue with the availability of a dry dock.
Having assessed that, we were aware that we would get the window for that work beyond the end of quarter 2 in 2026—it would be in July and August. Therefore, we set about trying to minimise the impact of that and did a very deep dive into every aspect of the schedule to see what we could do to optimise it. As we went through that work, we identified that, between system installation and commissioning execution, which is where we start to work the live systems, there was a disconnect at a very low level in the plan, which meant that that also needed to be corrected. To compound that, we are unable to put liquefied natural gas on a ship before it goes into the dry dock, for good safety reasons, so the LNG commissioning was therefore also affected.
All those elements flowed together: the availability of the specialist subcontractor for doing the repair in the dry dock; the availability of the dry dock; the extended window; the reworking of the commissioning schedule to align with system installation; and the fact that we had to delay LNG commissioning, because we could not have LNG on the ship when we went into the dry dock. Those elements combined to create the challenge that moved the schedule into quarter 4, and the root of the situation was, fundamentally, a corrosion issue in the stern tube and with the hull. As I said, we have learned lessons from that about how we better protect the hull, but, equally, we recognise that that must be repaired before we hand the ship over.
That led to an analysis of the cost, which David Dishon led the work on. We looked at what we could do to ensure that we covered the scope of the work. We recognise that, because the ship will be there longer, there will be additional costs, between insurance, utilities and the other aspects associated with running the business. Those aspects combined to give us the cost that, unfortunately, we had to share in January.
My problem is that there were eight months between your writing that letter in May and our finding out that the cost had gone up and that there was a delay. It took eight months, from when you got your feet under the desk, to work that out. That seems a huge amount of time, does it not? It does to me. If I were running a business, I would be seriously concerned that it took eight months to work out that there were problems.
Until we went into the dry dock in August, we were still sitting within the quarter 2 schedule. We were having some issues—some challenge with the schedule—but we were still sitting within that window. It was going into the dry dock and discovering the corrosion—a specific issue—that led us to reassess the schedule. In doing so, we found one more latent issue in the schedule. For the eight months of that work, we were reporting that we were going to make quarter 2 and looking reasonable for the budget.
You went into the dry dock in August.
Yes.
You must have got a report pretty quickly from the dry dock. If it was my boat, I probably would have gone down and looked at it myself. That still left four months to work out that there would be an increase in price before the committee was notified.
I will set out what happened in those four months from August. We got the report. We looked at what we originally thought would be hull paint recovery and stern tube remediation being done in parallel. That was the first step of identifying the scope of what we would need to do in the dry dock. Subsequently, we got an analysis that said that those two measures could not be done in parallel but had to be done in sequence. That was a key part of understanding the scope—once we know the scope, we know the duration of time that will be needed in dry dock.
Then we had to identify a dry dock that was not already prebooked and was available for us in that window, as we do not have a dry dock at Ferguson Marine. Also, in time, we had to identify specialists, such as a subcontractor to come in and do the machining of the stern tube for recovery from the corrosion. Bringing those together was what—
You wrote to the committee on 15 September, saying that significant milestones for the committee had been met, that there was increased confidence in the delivery timetable and that the project remained within the £185 million budget. You basically said that everything was fine and that we should not worry about it. At that stage, if it had been dry-docked in August, you must have known that there were significant issues. You have admitted that yourself.
In August, we had not understood the scope. We thought that we could do the work in parallel and that that it could be contained within a week or two, so we were looking for a dry dock. That is why I said that we had not worked out the scope. The information that we had in front of us at that time indicated that it was still possible that, if we found a dry dock and a shortened window, we could contain it.
But the price would go up.
Not necessarily—
Something in that 15 September update to the committee was fundamentally flawed—it was wrong. Either the price was going to remain the same and the boat was going to be delivered on time, or the price was not going to remain the same and the boat was not going to be delivered on time. You said something to the committee that was fundamentally wrong.
Given the information that I had at the time, I believed that the letter was correct—that we could contain it. Until we had done the work and analysis to fully scope out the recovery action for the corrosion, we were on a track that indicated that we could contain it within the schedule and the cost. That is why I made that statement on 15 September and was comfortable in doing so.
Were you comfortable on 15 October?
No, because at that point I started to understand the scope of the work.
Do you not think that it would have been appropriate to let committee members know that the letter that you had written to them in September was factually incorrect?
I think that it was appropriate to do the work so that I could fully inform the committee of the impact, because at that point we were still assessing the impact. That is where my focus was.
When did you complete that work?
I completed it at the end of November.
Wow. To me, it seems to be a bit of a guddle, especially given the fact that, based on some of what you have said regarding LNG, you must have known that LNG could not be stored at either place when you started down this road, yet you factored that in.
No, we knew that LNG could not go in there. The original schedule was that we would go into dry dock in March and the LNG transfer would happen after that—between then and quarter 2. When we looked at the scope originally and thought that we could contain the work within less than two weeks, there was the potential to use a dry dock in April. That is why we started to look at the commissioning schedule at that point.
When we got the full scope, we saw that we would need about four weeks for dry dock and that there were commissioning issues along with system installation. That led to a full bottom-up review of the schedule from a very low level of detail. Doing that took us time, until we got to a point, at the end of November, where we were able to say that we understood what the schedule would be. We then prepared some analysis and cross-challenge, and we brought in more people to look at the schedule to see what we could do to try to bring it back. Subsequent to that, we wrote the letter of 18 December, knowing that we still had the cost to work up, which we provided in January 2026.
Are you confident in the details that you gave in the letter of 30 January—that the increased cost of £197.5 million will not be exceeded and that the ferry will be delivered in quarter 4?
I have a high confidence in that number and the schedule for Q4 2026, but I do not think that any CEO who is dealing with a complex vessel such as this would be able to give a guarantee at this point. We will work through and manage our risks to seek to secure a Q4 delivery that is within budget. We have high confidence just now, and that is what we are working to.
I have to say that that does not fill me with any confidence at all. I have heard the same thing being said before and we have ended up with increased costs. What we know is that CalMac has insured the Glen Sannox for £57 million. That is what it will cost to rebuild it. We are already up to a cost of £197.5 million for the Glen Rosa, which is, by anyone’s calculations, about four times what it should have cost, and we still do not know that it will be delivered.
I have to say that, in some ways, I will be glad when I leave Parliament and I do not have to continue to listen to this, because I am not convinced by any of the arguments that you have given. I will leave it there. I invite Michael Matheson, the deputy convener, to ask his questions.
Good morning. I turn to the issues with the Glen Sannox. It has now had to have emergency repairs associated with cracks in its hull carried out on two occasions. Do you know the cause of the cracks, and will the repairs that have now been carried out permanently resolve the issue?
The crack that was identified was a 20mm crack that manifested itself through vibration through the hull, which was caused by cavitation when the ship went astern. Propeller cavitation is when bubbles come off the tips of the propellers—that vibrated the hull and caused the crack.
As soon as that was identified, the right thing to do was bring the vessel into dry dock and repair the crack in the first instance. The analysis that we have done identified primarily, that there was a root cause, and secondly, that there were two solutions. The root cause was the excessive cavitation—the bubbles coming off the blades of the propellers. The second part was to identify what we could do to mitigate the vibration while we did the analysis of the propellers.
The first step of the solution was to add additional steel to offset the vibration issue in order to prevent any further cracks in the hull, which we did on the Glen Sannox when it was in dry dock over Christmas. The other step was to start the analysis with our specialist subcontractor on the propeller design.
In the past week we have concluded that work on how we can optimise that design. That work identified that there is an opportunity to improve the design of the propellers and significantly reduce the cavitation on them, therefore offsetting the cavitation in astern mode. Between the steel that we have installed and the updated propellers, we will have a solution whereby this will not happen again.
Okay. What is the timeframe for the changes that will be made to the propellers?
In the process that we have gone through, we have done the design, we have gone to an independent expert again to validate that design and we have done a tank test on it in Austria to confirm that this is definitely a solution this time. That has just concluded. We are now going back to the supplier that did the original design, and we are pushing them to get a schedule of when we will get new propellers.
At the moment, it looks like approximately six months, but that is our guide—it is the typical time that propellers take. We understand the issue, and we are pushing to try to get them as quickly as we can for Glen Sannox and for Glen Rosa.
I presume that those changes are having to be carried out under warranty. Are the costs associated with dealing with the cracks and the work to identify a change in propeller being incurred by you?
Yes.
What are those costs?
For all the propellers and the steel strengthening?
For the replacement of the propellers on the Glen Sannox.
The Glen Sannox warranty for recent dry dock—
In case you are thinking of giving me the price for all propellers.
The recent dry dock costs for propellers and steel strengthening is just over £1 million.
Are the lessons that you have learned from the Glen Sannox being applied to the Glen Rosa?
Yes. When the Glen Sannox came up from Cammell Laird last week, we had trials on board. The steel work that was installed on Glen Sannox has proven to mitigate the vibration, but it does not take away the root cause, which is the propellers. We have now commenced fitting that steel work on Glen Rosa as well, in preparation for the mitigation of the steel and to give us the opportunity to get the propellers installed when they are available.
I presume that, if the cost is around £1 million for the Glen Sannox, it will be a similar additional cost for the Glen Rosa for that work to be carried out.
Yes; it will be slightly less.
We are doing separate work in Cammell Laird for the Glen Sannox, so it will be less than that when we get round to doing it for the Glen Rosa.
Okay. Thanks.
Sorry, can you clarify that? For argument’s sake, because what is half a million pounds in the big scheme of things, let us say that the work will cost £1.5 million between the Glen Rosa and the Glen Sannox. Who is going to pay that? [Interruption.]
Gosh, how very annoying of my phone. I do not know why that happened. Siri is a wonderful thing but I do not understand why it works on silent mode.
Can you explain to me who is going to pay that £1.5 million?
Ultimately, the Scottish Government will.
So it will be the taxpayers of Scotland.
Correct.
Is the extra £500,000, or whatever it is, for the Glen Rosa included in the £197.5 million?
That is included in the risk element.
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More for the taxpayers to pay.
Over to Douglas.
It is not really a risk any more, though, is it?
It will be a risk that crystallises. However, at the time that we were doing it, we did not know that, so it is included in the risk element.
Right. Excuse me for not knowing this, but is the Glen Sannox back out working again just now or not?
I am sorry. Would you say that again?
Is the Glen Sannox back out working or is it still tied up?
It is still tied up, but I would have to call on CalMac to explain why it is still tied up. We have cleared the work that we had.
Will it be out of service for six months until the propellers are changed?
No. The additional steel has taken away the vibration in the hull, which should negate any recurrence of the crack that was seen previously. It could therefore go back into service. However, to get to the root cause of the issue and fix it, new propellers have to be fitted.
So is the fact that it is now out of service really a CalMac issue?
Yes. We are not aware of any reason for stopping it.
Have there been any issues with the LNG side of things on the Glen Sannox or the Glen Rosa?
No. On the Glen Rosa, we are just finishing the installation of the LNG pipeworks. When we can do so safely, we are ready to start the installation, commissioning and setting into work of that system. I am not sure what use has been made of LNG during sailings of the Glen Sannox. One safety improvement has been brought to our attention, which we have now adopted on the Glen Sannox and are implementing on the Glen Rosa. It passed all the safety requirements, but, in operation, based on the direction of wind, there could be some flow back of LNG fumes. We have now corrected that on the Glen Sannox, and we will correct it on the Glen Rosa.
Okay, but do you know whether it has been used extensively?
I do not know.
There have been reports that parts were stripped from the Glen Rosa to get the Glen Sannox back up and working. Will you tell us a bit more about that, please?
As I understand it, when the Glen Sannox was going through its setting into work and then its trials, for efficiency, material was taken off the Glen Rosa and put on the Glen Sannox to ensure that there was a rapid response to any defects or changes. That has been done.
When I came in, one of the first things that we did was make a full analysis of the material state of the ship and all the material that we had in the warehouse, to satisfy ourselves that we did not anticipate any materials issues coming up and so that we could order materials in the lead time that was needed for them to be available for the relevant activity point in the schedule. Having gone through all that, we are now content that we have the materials that we need to complete the Glen Rosa.
We carry the same risk with the Glen Rosa as we did with the Glen Sannox: we could get to the point of setting into work and find that something that should work does not work. Therefore, we are doing an analysis so that we are in a position to understand whether we will need to go to our suppliers, as well as to know the speed of their response in supplying materials. As part of our contract, we have purchased a number of spares to provide to Caledonian Maritime Assets Ltd and CalMac, so that might be another recovery route for us should we find a defect in some equipment.
Have the parts that have been stripped off the Glen Rosa been accounted for as part of the £197.5 million, or have they been accounted for in terms of repairs to the Glen Sannox? How have you accounted for that?
The original parts that were bought for the Glen Rosa and put on the Glen Rosa are charged to the Glen Rosa. If we have taken anything off the Glen Rosa to put on to the Glen Sannox, that is charged to the Glen Sannox under the warranty.
I guess that the time for people to take parts off the Glen Rosa would also be charged.
Correct. That is fully absorbed.
I guess that the time for them to refit it back on the Glen Rosa once a spare arrives would also be charged.
Correct.
Does this cause any delay for the Glen Rosa? We are talking about quarter 4, which is now only nine months away. Will the stripping of parts off the Glen Rosa to put on to the Glen Sannox impact the timescales that we are looking at?
No. As I say, we have done an analysis, and we know that we have all the material that we need now or that we will get it in a timeframe to suit the activities that consume that material as we execute the Glen Rosa. The risk that we have with the Glen Rosa is the risk that manifested itself with the Glen Sannox, which is that, when we turn something on, it does not work—it might have been lying on the shelf or on the ship for a number of years, and it does not work.
Despite the fact of maintenance and checks, it is not until you make something live, whether that is through pressure or power, that you find that it does not work. We carry that risk. It is there on every ship; it is not just Glen Rosa and Glen Sannox. That is one of the risks that we have accounted for in terms of the high confidence going forward. We have done all that we can to try to mitigate the risk, but it is one of the risks that we carry. When we get into full commissioning, there is the potential that some of the equipment might not work. At that point, we will have to assess the speed of response of our supplier or get spares or get something from our own stock; we could take something from somewhere else on the ship and make that work.
If it had been completed to its original timescale and something like that had happened, you would have been able to go back to the manufacturer and say that it was not working, but we cannot do that any more, can we? I imagine that everything is out of warranty.
Yes, things are out of warranty. If it was within the timescale, we would still have to go and get the material, but we could go back to the supplier and it would be under their warranty.
Has any risk provision been put in for things that are no longer under warranty and are not working?
That is part of the £5.5 million and the £197.5 million; we have risks for delays, but we also have obsolete materials, missing materials and anything that we have to take out, so there is an element there for obsolete materials.
How many spares do you carry for both vessels in the yard?
The spares that we carry are defined by the contract, so we provide those spares. We do not carry spares particularly. We are trying to make sure that we understand, for equipment going into commission, our ability to get a speedy response. For the thousands of items on there, we do not know what might fall over—we have not done that level of analysis—but we anticipate that some equipment will not work effectively. Therefore, we need to have a good, slick process with our suppliers to work out where we can secure a replacement for that equipment, whether it is from that supplier or whether it is from CalMac. We can go to CalMac and ask whether we can get one of its spares—that option is typical for last of class in any programme that I have worked on. The other part is about trying to work out whether it is something that can be recognised as a defect if we have not got it completed by the time that we want to deliver the ship.
Have there been any issues with spares going missing, just because it has been such a long period of time?
No, we have not got any record of that. We moved parts from Glen Rosa to Glen Sannox. We did an analysis when I first joined which flushed out that, although an item was missing, we could not track the paperwork for it, so the previous management may have decided to move something across for expediency when executing repairs to Glen Sannox. We have now identified that through paperwork or we have identified it as a gap and then created the paperwork to secure a new piece of material.
I thought, David, that you said that things had maybe gone missing.
No. I am saying that, by the time we get to delivering Glen Rosa, if we then find that something is missing and if it is not in the warehouse or if it is obsolete, we would make provision for that part.
Duncan, do you want to come in? I notice that your hand is up.
Yes, thanks. I would like to go back to three points that the convener mentioned earlier. First, he has rightly been concerned about what has gone on in the past, but, frankly, those of us in the new management team are not time travellers. Also, looking back at what has gone on with our predecessors is not really our concern; we are focused on taking the yard forward.
The second point is that Graeme Thomson has been taking time to look at the actual process and I have been visiting the ship every month. I was in the dry dock in August, and any shipyard that immediately picks up the phone to say that there will be a delay without knowing how much it will cost or how long it will take would be negligent in its duties. We took our time, we decided to do it properly and then came back with a forecast for taking the build forward.
The third point is the £57 million rebuild cost, which bears no relation to a new-build cost for a vessel. I have been working either for a shipyard or, more often, a ship operator, my whole life. People very often underinsure to keep the premium down. That ship would be well in excess of £100 million if we built it now, although I accept that we are hugely over budget. I thought that it would be prudent for me to make those points.
Thank you for clarifying that I need to go back to CalMac and ask why it is underinsuring a vessel that belongs to the people of Scotland, which is, in effect, what you have said.
Well, I would challenge you to go out and get a price of £57 million. I am sorry, but if CalMac was being honest with you, it would tell you the same thing.
With respect, my family has been in insurance for many years. I understand that, when you insure things, you insure them for the cost of replacement. I asked what the replacement cost to CalMac was and it gave me that figure, so I will definitely question that.
To clarify, before we move on, what are the total warranty claims on the Glen Sannox?
At the moment, it is £2.2 million. It will end up somewhere around £3 million.
£3 million?
Yes. I would say that it is looking to be £3 million to £3.2 million.
I will turn to the Government’s announcement of a direct award to Ferguson Marine to construct four new vessels of three different designs. Given the history and our previous experience, what assurances can you give us that you will be able to deliver those vessels at what would be considered a reasonable market rate for such vessels?
There are two parts to that. I will take the last part first.
We have gone through the process of assessing for what, potentially, we would be able to build those vessels. We ran a number of scenarios on a number of vessels. We prepared that for the Scottish Government at its request, and we did that on the basis of what we think we would do it for. I understand that the Government is doing an assessment of what the market would expect to pay for those vessels, in terms of going out to an order. That, ultimately, is the constituent part of the subsidy case.
We are in a position where we know that we will not be as efficient as the current modern shipyards across the UK and internationally just now. That is the journey that we need to go on. We recognise that we have a cost-efficiency curve to come down and improve on. However, that is the basis of why it is going through the subsidy case.
On the vessels, we have built the two Marine Scotland vessels before; we originally built the vessels that are in operation just now. We have also done ferries: a third of the CalMac ferry fleet was built at Ferguson Marine. They have been different classes of vessel. Therefore, none of that particularly fazes us.
In relation to our managing a portfolio, the organisation structure that I have put in place is scalable to manage a portfolio of different classes of vessel, which will all be at different phases as we go through the next five years. Some will be coming through design, some will be in building, and some will be in commissioning, and we have structured an organisation that allows us to do that.
We will augment the capability within the organisation. Equally, we know what our strengths and capabilities are, although we have not particularly demonstrated them in the past 10 years. We will build on that and, where we know that we need to go out to subcontractors for specialist support, we will do that, and manage them as major subcontractors to execute their work to support us.
I am thinking in particular about the Marine Scotland research vessel, as the mission system on there is typical of something that would go out to a specialist company that does that kind of work. It will do the design, we will support the installation, and it will do the sector work in commissioning. Therefore, we allocate out risk appropriately to people who are domain experts in their area. We place a contract, and the risk, with them to manage that integration. That is how we will manage the class.
Michael Matheson is right that we will go through three classes of vessel. However, as I said, we have been through that before in what we have done previously with Marine Scotland and with ferries. We will manage this in the same manner, as we have done successfully in the past.
You sound quite confident about that. As CEO at Ferguson Marine, what gives you that level of confidence that you now have in place a management structure that is capable of delivering these vessels on budget, on time and to the spec that is required?
If I look back on the 10 months that I have been in post and talk about the changes that have happened in relation to programme management and programme controls, we have now implemented a much more robust planning process, which has uncovered some of the challenges that we are talking about. That robust planning process gives us a fidelity analysis that is of a depth that we could not previously reach, but is now at the depth that I would like it to be. We also run earned value management systems and cost accounts, and we are training control account managers. Those are all typical, good-practice programme management approaches in running a programme of this complexity.
We have backed that up by bringing in a general manager for programme management to support that. I have also brought in a ship delivery director to manage the execution of Glen Rosa. Going forward, we will do something similar for all the vessels to drive delivery. On top of that, we have driven a message of accountability, ownership and scope understanding. We are driving that forward with Glen Rosa, and we are still on that curve. With the new vessels, we will do that from the start.
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The fundamental thing that we will do differently, however, is to start with good practice from day 1. As I look back, based on my understanding of how we moved into the building of Glen Sannox and Glen Rosa, I see a number of issues that I would not have taken on as a shipbuilder. I would have approached it quite differently. In a previous committee meeting, I was asked what lessons I had learned from Glen Sannox and Glen Rosa. My commentary is much more fundamental. It is not even about lessons learned in the main; it is just about applying good, solid shipbuilding practice. We will bring plenty of that to Ferguson Marine, and that has started now.
Therefore, I have confidence that, with the new vessels, we can bring and mobilise a lot of good practice to ensure that we start the programme well. Programmes of such complexity are always a challenge. The basic point is that, even if you start well, that does not mean that you get better. You start well and try to maintain that. However, I have been in shipbuilding for 40 years, and in every programme that I have worked on, even if you start well, you have the challenge of maintaining that momentum.
In my mind, there are three parts. One is about having the right contracts and ensuring that the requirements are understood. Even in the past day, I have had discussions with the Scottish Government about the contract terms for the future ships and the requirements, to ensure that we get alignment and that we do not have an over-the-wall situation and are just handed things. We need to engage proactively and understand how to start well.
We need to mobilise well. That really means that, before we pick up our calculators or burning torches, we need to understand the scope, how we will mobilise and how we will execute. We need to understand our make/buy strategy, our programme management and the controls on how we will do it.
The final part is getting to delivery. If you have done the first two parts well, you are off to a very good start on a programme.
I turn to Duncan Anderson. The executive team appears to be confident that it is capable of delivering the four vessels and has processes in place that will allow it to deliver them at a market rate, on time and to the specification required. You have been a non-executive member of the board and are now chair of the board. What is the board doing differently to give us assurance that you have robust and effective oversight of your executive team in delivering on the commitments that they are making?
As a board, we are very close to management, but we still have enough distance and oversight of the overall direction in which they are going. One important thing is that, in the near future, I think, I am being replaced by another board member. My personal opinion is that there is not enough experience in shipyards or shipping on the board. From the Government’s perspective, we have coverage, but we do not have coverage in shipping or shipyard experience. We aim to improve on that.
As regards the committee meetings, we are making some changes to how we get the information and how it feeds into the bimonthly board meetings. However, the main issue is that we need to strengthen our experience on the board in the industry that we are in.
There is a confident executive team. You have been on the board and you are now chair of the board. The principal weakness that you have identified in the oversight by the board is a lack of shipbuilding experience. Is that it?
I am talking about the position over a number of years, and I believe that it has improved. For example, my predecessor as an NED was a naval architect. There are two issues. One is the experience in shipbuilding or shipping, and the other is experience on the commercial side. You have heard the recent good news in Parliament that there is a direct award scheme. Going forward, our main challenge is that, ultimately, the shipyard needs to be profitable, whatever the future holds for it.
In future, we need to win non-Governmental contracts with third parties that become profitable without a subsidy. We need people on board on the management team who can win those contracts, but with oversight from the board. That is our challenge for the future. The current board set-up is pretty good, although it needs strengthening on the commercial side. I have had commercial experience in my career, but we need someone else with that background.
Okay, and you are making some process changes to enhance oversight—is that correct?
Yes. There are certainly enough committee meetings. We have an operations committee, which is not common on a board. More commonly, we have the remuneration committee and the audit committee.
We have plenty of monthly meetings, but when I came on board, I had a problem with the quality of the information that we were getting. We do not want endless bar charts of results from the production team—that is what they use anyway. We want more relevant and direct board information that will allow us to oversee what the management team is doing. We are moving towards that now and we have already made some progress with the information that we are getting from David Dishon and Graeme Thomson.
Mr Thomson, you said earlier that you know what your strengths are and that you are trying to deal with the weaknesses at the moment. Would it be fair to say that project management has been a weakness in the past?
Yes.
You say that you have strengthened project management. What differences have you made in terms of project management and getting the right people?
I have established a programme management office, which did not exist previously, and we have brought our own planners into that. Previously we had subcontracted planners; they left the business last year and we have now brought in our own planners. We have also brought in a general manager programme—with a project manager who is experienced in the marine industry—and we have appointed production co-ordinators and trainee project planners.
On top of that, we have driven hard the adoption of a common project management planning tool called Primavera, which covers the fidelity and the analysis that we need. We have also implemented a robust risk management process and one of the many governance meetings that we now have is a risk management meeting. We also have a risk engineer to support us in developing a comprehensive risk register.
On top of that, we have also implemented control account management, as I mentioned earlier. We have also implemented earned value in trust, which is really just a key measure in programme management of costs in scheduled performance. It does not give us good news or bad news; it just tells us what the news is and allows us to make decisions based on that. We have also implemented other work around resource planning and recruitment including, as I said, a programme management organisation that did not exist but does exist now, is now populated and has a key role in the delivery of future programmes.
It sounds as though you have built up a team of people that will, of course, add to costs but might well save a lot in the future because you will not have to deal with mistakes at a later date by doing things and having to rip them out and do them again. Have you brought into that team folk who were external to the marine or shipbuilding sector but who have project management experience?
Yes, we have.
Could you give an indication of what those people have done before and what their specialties were?
Yes. For our general manager programme, we brought in a contractor at first and we are in transition to the full-time position. They both have a similar background, having worked in the marine industry on the type 23 and type 45 frigates and other complex projects. The one who is coming in was also the programme planning director for the type 31 programme and, before that, they were on the aircraft carriers. They have quite a depth of marine experience.
I get the point about marine experience, and that is grand, but have you taken project management expertise from elsewhere? I am thinking about the oil and gas industry, for example, where there is a great knowledge of project management of extremely difficult projects and a lot of pressure to deliver on time and on budget.
We have not recruited from that sector specifically. We have recruited planners, project controllers and project managers, but we have left the door open. We have not been, as might be perceived, myopic by requiring them to have marine shipbuilding experience. The people who we have hired demonstrated the greatest capability to do the work that we require of them.
You are open minded on that front.
Yes.
I imagine that you are equally open minded about those people garnering experience in order to apply project management techniques from outwith the marine industry.
Absolutely.
How will you ensure that all the lessons in project management, and everything that is done in that regard, lead to the right things being done in—please excuse the pun—on‑board delivery?
One of the things that I have done in my 10 months here is ensure that people understand the scope of their work, so that they understand what they have to execute, the level of effort that it takes and, therefore, the cost. We have broken that down into the schedule by establishing that everyone is a control account manager—they might be a production supervisor or production manager, but they are also control account managers who carry the responsibility to understand the scope, resources, risk and budget for the work. We have done a lot of training on that, so that we do not end up in a position in which one person—someone in the business—holds all the money while everybody else gets busy and works.
It means that people in the organisation understand, even at fairly low levels, the scope, risk, schedule, resources, budget and time available for their work and understand that they will be held accountable for their performance at a much lower level in the organisation.
You previously said that management and understanding the scope are important, and you have now reiterated that point. On that point, I want to raise a specific issue. Earlier, you talked about coming across the propeller cavitation difficulty. You will come across difficulties from time to time, but one would have thought that, in a situation such as propeller cavitation, there would be experience and a clear understanding of the scope in order to develop a system with no—or minimal—cavitation. Can you indicate how you will ensure that such issues do not come into play in the future?
You are correct. Some of that is down to lessons learned; some of it is about recognising what was not done but should have been, and returning to good practice.
I imagine that the propellers were developed and tested 10 years ago and proven computationally to be free of cavitation. The lesson that we learned from that was that a tank test was not carried out in the astern mode at the time, as I understand it, which is why there is now a very specific issue. That is not necessarily unusual if you rely on a computational model, but it is certainly a lesson about what modelling we should have done. That is why, this time round, we did a tank test of the new design in the astern mode before confirming last week that we now know that the solution works.
I do not want to put words in your mouth, but it seems that there will be a lot more understanding of the scope going forward. More will be spent on project management at the beginning in order to get things right and, based on what you said, there will be much more testing at the beginning so that things are not missed.
Yes. To add to that, we will do a full analysis of the nature and content of our subcontractor contracts to ensure that, when we put work out, we have the controls, measures and requirements clearly in place, so that the people who we subcontract fully understand the scope of their work and what they have to do.
They will also be managed appropriately by the project managers.
Absolutely.
Thank you.
The questions that Mark Ruskell wanted to ask have, I think, been dealt with, so I will move on to Bob Doris. I will then come back to the issue of the direct award.
10:45
Good morning, everyone. I want to ask about something that, I hope, is a bit of a good news story but which requires scrutiny, too—that is, the £14.2 million that the yard has notionally been guaranteed by the Scottish Government over a two-year period. David, I think that you commented on this to the committee as long ago as November 2024.
Yes.
Crikey. At that time, you said that the money would be used to get shot of “equipment that is obsolete”; to repair equipment that “is not working”; and to upgrade equipment that needed “to be upgraded”. Then you started to set out how the money could be portioned out. I think that you said that £4 million would be used to upgrade obsolete equipment, and about £8 million—or over half of the overall amount—would be used to pivot towards ensuring that the yard was fit for future work. I just wanted to put on the record some of the details of the evidence that you gave in 2024.
The Government has said:
“To date, the Government has received 11 separate capital expenditure (Capex) requests from Ferguson Marine. Following rigorous due diligence, all 11 have been approved, with a combined total value of over £570,000.”
That is correct.
Everything is relative but, compared with that £570,000, the £14.2 million that was announced in 2024 represents a huge, substantial potential investment. It is very clear what that money was to be used for, but to date only £570,000 has been spent. Can you explain why the process seems to have been so slow?
I was here in November 2024, but I think that the Deputy First Minister announced the £14.2 million in July 2024. She also said that it had to comply with financial and legal due diligence. At that point, we thought that that would probably take a few months, but it has taken a lot longer than that.
You are absolutely correct—we have spent £570,000 so far. Legally speaking, because we have not gone through the financial and legal due diligence—we were going through a commercial market operator assessment at the time—we can spend the money only on anything that has a safety implication or on obsolete equipment. We identified what we thought that we could spend at that moment in time, and that has been approved by the Scottish Government.
The rest of the money will very shortly be spent on upgrading the yard. We could not do that at that point in time, because we did not have the legal route to do so, but the direct award has helped us by unlocking that capital investment.
I suppose that, in one respect, I am pleased that so little has been spent to date, because there would have been no point in sinking money into the yard in late 2024 if you were investing in the wrong kit and equipment for the business.
That is correct.
However—and I am not trying to catch you out—it seemed quite clear in late 2024 that you were going to spend about £4 million on replacing obsolete equipment. I think that you have suggested that that figure is now less than £1 million. Is that because some of that obsolete equipment is no longer part of how you intend to take the yard forward and therefore does not need to be replaced?
No. You are absolutely correct to say that there was no point in spending that money in 2024 if it was going to be spent on the wrong kit, but there was also no point in spending the money if the yard had no secure future. We had to go through that process; after all, these are public funds, and you do not want to spend £14.2 million only to find out that you have no secure future and are left with a white elephant.
One of the lines in that £4 million spend was a full upgrade of the electrical system. It is obsolete, but there are no health and safety implications arising from it at the moment, and it, too, will be part of the future upgrade. It is a timing issue. The £14.2 million spend has been fully mapped out, and we will be starting that work very shortly.
You say that the £14.2 million has been fully mapped out, but has that information been made public? Would it be appropriate to do so? Clearly, there is a will in Parliament to scrutinise the future of Ferguson Marine—with good will, because we want it to prosper—but we are, like the convener, also very conscious of the missteps that have been made over several years. We want to ensure that that £14.2 million secures the yard’s future and is not another misstep.
No—absolutely. We can do that, and give you a full breakdown. We have to go through Public Contracts Scotland to get the tender process started, so once that is up and ready, we will give you that information.
At the heart of the context around all this is a core question. Subject to due diligence, how will the investment be used to ensure on-time and on-budget delivery of the four vessels stated in the direct award? Can you bring that to life and provide specific examples of how that investment can be used, in order to give the committee a degree of reassurance that we may previously not have had?
Yes. For example, one of the items is a semi-automated 13m panel line. That will involve not only implementation of the panel line but a building upgrade as well. It will allow us to be more productive—our man hours per tonne, for example, will reduce significantly and there will be a 50 per cent productivity increase in that regard. Those working practices and efficiencies will reduce the cost of the build and allow us to be more competitive again in the future, so that, when we get to the end of the four vessels and we are involved in competitive tenders on the open market, we will have learned the lessons from doing the marine protection vessels and marine research vessels and the second phase of the SVRP and will have learned how to use that equipment to become more efficient.
I have one final question. I am looking through your previous evidence to the committee, which was very helpful. You suggested that the investment of £14.2 million would be almost a “catch-up” for the yard, because successful commercial yards would, as a matter of course, be investing over £1 million, and possibly as much as £2 million, annually or regularly, to ensure that they are always fit for the future and at the cutting edge, so that they can win profitable contracts.
That raises a question about what happens once we have invested the £14.2 million. The day that you install new equipment, a new piece of replacement kit may appear on the horizon. What is the sink fund for replacements as a matter of course, once the catch-up has taken place? Where does that money come from?
The £14.2 million will be phase 1. We have done substantial research into what the owner of a shipyard should be putting in as capital expenditure—again, I go back to the figure of £1 million to £2 million per year. That investment had not happened prior to the Scottish Government taking ownership in December 2019, so there was a significant catch-up even for the Scottish Government. When the Scottish Government took over in 2019, it had to learn about running a shipyard. Then the Covid-19 pandemic hit, and we reached a stage at which the Government was looking at potentially selling the shipyard, so it would not want to put capital investment in. Now, it is at the catch-up stage, and realistically, the investment should be about £1 million to £2 million every single year going forward, just to upgrade.
To go back to the panel line example, it is not necessarily the case that new ones are coming in and we need to rip everything out and start again—there will be technical upgrades for that.
I really hope that we get to a stable state with Ferguson Marine in the next few years, and it becomes a good-news story.
So do I.
I think that all of us—including the convener, despite the terrier-like scrutiny—will want to see the yard being run successfully, profitably and for the public benefit, so I thank you for those responses.
I agree with that, but I point out that, prior to nationalisation in 2019, if I remember rightly, a £30 million loan was given to help the yard become more competitive, and then it was given a further £15 million; the two sums were not linked, but that was £45 million in total. It appears that that money disappeared, and no one has quite worked out where it went. As an observation, it is a pity that it was not spent on the yard.
I see that Douglas Lumsden has a question.
Mr Dishon talked about a panel line. Is that the same as the plating line that was discussed in your previous evidence?
I will defer to Graeme Thomson.
Yes, it is a semi-automated panel line. Basically, for large plates, you automate how you process the plate, put the stiffeners on it, weld it and put the penetrations into it so that, when it gets to the end of the panel line, you are able to fold it into a unit or a compartment.
A couple of years ago, we were told that the figure for the panel line was £25 million, but there was also a long lead time. Can that now be ordered? If it is not ordered, will that affect the delivery of the four new vessels that are being discussed?
There are two parts to that. In the past 24 hours, we have been speaking with the Scottish Government about getting a mechanism in place to allow us to order the panel line. We have engaged with a supplier, which has indicated that that will take 12 to 14 months, but it gets a lot of demand, so the sooner we book our manufacturing slot, the better. We are therefore keen to do that.
In the analysis that we have done on what it would take to build the vessels, we have made an assumption that we would have the panel line available. Therefore, the pricing that we have presented—which might not be market competitive in the first instance, but gets us there—is based on having the panel line available.
If we got the order today, we would not have a fully functioning panel line installed until March or April next year. However, in parallel with that, whatever the first vessel is—we are assuming that it is a Marine Scotland vessel—we still have to go through our design process and the long lead time for material purchase for the vessel, which means starting to build only when the design is mature.
Between getting from here to contract and design, and considering the long lead on items that are needed inside the ship, we expect that to proceed after March 2027. We will get the benefit of the panel line at that point, but we have a bit of a runway to go before then.
At present, you do not know what you are building, because the specification and the design work have not been done. Is that correct?
Yes, but that is not unusual. In shipbuilding, what happens most often is that the procurement agency for the ship operator provides us with a document that contains a set of requirements. Occasionally, it has a concept design done, but it is only a concept design.
Part of our contract involves creating a detailed functional design, which is a lot more detailed. We spec out the size of pumps, engines and ventilation and start ordering all that equipment. Latterly, we go into a detailed design, which is bespoke for the ship. We have a journey to go on, but the current situation is typical.
Things such as how the vessel will be powered—whether it is dual fuel again or whether it is diesel or electric or whatever—are still to come from the design. You do not yet know how the ship will be powered.
That information will come from the requirements. The customer will say in the specs whether it wants the vessel to be dual fuel, how many cars it wants to have on the vessel and what sensors it wants for doing marine research. The customer defines those requirements and we then analyse how we could bring that together as a package.
Is it correct that it is only at that point that you will have a price that you can give to the Scottish Government?
Yes. The price evolves. We have already done a price based on what we know, but we will keep on evolving the price and narrowing it down. Typically, we give a price based on what we understand, but it has a level of variability, because we do not have the detail. The intention is to narrow that down and to ensure that we stay within that price band to get to the detailed price.
It will be a long time before you have a contract from the Scottish Government to build the four vessels, and it is only an intention that the contracts will come to you.
Yes. We have had discussions with the Scottish Government about a contract. We are keen to speak to the procurement agency to work out how we package that up.
If it is an individual contract, we are keen to start the conversation and the contract on the first of those vessels as quickly as possible. At that point, we will discuss the requirements and continue to refine our price, scope and schedule and understand what material we have to purchase and the lead time for that material.
It will be a while before we know the timescales for delivery and all those things.
That will happen a lot further down the line.
It sounds as if we are not going to repeat the stage where we were building the ferry before the design had been approved, which is where we were when we started the scheme with the Glen Rosa and the Glen Sannox.
I have a couple of questions. I know that Duncan Anderson is not particularly happy to look at history, but I remember David Tydeman coming in and saying that Ferguson Marine would always be 20 to 25 per cent more expensive than any other yard when it came to building ships. Was that wrong?
That was based solely on labour—at that time the delta was on labour. However, on all other aspects, including efficiency and materials, we definitely should be able to be competitive, and those are the areas that we need to focus on now.
If, however, we are going with—convenient as these examples are—Poland and Turkey, and their labour rates are cheaper, we will not compete with that. If that is the deciding factor in the race to price, we will face a challenge. We should be wiping our face with Turkey and Poland on what they pay for materials compared with what we pay, and we should be just as efficient as them with the investment that we are proposing to make.
11:00
I understand that, but I am trying to work out whether, with the labour involved, the cost will be 20 to 25 per cent more than building a vessel overseas.
I do not believe so.
What is a reasonable figure?
I think that it will be 10 per cent.
Is it 10 or 15 per cent? Are you happy with 10 per cent?
Yes, although I am sure that this will be played back to me some time in the future. I will look forward to that.
You will be glad to know that it will not be me who does it, but somebody will probably come and ask you to justify it. Is that figure based on the investment that the Government is making, or is it without that investment?
It is with that investment.
My next question is about the contract award that the Government has indicated that the yard will get. You do not have a huge amount of space in the yard, which limits what you can do at any one time. Will the contracts take up all of the five years, or will they take longer, because of the limitations on space and equipment?
We estimate that it will take about five years, although that is partly about when the contracts are let.
You are absolutely correct that the yard will run out of space at some point. We are certainly looking at what we are doing with the investment that we have talked about and how we can optimise the space that we have. The footprint of shipyards traditionally grows organically, because they are there for many decades. In the journey that we are starting on, we will look at how to optimise space so that there is a proper production flow that makes best use of it. If we had four slipways and four panel lines, we would look for resource to use them all in parallel, but that is not the way, and we would also lose lessons learned from that.
Absolutely. Space is a limiting factor. We hope that you will get this direct award from the Government, but you will not be able to take on any other work while that is being done, will you?
We will have to do that analysis. As was said earlier, we want to get some detail on the ships, to understand how we will put them through our facility, and to look at the capacity that we might have left, if any.
I have been speaking with Inverclyde Council about how, if we were looking to expand our footprint, there are areas around the yard—although it might not look like it—that we could go into, subject to the council being amenable to that. There is also the Inchgreen facility a mile down the road from us.
I have been clear since I have been in the job that I hope that Port Glasgow will not be big enough in five years and that we can expand and spread out more, perhaps at Inchgreen or other annexed areas, so that we can get to the point at which we are creating a good solid commercial shipbuilding industry in Inverclyde again.
The area that you would need is currently under water and would need huge investment to make it into a yard, would it not?
Are you talking about Inchgreen?
I am talking about the yard spreading out where you are at the moment.
I might be about to upset some people in Inverclyde, but part of the issue is that we have a fire station in the middle of our yard that serves the whole community. We cannot move that, because it is critically important. There is space in front of the yard that we could use. It does not look like much, but it could be sufficient for us to put in another panel line or other automated equipment.
When the Government made its statement the other day, it said that Ferguson’s could not be in a position in which it had to rely on Government contracts and that it also had to have contracts from elsewhere. You are fairly committed to the Government for the five years. Do you fear that, when those vessels are all built, you will come to a bit of a cliff edge, a bit like you did with the Glen Sannox and the Glen Rosa, because you will not have anything else?
I am going to say no to that, because I am looking at the current demand for marine vessels and the longevity of that demand. As the National Shipbuilding Office reported in 2022, between the UK Government and the devolved Governments, there is a requirement for 150 vessels in the next 30 years. We should be attractive and competitive in the UK within the five years and able to secure work on a competitive basis.
The condition that prevails on the direct award is that the maximum that we can take in while executing the direct award work can be only 20 per cent of the value of the direct award itself. As a result, we might be constrained not by size but by the nature of the work that we can take on, to ensure that we do not in any way threaten the delivery of the direct award work that has been proposed.
I want to understand the direct award a bit more. I presume that there will be five contract payments, as there are for most ships built around the world, and not the 18 that we had for the Glen Sannox and the Glen Rosa.
That is why we are speaking to the procurement department—we want to engage on and understand the issue. I have made it clear up front that we do not want to get into the position that we were in with the Glen Rosa and the Glen Sannox, but the best way to do that is to ensure, in this first phase, that whatever contract we establish serves everybody’s interests and is the best arrangement for us to be successful as an enterprise.
When do you expect the first payment to be made?
I expect it to be made on contract signature.
When will that be?
I have just had a conversation about that in the past 24 hours, in which I said that I was keen to get involved with the procurement. Given what I have just described with regard to ordering the panel line and the lead time for that, I am keen to get a contract in place as soon as possible to allow us to mobilise our team of engineers, our supply-chain people and our subcontractors.
David, when you have been before the committee in the past, we have talked about non-recoverable costs.
Yes.
What are the non-recoverable costs each month?
They are currently about £500,000 a month. For the year to date, which we are 11 months into, we have had £5.4 million of underrecoveries, so we will end up this year with a figure of £6 million.
I know that you have quoted me talking about £1 million but, for clarity, what I said at the time was that the figure could get up to £1 million. When the yard closes down for two weeks in December, for example, there are a lot of underrecoveries. At the moment, the figure is anywhere between £250,000 and £500,000.
I want to understand this. You are not getting any more money for the Glen Rosa—well, the extra money that you could charge for it.
That is correct.
So is the cost of everything that is going on at the yard—the lights, the people and all the bills that you get in—not unrecoverable?
Yes, that is where the underrecoveries are at the moment.
It is just £500,000 a month to cover wage bills, electricity bills, rates bills and all the rest of it. All of that comes to only half a million.
That is correct. For example, people who are not working on either the Glen Rosa or the BAE Systems work will be working on the business case, the future of the yard and bids, or they will temporarily not be able to do the work of their trade for a week or so, but we still need to keep them. That sort of thing falls under the category of underrecoveries.
You have been told that the Glen Rosa is going to cost more money, so surely the people who are on the Glen Rosa have to be unrecoverable, too, because you are not getting any more money for them.
No. If we take the whole wage bill and look at a particular trade—say, a welder on £30,000 a year, just to keep the figures round—there are no underrecoveries at all if they are working full time on the Glen Rosa.
So all of that will be paid for by the Government.
Correct.
On the Glen Rosa contract?
It will be charged to the Glen Rosa. If there are, say, two or three weeks in a year where, because of the way in which the work is sequenced, people have no work to do, they will be put on to other work, and that work cannot get charged to BAE Systems or the Glen Rosa. Those are underrecoveries, and we will then ask the Scottish Government for that money.
Let us imagine that the Glen Rosa was not there and that you did not get the contract. What would the underrecovery be? What is it actually costing?
It is costing £1.9 million a month, and that is all salaries. If we were to keep 300 people employed, and if we took into account the costs of running a warehouse, rent, audit fees, overheads, utilities and so on, the figure would be £1.9 million a month. In that situation, you would obviously scale things down, but that would be the maximum.
So it is pretty vital that Graeme Thomson gets those contracts signed and gets that money back, because that is what it is going to cost the Scottish taxpayer to run the yard while nothing is actually happening.
It needs to happen as quickly as possible. That is why, if there is a gap between the Glen Rosa being delivered and the new contracts being in place, we need to find something to fill it.
Okay. Those are all the questions that we have.
I will reiterate what Bob Doris said: I, too, want Ferguson Marine to be successful. However, you will excuse me if I am sceptical, because I have heard the same story from Clyde Blowers, Tim Hair, David Tydeman and now Graeme Thomson—the stories are all the same. I do hope that once I am retired—or, I should say, once I am working at home, as I will not be allowed to retire—I will see the Glen Rosa get delivered at the end of this year and the contracts happening, but please excuse me if I remain sceptical.
On that note, I thank our witnesses very much. I briefly suspend the meeting to allow for a changeover of witnesses.
11:10
Meeting suspended.
11:21
On resuming—
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