Public Audit Committee

Meeting date: Thursday, June 22, 2023

Official Report 607KB pdf

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Written Authority: Completion of Vessel 802

Agenda item 2 is consideration of evidence on the written authority that the Cabinet Secretary for Wellbeing Economy, Fair Work and Energy issued in recent weeks. I am delighted to welcome our witnesses this morning. The cabinet secretary, Neil Gray, is joined by Kate Hall, who is the deputy director of strategic and industrial assets, and Colin Cook, who is the director of economic development, in the Scottish Government.

We have a number of questions to put to you, cabinet secretary, but, first, I invite you to make a short opening statement.

Thank you very much, convener. I appreciate the opportunity to provide the committee with an update in relation to the written authority that I provided in May to secure the continued build of vessel 802 at Ferguson Marine Port Glasgow.

During the meeting of the committee on 1 June, when the director-general economy was in attendance—as well as in the recent Public Audit Committee debate on 8 June, which I responded to—it was clear from the outset that the committee was interested in the process of written authority, as the steps that a minister takes in that regard have not been taken in quite some time. The process is rare in Scotland, so I am of course more than happy to discuss the detail of it during this session.

As part of the process for providing written authority, I was satisfied that the accountable officer—in this case, the director-general—scrutinised and interrogated the projected costs that FMPG provided and assessed those costs against alternative options. That work followed an independent assessment of the assurance work to test the underlying assumptions and robustness of the data on the estimated cost to complete vessels 801 and 802.

To be clear, if the written authority to complete vessel 802 at Ferguson’s were not provided, we could be looking at a delay in deploying a new vessel to May 2027 at the earliest—four years from now and two and a half years after 802 is due to be delivered. As I advised at the time, I do not consider it acceptable to ask our island communities to wait that further period, and I continue to stand by that.

Although the impacts on our island communities and on our economy are not covered by the value-for-money assessment, they have guided the decisions that I have taken, which recognise the broader social and economic benefits of completing both ferries and ensuring that the yard continues to have a strong platform on which to progress and prosper. I remain committed to supporting a sustainable future for Ferguson Marine; providing written authority confirms the Scottish Government’s intention to deliver vessel 802 at the yard and provides a platform on which future success can be built.

As you have said, convener, I am joined by Colin Cook and Kate Hall, and we look to answer any questions that you have in your scrutiny of the process behind the latest written authority that I provided.

Thank you very much.

Can you describe the timeline of events that led to the director-general economy’s request for a written authority?

I am happy to provide the full timeline of events in writing to ensure that I get the exact dates. The process that was undertaken led to the decision being taken on 14 May, when I gave the written authority. I was before Parliament on 16 May to ensure that I was informing it at the earliest possible opportunity, holding myself accountable to colleagues for the fact that I had taken that decision. I have a full list of the dates that run up to the decision, which I am happy to provide in writing so that the committee can see them.

Thanks, and that is perfectly acceptable, because we understand that you are not long in post. We are happy to receive information in writing to ensure that the information that we have is accurate.

Obviously, you were in post at the time that the request for written authority was made, and it was based on the report that was produced by Teneo, as we understand it. Did you get direct access to that report?

Yes, I requested access to it to ensure that I was fully informed about the work that had been undertaken and to ensure that I was confident that it was a robust assessment of the costs and that the value-for-money assessment was robust and accurate. However, I stress again that that is a relatively narrow value-for-money assessment that does not take into account the wider considerations that I must take into account, as a minister, including the delay for island communities and the future of the yard, the workforce and the local economy in Inverclyde.

Therefore, you looked at that yourself. Were you also satisfied that the director general had scrutinised and analysed that to the depth that was necessary to arrive at the conclusion that written authority was required?

Yes.

That is fine. You will be aware of, and you have alluded to, the fact that Gregor Irwin, the director general economy, appeared before the committee a couple of weeks ago. During that evidence session, we spoke to him about access for the committee to the Teneo report and the information that led to the decision to request a written authority. At the time, he told us:

“What we are doing—and what we will work through with the Auditor General and his team—is seeing what we can do to share additional information. That process is on-going and is not yet complete, but we absolutely need to get it right, because we are committed to transparency.”

Two weeks later, we got a letter back from Mr Irwin saying no to that request. What happened between 1 June and 14 June?

A decision was taken in the Government, jointly by officials and ministers, that the commercial sensitivity of that information meant that it would not be appropriate to release the report. There is nothing in it to hide. There is no issue with the numbers—that is not the problem. The problem is the commercial sensitivity of the report and the fact that that report is the intellectual property of Teneo. That makes it difficult for us to release it. We do not want to put the competitiveness of the yard at risk. I think that you alluded to that, yourself, convener, in your letter. However, to put that in the public domain absolutely would put the competitiveness of the yard at risk and jeopardise its future.

That includes the rationale for the request for written authority. That is quite a narrow focus. Gregor Irwin falls back on the use of the word “narrow” quite a number of times in his evidence to the committee and in some of the written information that we have seen. That rationale is quite a narrow focus, is it not? Why would that preclude even some of the Teneo report or even some of the information that was the basis for that decision—as you said, the decision was very unusual; it was the first time that there had been a written authority since 2007—being provided?

To be clear—I hope that I am not putting words in Mr Irwin’s mouth—I do not think that that was a decision that was requested because there was advice against proceeding in that direction from colleagues in the Government. The decision was made because Mr Irwin could not be satisfied, based on the economic uncertainty, inflation, the other elements of information that were available and the direct cost comparison between completing and procuring elsewhere, on that narrow value-for-money element.

Mr Irwin was satisfied on the other two elements—on the appropriateness of our proceeding—and I think that that has been set out to the committee. However, no, we are not able to release the report, as I have said. We hold very dear the future of the yard, and we want to ensure that that is protected, as I am sure that you understand, convener.

Who made that decision?

That decision was taken first of all by the director general, and I was asked to confirm it, and so I confirmed that that was the appropriate action to take.

You vetoed the release of that report.

No; I did not. That was a collective decision taken in the Government. Gregor Irwin suggested that it was the right—

Did it go to the Cabinet, for example?

No. That decision was taken by me and Gregor Irwin.

The First Minister tells us in his document “Equality, opportunity, community: New leadership—A fresh start” that

“it is imperative that transparency underpins our approach to delivery. My government will ensure the people of Scotland have the information they need to hold us to account.”

How do you reconcile that statement of intent with what has happened with this issue?

It has been acknowledged by the committee that we proactively released and published more than 200 documents on the Government’s website in relation to the on-going process at Ferguson’s. We have offered ourselves—Gregor Irwin has been before the committee, and I, as cabinet secretary, and Mr Cook and Ms Hall are here today—and we have published as much as we can without putting the yard at a competitive disadvantage. We are going as far as we can to be transparent and to let people understand the decisions that we are taking and why we are taking them.

Surely there is nobody in the Government more familiar with what is in that Teneo report than the director-general economy. Why would he sit two weeks ago where you are sat today and say that work was on-going, that he was having discussions with Audit Scotland and that he hoped to release at least some of the information in that document?

To be clear, I do not think that that characterises the director-general’s statement appropriately. We considered whether anything could be released, and it was decided that the report and its contents were commercially sensitive and that releasing the report would put the competitiveness of the yard at risk, so it would not be appropriate for us to release it.

That is the decision that you took as cabinet secretary.

We took that decision as the Government, yes.

I will ask about the process of written authority. We were told that not only you but the Deputy First Minister and the First Minister were involved in the decision to issue written authority. Were the Deputy First Minister and the First Minister involved in the decision not to release the report?

My understanding of the written authority process is that the Deputy First Minister and the First Minister are required to be part of the process of issuing written authority because of its nature. I will need to check, but I am pretty sure that they will have been sighted on my decision to decline the publication of the report, but that was a decision for me and Mr Irwin.

We may return to some of those themes, but we are quite tight for time, so I will ask the deputy convener, Sharon Dowey, to put some questions to you.

Good morning. You provided written authority to the director-general the day after it had been sought. Did you give sufficient time to fully consider the request and consult officials and Scottish ministers as appropriate, particularly given that the request for and provision of written authority were completed over the course of the weekend?

Yes. When I provide in writing the timeline of the process before issuing written authority on 14 May, it will become clear that sufficient rigour was given to interrogate that. I ensured that we had looked at all possible permutations of the cost analysis to ensure that I was confident that the process was rigorous and that it had been carried out fully and appropriately, not just within the Government but with our external advisers. We considered all possible permutations, and I was confident that that was the right thing to do.

Did you have meetings prior to 14 May?

Yes.

How many meetings did you have, and who did you meet?

I met colleagues present, who were at that time fed up of seeing my face on the screen, because I had requested quite a number of meetings and discussions. The First Minister and the Deputy First Minister were part of those as well, because of the nature of the written authority process. We ensured that we had rigorously interrogated the information that was before us.

Who requested the Teneo report and how long did it take to complete?

The Teneo report was compiled over a number of months following receipt of the original proposal from the chief executive officer. The revised cost estimates were provided in September and the report was completed shortly before the decision was taken in May.

09:15  

The report was asked for in September 2022.

Correct. That was when the work was initiated as a consequence of the revised cost estimates from the CEO, and the work then took a period of time, given the scale of the consideration that was involved.

There have obviously been issues with the costs for quite a few years. Has anybody asked for a report on value for money to be done previously?

There is an on-going process of interaction with the management at the yard to ensure that everything possible is being done to keep costs to a minimum. Obviously, decisions have been made on the design of the ships that have contributed a significant amount to the additional costs, and they have been part of your deliberations over a long period of time. We continue to have discussions with management at the yard to make sure that everything possible is being done to minimise costs and that cost control measures are in place.

We have spoken previously about the decision that we took to establish the strategic commercial assets division, which Kate Hall heads up, and how that was a signal of our desire for a far more robust process of managing assets such as Ferguson’s, Prestwick and our interests in Lochaber. The process that we followed to commission and interrogate the report is a sign of the new way of working and the robust approach that we have just discussed, which Audit Scotland helped us to create. That rigour is very much what you will see in the future, and I believe that the committee has welcomed it previously.

Was any advice given in the past that it would not be value for money to complete vessel 802?

No. If an accountable officer had been concerned at any stage, they would have had to request written authority to proceed.

In your letter to the director-general, you refer to there being a

“narrow value for money case for continuing to build vessel 802 at FMPG”.

What is meant by a

“narrow value for money case”

and how did you arrive at that conclusion, given that the term is not specifically used by the director-general in his letter to you?

The narrow value-for-money case that I describe is in the direct comparison between completing vessel 802 and procuring elsewhere, with elements of economic consideration being part of that. In his letter to the convener and to me, Gregor Irwin sets out some of the uncertainty that there is within the market. The cost comparison meant that, in the value-for-money assessment that he has to carry out as an accountable officer, he was not able to conclude with confidence that there was a value-for-money case for completing vessel 802 at the yard.

The consideration that I feel that I am duty bound to take is much wider. It includes the cost to the islanders of a further delay in the vessels. We already know that our island communities have suffered significant disruption. As somebody who was born and brought up on an island, I know how difficult a time people in the islands will have been having, so I am acutely aware of the need to deliver the vessels as quickly as possible. That was at the forefront of my consideration.

Alongside that, there is also the consideration of the future of the yard. The narrow value-for-money assessment is neutral on whether the future of the yard rests on vessel 802 being completed at Ferguson’s or procured elsewhere. I felt duty bound not to consider that neutrally because I felt that, if vessel 802 was not completed at the yard, it would have been put at risk. That was part of my consideration, along with the workforce and the contribution that the yard makes to the local economy. I have heard directly from like likes of Stuart McMillan and Ronnie Cowan about their experience in the local community and about the discussions that they have with those from local businesses, who told them that, without the economic contribution that the yard makes, their businesses would not be viable.

I have to make a wider consideration that goes beyond what has been described as the narrow assessment, which is about the cost to complete at the yard versus reprocuring elsewhere and also elements of economic consideration beyond that. What I have to consider goes much wider, and that is why I made the decision that I did.

Obviously, we have concerns about the completion dates as well. We have heard that, throughout, there have been issues embedded in the Glen Sannox and vessel 802. How confident are you that no more issues will be found? Did the report highlight any other concerns that the committee should be aware of?

I and my colleagues are in constant dialogue with Mr Tydeman and I am looking forward to having the opportunity to visit the yard in the summer recess in order to see for myself the progress that is being made.

Lessons are being learned for the delivery of 802 from what has happened with 801. We have spoken about the design difficulties that led to cost increases and delays with 801. My hope is certainly that that knowledge will minimise any further delays and any other cost increases. Clearly, it is not something that I can absolutely guarantee, but we are having discussions with the yard about ensuring that everything that is possible is being done to expedite the process and to minimise costs at all times while doing so—not least because of the overriding concern that I had in taking the decision to issue written authority, which was about delivering the vessels for our island communities as quick as possible.

I hope that, in Mr Tydeman’s contribution to the committee, he was able to say that that is similarly his overriding objective at present.

You say in your letter that you

“accept that the value for money assessment concludes that it would be cheaper to re-procure a new vessel”,

but that that new vessel could

“not be deployed until May 2027 at the earliest.”

How did you arrive at the May 2027 date for the potential deployment of a new vessel?

We arrived at it through discussions, the market awareness that we have from work elsewhere with vessels that we have procured from Turkey and the awareness that we have of the estimated time that it would take to go through the procurement process and for the ship to be built and delivered. I stress that May 2027 would be the earliest possible date that we could see a reprocured 802 delivered from elsewhere.

Did you look at the possibility of stopping the building of 802 and giving FMPG a new contract for a new ship?

No. I will need to check, but I do not think that that was part of the consideration. The consideration was about completing 802 or reprocuring it elsewhere. Whether FMPG could have been part of that procurement process is for deliberation, but it was purely about estimating the cost and the delivery timescale of reprocurement compared with those of completing 802 at the yard, which we are currently progressing.

Was the May 2027 date one of the conclusions of the Teneo report?

No.

For clarity, I note that the Teneo report looked at the value-for-money case that we have been discussing.

Yes—okay. Craig Hoy has some questions.

Good morning, Mr Gray. The assessment of value for money was detailed, but you said that it was narrow and that you had to set it against what you have described as a wider set of considerations. Can you provide to the committee or publish any detailed assessment of that wider set of considerations? You said that one of them was a conversation with Stuart McMillan, which does not sound particularly scientific.

That was not scientific. I concur with Mr Hoy’s assertion on that.

The overriding consideration for me was the impact on island communities of not completing vessel 802 at the yard as quickly as possible. Colleagues who are here at the meeting and other colleagues in the Parliament have acknowledged that it was the right decision to ensure that 802 was completed as quickly as possible because of the impact on island communities. It does not take a deep dive or a wide assessment to understand that impact, because we have been living it in the disruption that there has been for island communities for so long.

The reference that I made to conversations that I have had with Stuart McMillan and Ronnie Cowan was anecdotal and not scientific, as Mr Hoy suggests.

Do you not think that, given that we are talking about the commitment of a huge amount of taxpayers’ money, ministers should undertake more than anecdotal or non-scientific assessments when they seek to override official advice?

Again, I would not want to put words in Mr Irwin’s mouth, but it was not his advice not to proceed, as Mr Hoy has perhaps suggested, although I might be wrong in that regard. It was rather that Mr Irwin wanted my authority to proceed, knowing that there was not a narrow value-for-money case for vessel 802.

I think that Mr Hoy wants to establish that we have brought the required rigour to ensuring that we spend taxpayers’ money appropriately. The Teneo report gives us a significant amount of information, but we also have our assessments of the work that is on-going at the yard. We know the impact that delaying any further would have on island communities and the impact that putting the future of the yard in jeopardy would have on the local economy in Inverclyde and the workforce at the yard. Another important consideration is the need to ensure the best possible future for commercial shipbuilding in Scotland.

Those were all important considerations, as colleagues have acknowledged, and that is why I gave written authority in this case.

As the convener identified, it is the first time that written authority has been used since 2007. Will you explain in a bit more detail specifically why you thought that it was necessary to provide that written authority? What were you seeking to achieve and what were you seeking to avoid occurring?

In the written authority process, a minister does not seek to intervene in order to override a decision with written authority. Rather, an accountable officer—in this case, it was the director general, Mr Irwin—concludes through the green book analysis under the Scottish public finance manual that the value-for-money test or one of the two other elements of the accountable officer process has not been met. He or she then has to seek the authority of the minister—in this case, it is me—to proceed with the work.

There have been cases at the United Kingdom Government level in which ministers have sought to override advice from officials. In this case, however, Mr Irwin concluded that, on the narrow value-for-money assessment, he could not conclude that the work represented value for money, which is one of the three elements that he has to consider. He therefore sought my authority to proceed and I gave it, given the wider considerations that I had to take into account.

From this point on, a lot rests on your shoulders. You have asked the director general for economy, as the accountable officer, to ensure that both they and FMPG

“do everything possible to improve productivity, maximise operational efficiency and ensure that there is a tight control on costs”.

How do you expect that to be achieved?

The work that Mr Cook has outlined is being led by Ms Hall. Mr Tydeman has already sought to deliver productivity improvements and learn lessons from the process of getting vessel 801 to the stage that it is at, which is very close to completion. The substantial element of cost and, therefore, risk to the overall contract is the completion of 802. There was no value-for-money issue with 801. The issue was with 802, because it is further away from being completed.

As I have outlined, my hope is that, by being aware of the issues that there have been—which were, as I said, mostly due to the design issues of 801—we will be able to learn enough to mitigate as far as possible in relation to 802. That cannot be guaranteed until the process is continued, but it is certainly my hope. As I set out in that correspondence and as I have said in the meetings that I have had with Mr Tydeman, my expectation is that the yard will do everything possible to mitigate the risk of any further cost or time overruns.

09:30  

Should tight control of costs involve stopping any further bonuses?

The Government has been very clear about our view of performance-related bonuses. They are contractual obligations, and I am sure that colleagues on the committee would not wish us to be seen to be breaking contractual law, but we have made very clear to the yard our displeasure at there having been bonuses and at any likelihood of any future bonuses.

A process is on-going as to whether the contracts can be renegotiated in order to see those removed. I hope that that can be the case, because I share the upset and anger of colleagues on the committee, colleagues in Parliament and people in Scotland around those bonuses being paid when there has been such delay and there have been such cost overruns with the project.

On 27 April, the First Minister said:

“It is my expectation and the Government’s expectation—the chair of Ferguson Marine knows this very well—that there should not be bonuses in the current financial year, 2023-24”—[Official Report, 27 April 2023; c 12.]

However, that was flatly contradicted at this committee by the chairman of the yard, Andrew Millar. Was the First Minister overspeaking or trying to somehow exert some remote pressure on the board?

No. The First Minister set out the Government’s position, which is that we do not expect that to be the case. The chair has a role to play and we have communicated our position to the chair very clearly. It is for the chair to go through the process that he needs to go through. I respect that and I respect his position in this case, but I also share what I presume is the displeasure of Mr Hoy and of colleagues on the committee and in Parliament at the idea of there being performance-related bonuses for a contract that has overrun in terms of both time and cost.

What assurance can you give the committee that there will be no additional funding beyond what has been forecast by the CEO of the yard and agreed by the Scottish Government—that is, no more than £97.5 million for vessel 801 and no more than £105.1 million for vessel 802? What assurance can you provide that that will not be exceeded?

A process is on-going for each financial year, through the budget process, in terms of the allocation that goes to FMPG. Part of that is about assessing what money will be required in order to continue the work that is on-going. That is partly what has triggered my being here today, because there was a need for additional rigour in relation to the estimates that were given by the chief executive in September.

I am hopeful that we will be in a position where there will not be any further requirement for funding. However, it is not something that I can absolutely guarantee. We are in a very difficult economic situation. Everybody saw the very disappointing UK inflation figures yesterday. Inflation is sitting at a stubbornly high level and we are in a very turbulent economic situation, which will have an impact. However, I am hopeful that that impact can be minimised as far as possible. Obviously, there is a process to inform Parliament should there be any further requests, as there was last year, for an increase in funding. I will ensure that that process is followed, as it was last year.

You talked about the public’s anger about the delays and the cost overruns. This situation has been going on for eight years and there have been six ministers, but there have been no ministerial resignations. If there were to be any significant increase in costs or significant delays, would you resign, given that you have issued the direction?

If I, personally, did something that put at risk the delivery of a Government agenda, of course I would consider my position. However, in this case, the issues that we are talking about, particularly in more recent times, have not been due to ministers or Government issues. As I said in my previous answer, we are facing incredibly turbulent economic factors that are driving supply chain constraints and cost increases, not just for parts but also for labour. As a result, the situation is incredibly unpredictable. Mr Hoy is well aware of the economic situation that the UK faces, and the impact that that has on public contracts is obvious.

I therefore cannot foresee a circumstance where this would be something that I would resign over unless I had done something directly, myself, that had caused any issues. So far, I do not think that that has been the case, Mr Hoy.

You blame economic headwinds but, obviously, mistakes were made in the past. On that basis, should any of your predecessors have resigned?

My predecessors in my portfolio, transport portfolios and others have made themselves more than available in the inquiry that has been conducted in this case. They can, obviously, speak for themselves on the decisions that they have taken. However, my overriding concern is to ensure that we complete the vessels as quickly, timeously and cost effectively as possible. That is what island communities deserve and it is one of the most important elements in my portfolio. I will keep pushing as hard as possible to ensure the timeous and cost-effective delivery of the vessels.

As somebody who was born and brought up an islander, how do you think people will react to your answer, which suggests that the reason why the two vessels—both vessels—are five years late and three and a half times over budget is inflationary pressures and supply chain difficulties?

Convener, to be fair, that is not the only suggestion that I have made about the reasons for the substantive elements of the delays. I spoke earlier about the design problems with the vessels, which are the substantive element. However, with regard to the more recent issues and Mr Hoy’s questions about the future and progress on completing the two vessels, the overriding issues over the past number of months—and the reason why additional funds have been requested—have certainly been driven by the design difficulties but also by the economic factors. There is no doubt about that. Mr Irwin’s seeking my authority made that plain. He was not able to forecast the final cost with sufficient certainty because of the economic turbulence in the market. I do not think that it would be fair to put that to one side and suggest that the project is somehow immune from the economic conditions that we are working in when other projects are suffering from those difficulties.

Okay. I just reflect on the fact that, with regard to the supply chain, components were ordered so far in advance that they were rusting in the yard because they had not been used.

Bill Kidd has a question for you.

Cabinet secretary, to go off on a wee bit of a tangent—this is still related to what you have been speaking about—the Scottish Government has allocated many millions of pounds to ensure that the two vessels are delivered. However, on 24 May, you wrote to us and stated that £120,000 has been provided to Ferguson Marine for capital investment measures. A lot of money is being spent on those two boats, but capital investment measures give an indication of where the yard will go in the future. I have to say that £120,000 does not strike me as a figure that will fill people with a huge amount of confidence with regard to the yard’s future. Why has that money been allocated now? Will you give us a breakdown of how the money will be spent, please?

I will bring in Colin Cook to comment on the particulars of that figure. The future of the yard will depend on ensuring that it is productive and competitive. Some of that work will require difficult decisions to be made about the future nature of the yard, including the capital investment that will be required to bring it up to competitive standard. A request has come in from the chief executive for work that he believes is required to bring it up to standard, and we must go through a rigorous process of ensuring that we are in line with subsidy control measures to take that decision—something that both the convener and I mentioned during the debate.

I bring in Mr Cook to provide further detail on the figure of £120,000.

The figure of £120,000 covers three things. Money was allocated for a desktop study on potential future engineering work; to strengthen the internal audit function of the yard; and for a cybersecurity improvement programme. The chief executive recommended those three things to be necessary for the yard. They are not the entirety of the capital investment—or, indeed, of his ambitions for the capital investment—that would be required to ensure that the yard becomes fully competitive.

I have a question on the back of that. I understand those elements. I do not want you to have to predict things—that sum of £120,000 has been allocated now for those specific elements—but, as things go forward, are there likely to be further requirements in that business scenario?

There is undoubtedly a requirement to do more. The request that I mentioned earlier has come in. From a subsidy control perspective, we have to assess whether that work would be forthcoming if the yard was in private ownership, and whether, by our providing it, we would be providing a subsidy or a competitive advantage to the yard that it would not have in the private sector.

That work is on-going, but, undoubtedly, work is required to ensure that the yard is competitive going forward. That is where some of the difficult decision making will be over the coming months in terms of ensuring that the yard is in as fit a position as possible to ensure a good future.

We have got a final couple of questions from Willie Coffey.

Cabinet secretary, I want to explore a bit more the financial controls and the information that the Government will get from this point until the completion of vessels 801 and 802, and how Parliament can be made aware of those aspects and see that information.

Clearly, we have been concerned during the project that the flow of information is lacking. Those aspects have come up several times in this committee, and the Auditor General for Scotland has raised those, too. Therefore, what assurances can you provide to the committee and the public that the quality of information that you get—the accuracy of the financial forecasts and all that—is robust enough and that the regularity of that information is sufficient enough to give you the comfort that you need, and which the committee and the public will seek, from now until the conclusion of the project?

I thank Mr Coffey for that question. The committee provides a critical function in holding the Government to account. Again, as I did during the debate, I thank you all for the work that you do to scrutinise not just this project but other projects and work that the Government delivers.

09:45  

As Mr Cook said, we have the directorate in place and are doing the work, on which Ms Hall leads, to provide that rigour and put as much information as we can into the public domain, as well as providing it to this committee to ensure that you are able to discharge your duties. Again, I give the commitment that we will provide as much information as we can. I understand the committee’s frustration that I am not able to go further with regard to the due diligence reports, but when we can provide information, we absolutely will do so, so that you are able to do your work and the public is able to have confidence in the decisions that we take.

Will there be monthly or quarterly updates? How frequently will the updates take place?

We meet the CEO and his finance team weekly, and we provide regular internal updates to the cabinet secretary and other ministers. We also share on our website details of the monthly reports that we get from Ferguson’s. There is therefore a clear beat and rhythm. There is also a process for internal escalation so that, if we think that something could be going awry, we can immediately share that with senior people, including the cabinet secretary, and ensure that the accountable officer in the Scottish Government is fulfilling their duties.

Would we be notified of concerns or issues as they developed? I am sure that the last thing that we would want to hear would be a further announcement in Parliament about another issue with the finances. How would we get a quicker assessment of anything that happened?

In relation to what we are discussing today, I took a decision on 14 May and made a statement in Parliament on 16 May—the next parliamentary sitting day. I hope that that gives some comfort to Mr Coffey and his colleagues that I am committed to providing information as quickly as possible to ensure that there can be public scrutiny and that this committee can discharge its duties as effectively as possible. We will seek to put information into the public domain as quickly as we can.

You have mentioned several times the current inflationary pressures that are having an impact on the costs for completion. I presume that that will be evident in the monthly updates or whatever we see.

As I said in response to the convener, inflation and the wider economic conditions are obviously a factor. The design difficulties are a major factor relating to the cost overruns and delays. As I said, I hope that Ferguson’s, in delivering the vessels, will be able to mitigate those difficulties as they relate to 802 as much as possible by learning from the problems that there have been with 801. I cannot guarantee that, and I do not think that the yard would be able to guarantee that until work on the vessels has progressed, but I hope that there will be a timeous and cost-effective delivery of the two vessels for our island communities.

The committee has discussed the big issue of the written authority. In your opening remarks, you said that such a decision is a rare occurrence. Have there been any other written authority decisions in the current parliamentary session or in previous sessions? If there were any, would the Government publish those so that—

We have to publish them. The Scottish public finance manual sets out how the accountable officer must go through that process. I believe that the previous written authority was in 2007, but there have been numerous such decisions at a UK Government level during that time. I am happy to furnish the committee with more details in my correspondence with the convener on the timeline, which I spoke about earlier.

Such decisions are a rare occurrence in Scotland. I am pleased that that is the case, and I hope that they will not be required routinely, as they are elsewhere. Given that they are so rare, I understand the committee’s interest in how the written authority came about, which is why I am more than happy to be here today and to provide as much information as I can about the process that was gone through to arrive at that decision, so that the committee can have confidence in that regard.

Thank you.

I said that Willie Coffey would ask the final questions, but Graham Simpson has indicated that he wants to come in with a brief one.

Cabinet secretary, earlier you said that there was no issue with the numbers. I would like to ask you about those. What is your estimate of what it will cost to complete hull 802, as opposed to what has been spent now?

The figure that is in the public domain is £105 million to complete it, which is part of the overall cost of £202 million to complete it from when the yard was nationalised.

That £105 million is the gap between what has been spent now and what it will take to complete.

No. That is the total cost from when the yard was nationalised.

What is the gap between what has been spent and—

How much has still to be spent, from today?

Yes.

I would need to come back to you in writing with that figure in light of the estimate that the chief executive issued last September.

In September, it was £70 million.

I do not need to respond to you in writing, then. [Laughter.] Ms Hall has assisted me by saying that it will take £70 million to complete 802.

Is that £70 million extra?

From the September date that that was set out by the CEO.

Another £70 million. Okay. I think that that will help the committee to assess value for money. We can probably figure out that it would be cheaper than £70 million to buy a new ferry elsewhere.

Hmm.

Okay. Thank you, convener.

I have just got one final public audit question for you, cabinet secretary. It is on a much smaller scale, but it is quite important to us. It concerns the cost of the consultants. In the evidence session on 1 June, Mr Irwin said that the cost of the First Marine International report came in at a quarter of a million pounds for six months’ work. He described it as

“first-class external independent technical advice”,

and acknowledged that

“that sort of advice might not come cheap”.—[Official Report, Public Audit Committee, 1 June 2023; c 13.]

So that was six months’ work for the FMI report at a cost of a quarter of a million pounds.

In a parliamentary answer at the weekend, we were told that the cost of the Teneo report was nearly three times that amount—an estimated £620,000. Admittedly, that was not for six months’ work—I think that Ms Hall said earlier that it was for eight months’ work. Given that, earlier, Mr Cook said that the Teneo report just looked at value for money, why on earth is it costing such a huge amount of money? In light of that, why on earth is none of that report able to be published?

I have set out why I cannot publish it. There will be a debate about that—and you, convener, will perhaps hold a different view on it than I do—but I am not willing to put the yard at a competitive disadvantage or jeopardise its ability to compete for future orders.

The work that Teneo did went into a substantial amount of detail. It worked with the yard to ensure that all potential permutations on risks to the contract were considered, particularly on 802. It was able to give advice off the back of that. The work involved more than just looking at numbers on a spreadsheet or comparing costs; it examined the processes that are in place at the yard. It is well recognised that Teneo is an international expert in the field, and the advice that it has provided has given me assurance that I was able to take the correct decision in issuing written authority to see the completion of 801 and 802.

But there is not a single word or sentence of that report that you are prepared to release into the public domain.

No—and I have said why, convener. I hope that it would be understood that, by releasing the report, we would be putting the yard at a competitive disadvantage. Yards—

Even in redacted form?

Yards around the world would be able to look at what is being said in the report and benchmark their own work based on what has been produced as part of it. Competitiveness is not the only element that I must consider; there is also the intellectual property that is attached to the report from Teneo’s point of view. Unfortunately, I am not able to release that information.

Okay. But in light of that, I still question why Gregor Irwin—who was then sitting in the chair that you are sitting in this morning—was contemplating, in co-operation with Audit Scotland, releasing some of that material.

Again, we were considering what could be released, but it has been concluded that we cannot release the report. We were not looking to—

But he did not know, two weeks ago, that the release of the report—which you have just described as a report that, in its entirety, has got intellectual property rights attached to it—would jeopardise the commercial future of the yard.

No, but we were looking to be as co-operative as possible. As Mr Irwin set out, we were looking at everything possible so that we could be as co-operative with the committee as we possibly could be, to ensure that it had as much information as it could have. The conclusion is that we cannot publish that report.

Okay. Well, as I said in the debate:

“Governments are judged by what they do, not by what they say they do”.—[Official Report, 8 June 2023; c 75.]

I thank the cabinet secretary for giving evidence. It is greatly appreciated that you have done that yourself. I also thank Colin Cook and Kate Hall for joining you.

We will now take a short break to allow for a changeover of witnesses.

09:56 Meeting suspended.  

09:57 On resuming—