To call on you readers

We have several who understand matters Scottish:

Following the deal in 2014, the Scottish Government loaned Ferguson Marine £45 million to help it diversify and the yard secured a £97 million contract the following year to build two Cal Mac ferries on behalf of the government agency, Caledonian Maritime Assets Ltd (CMAL).

Mr McColl said that when the cost of the design for the complicated hybrid vessels went up the agency should have met the increased costs and quoted a similar case in Quebec, where a contract ran over budget and the government stepped in to help.

He said CMAL had instead “buried their heads in the sand”, telling the Mail on Sunday: “I got the Government to get everyone round the able over a year ago to repeat what happened in Quebec – to get in independent experts who understand marine engineering and naval architecture. They’ve totally refused to do that.

“It’s more frustrating that the Government has not stood up to CMAL, it’s a wholly owned government entity. They simple problem here is they need to pay the actual costs to get the ferries that they have asked Ferguson to build.”

How badly has the SNP screwed this up?

30 comments on “To call on you readers

  1. The Telegraph article doesn’t give any details, but it sounds like the shipyard quoted for a contract, started building, then discovered it couldn’t actually do it for the agreed price.

    Of course, if the customer kept changing requirements then they have to foot the bill, but so far it’s not clear that the incompetence is on the government side. Amazingly.

  2. BiW,

    It looks like it went out to tender so the bidding process needs to be looked at. Did the government have its thumb on the scales to ensure its preferred bidder got the contract? Did they carry out DD to ensure all the bidders were competent? Did they spec out the requirements accurately or just wave their hands about?

    The tender RFP/RFQ and the redacted [commercially sensitive info] contract should be in the public domain but its more work than I’m inclined to do to go and find and ten read them.

  3. BiND, the most likely answers to your questions are Yes, No and No. The contract probably went to the bidder with the most woke employment practices.

  4. The FT has the following, which sounds like it was the customer buggering about, but the Scottish Government is backing it as it’s state owned.

    The vessels were ordered under a fixed-price design-and-build contract. But Mr McColl [head of Ferguson Marine] blamed delays and hugely increased costs on substantial late changes by Caledonian Maritime Assets (CMal), which owns and manages Scottish ferries and harbours for the state.

    Ferguson Marine demanded more than £61m in extra costs to be added to its £97m contract to build the ferries, but a review ordered by the government broadly backed CMal’s position.

  5. “It’s more frustrating that the Government has not stood up to CMAL, it’s a wholly owned government entity. They simple problem here is they need to pay the actual costs to get the ferries that they have asked Ferguson to build.”

    The simple problem here is the government needs to give him more money.

  6. off topic but an admission from Spud that people DO move for tax reasons, something he has strenuously denied…..also, of course, a puffed up claim to his own experience…..

    “Hugh Cornwall says:

    ………

    I doubt you have actual experience of advising these super-rich non-Doms. The firms that have been advising them know that they are leaving the UK.

    Richard Murphy says:

    As is noted elsewhere, many are not leaving

    Some do

    Which is a contribution to reducing wealth inequality in the U.K.

    And you assuming you know my career is excellent illustration of how little you know”

    Yeah, right, Spud. You’ve advised super-rich non-Doms.

    p.s. thanks to Hugh Cornwall for posting his comments. I endorse them. Sadly I’ve been banned from Spud’s site so many times, I’ve given up posting.

  7. Why is this chap appealing to government departments to pay him more money for the ships? Surely he has a contract, if that contract specifies that changes to designs/specs etc will incur costs then all he needs to do is go to court and get his contract upheld? If on the other hand he was stupid enough to sign a contract that allowed the customer to bugger around with the design and specs afterwards, with no extra payments required, then he’s a moron, especially given the customer is the State, who is notorious for changing what it wants after signing contracts.

  8. “Some do
    Which is a contribution to reducing wealth inequality in the U.K.”

    And at a strike of Murphy’s pen Tim Worstall’s joke becomes serious policy. Man takes his money out of the country: inequality reduces: joy unbounded; rich man invests in the country: unequality increases: rich man is an evil bastard, to be prosecuted in the Court of Public Opinion.

  9. From my understanding, the CalMac/government intertwinings have been problems for decades, regardless of government. Impossibly-uncommercial routes desperately needed to keep communities connected. It’s a proper ‘public goods’ thing, private sector would go bust trying to provide it so needs collective non-user-paid provision. Government ends up having to provide it, but being government can’t avoid buggering it up.

  10. jgh said:
    “Impossibly-uncommercial routes desperately needed to keep communities connected. It’s a proper ‘public goods’ thing, private sector would go bust trying to provide it so needs collective non-user-paid provision”

    No, that’s not public goods. Public goods are where it’s worth funding, enough users are willing to pay enough to fund it, if they had to pay for it, but there’s no way of stopping free riders, people using it without paying for it, and so in practice many of the users who would pay actually won’t, because they can get it free.

    Pre-digital telly is classic public goods; no practical way of preventing non-payers from using it, so the government had to make payment compulsory.

    So for a public good, people value it enough to be willing to pay enough to cover its costs, if there was some way of enforcing payment. But this? You could charge higher user fees, there’s no practical problem with that (in the sense that it’s easy enough to stop people getting on the boat if they haven’t paid the ticket price), but I’m not sure there are enough people willing to pay enough to run it.

    So this isn’t provision of public goods; this is a subsidy – one group (mainlanders) is subsidising another group (islanders).

  11. Ooooh. I know about this one.

    I did some work with CalMac- the operating company that sits beneath the government-owned CMAL- a couple of years back. IIRC, CMAL is the shipowner, and CalMac the beneficial owner of the ships (very long term bareboat charter, I think).

    The poster above is correct, the close relationship between CalMac and the government has been a problem for the taxpayer for a while. CalMac themselves are a pretty sane shipping company really, but the existence of CMAL as a government entity in the role of the shipowner does lead to the kinds of issues folks here can guess at. IIRC, the taking on of the Hebridean Ferries was under pressure from the Government (although that isn’t something I can claim first-hand knowledge of).

    The overruns in cost on the hybrid vessels (that are really actually pretty novel, and that was why/where I was involved) aren’t anything unusual in shipbuilding, and the how they happened/ why they happened isn’t actually that interesting- but yes- the customer usually is the one that pays for spec changes, unless the spec changes are required by the yard as they overstated their ability to deliver during the negotiation phase. I suspect that (should this case end up in litigation) it’ll be the usual argument from the yard (Customer requests forced a spec change) and the customer (yard didn’t understand what they were signing up for and thus underegged the likely costs). BiND/BiW are therefore correct.

    I should note that other hybrid ferries (Victoria of WIght, delivered to WightLink) were built without colossal fuck-ups in Turkish yards for 30m. That ship is pretty similar in LOA to the Calmac ships, dunno about any other aspects of the design.

    The underlying fuck-up was that the SNP managed to get into a lose lose position- either CMAL/CalMac would lose out cos their ships cost too much, or the yard would lose out as they had to eat the excess cost.

    As the SNP held stakes in both they were essentially betting that everything would run smoothly on a construction contract for a new ship design, using new technology with some very uncertain future costs. Which is a 100 to 1 bet. The only bit I’m surprised at is the (alleged) size of the overshoot- 61m on a 90m contract? Fucking hell. Those are titchy

  12. I wonder at the hybrid design. That looks like an imposed green agenda, unless hybrid has real technical advantages. I could understand a diesel/electric design for flexibility but why do you also need a big battery? I looked at the Victoria of Wight, and all the energy ever used comes from diesel ultimately – it hasn’t got a giant plug to connect up at Portsmouth overnight. Same argument for the hybrid Hurtigruten ferries in Norway – what’s the actual benefit?

  13. My experience with CalMac/CMAL is from the late 1980s/early 1990s when living in Scotland, and through a friend who graduated from Uni into the Scottish civil service I think dealing with transport. (He worked on the Alloa Extension.)

    I admit I’m teetering on the edge of my knowledge with technical economics terms, but I did think that “private sector would go bust trying to provide it so needs collective non-user-paid provision” was ‘public goods’, as opposed to what The Progressives seems to think ‘public goods’ are, as being stuff that it’s good for the public to have, like hospitals, education and food. And then using the other definition of ‘public goods’ to demand that government should be providing these ‘good stuff for the public’.

    So, what are things like street lights, the rule of law, national defense?

  14. @Tractor Gent

    The conventional case for hybrids on ships are based around:
    1) Generator diesels are cleaner that long-stroke propulsive diesels
    2) emissions in port can be avoided entirely by not starting the diesels until you are out of port/full away on passage

  15. If you travel CalMac, I think iirc you get the pleasure of knowing that the other half or more of your fare is being paid by the Scottish taxpayers as a subsidy to cover the losses.

  16. MacBrayne provided a service in the Highlands before WWII then it got nationalised by Attlee. In the 1950s it still had a lot of pre-war staff and the ethos of a company that depended for its survival on the satisfaction of its passengers who came back to use it again.
    They were very good – no-one ever missed a connection because they would wait for you if the bus/train/ferry was late and the bus always delivered the mail to the postmistress. [The train belonged to BR but it would wait if the ferry was late. In the 1950s BR still had a lot of pre-nationalisation staff.]
    Sadly all the pre-nationalisation staff have retired or died or both and Mr McColl failed to realise that the new management of “Caledonian MacBrayne” are not the same as the MacBrayne of our youth. He accepted a fixed-price contract with the design specification to be finalised *by his company* but Caledonian MacBrayne then changed the specs outside that remit.

  17. @jgh

    I did think that “private sector would go bust trying to provide it so needs collective non-user-paid provision” was ‘public goods’,

    No, not quite.

    Definition of public goods requires them to be non-rivalrous (if I benefit from the good, that doesn’t stop you benefiting from the good too, because it doesn’t “run out” from being used) and non-excludable (nobody can stop you from using and benefiting from the good – even if, for example, you refuse to pay for it, hence the free-rider problem).

    When you can walk safely on the pavement one dark evening, because your way has been illuminated by a streetlight, that’s no impediment to the streetlight lighting my path too (non-rivalrous). Nor could a facial recognition camera track your journey, turning off all the lights on each street you enter (if it could, then streetlighting would be excludable) so even if you refused to pay your Annual Streetlight Subscription you’ll still get the light (nothing to stop free riders)

    Similarly the defence of the realm from France is a public good, because protecting you does not come at the cost of protecting me and vice versa (non-rivalrous), nor would it be possible for the army to decide they’ll let the French invade only the homes of certain people (non-excludable). So notorious tax-dodgers therefore benefit from protection despite not coughing up for the service (free riders).

    A ferry service is not a public good because exclusion is easy – refuse to take on board anybody who doesn’t pay for a ticket. A more subtle question is whether it is non-rivalrous – if there’s lots of spare capacity available on the ferry then my ferry trip is not at the expense of yours, and so we have a “club good” (or “artificially scarce” good) which is excludable but non-rivalrous. On the other hand, if the ferry service is congested and I can only fit on the ferry if you have to miss this service and wait for the next one to come, then it’s a private good.

    There’s a fourth category, common-pool resources, which are rivalrous but non-excludable. For example, every fish that I catch is a fish that you can’t, but it’s difficult to police fish stocks.

    The reason we so often see government intervention in public goods is that otherwise they tend to be under-provided: none of us privately invests as much as we “should” to maximise group utility, because the benefits accrue to other people in a way we cannot capture, and even if a bunch of us paid for the service in good faith and “community spirit” there’d still be no way to stop free-riders. Sometimes there isn’t an intervention and the good remains underprovided, for example it would be lovely to live on or walk down a street where the front gardens were all gorgeous and carefully tended. But the other garden-owners have no reason to take my private benefit into account and they cannot make me pay for it (unless, as does indeed happen in the most spectacular gardens, they block off general visual access and charge people for tours) hence there’s insufficient incentive to look after their garden and streets tend to be uglier than socially optimal.

  18. @ MBE
    Well said.
    But some people do ignore economic theory: we and our immediate neighbour have no front garden but the couple next to her maintain a garden that provokes passers-by to stop and admire it. even the fence that took scores of hours for him to get perfect.

  19. Sighs, coughs

    The Earth belongs unto the Lord
    And all that it contains
    Except the Kyles and the Western Isles
    And they are all MacBrayne’s

  20. @mbe,

    Nice examples, thanks.

    I always used to think the lighthouse or lightship was the classic example of a public good until I listened to this Economics Detective Radio episode:

    The assiduous Vincent Geloso returns to the podcast to discuss his work with Rosolino Candela on lightships and their importance in economics. The abstract of their paper reads as follows:

    What role does government play in the provision of public goods? Economists have used the lighthouse as an empirical example to illustrate the extent to which the private provision of public goods is possible. This inquiry, however, has neglected the private provision of lightships. We investigate the private operation of the world’s first modern lightship, established in 1731 on the banks of the Thames estuary going in and out of London. First, we show that the Nore lightship was able to operate profitably and without government enforcement in the collection of payment for lighting services. Second, we show how private efforts to build lightships were crowded out by Trinity House, the public authority responsible for the maintaining and establishing lighthouses in England and Wales. By including lightships into the broader lighthouse market, we argue that the provision of lighting services exemplifies not a market failure, but a government failure.

  21. @Tractor Gent August 12, 2019 at 4:29 pm

    “The hybrid Hurtigruten ferries in Norway”

    A few weeks ago I tried to find detailed specs, energy saving etc, but all I found was hype and a good bit:

    Engines, Drive, control systems, bridge etc sourced from Rolls Royce

  22. A few weeks ago I tried to find detailed specs, energy saving etc, but all I found was hype and a good bit:

    Engines, Drive, control systems, bridge etc sourced from Rolls Royce

    Are you sure it didn’t say “despite Brexit”? 🙂

  23. Wonderful examples, thanks. I was going to mention lighthouses, but remembered our local lighthouses were provided by private local subscription.
    Lifeboats is an interesting example of where Government tried to get involved and ended up near-destroying the service!

  24. The over-budget CalMac ferries aren’t diesel-electric hybrid, they’re dual-fuel:

    The 102 metre vessels will be capable of operating on liquefied natural gas (LNG) and marine gas oil (MGO), reducing emissions to help meet Scottish Government reduction targets across transport.

    This dual-fuel technology is a UK first. New technology always carries risk & uncertainty, so the government’s emissions targets are likely partly to blame for this mess.

    There’s nothing fundamentally wrong with an LNG-fuelled ship; just that you wouldn’t choose LNG unless you were forced to by environmental regulations. Diesel and fuel-oil are simply easier to manage. (Even LPG-fuelled cars were only popular in countries where the government incentivised them.)

  25. Lifeboats is an interesting example of where Government tried to get involved and ended up near-destroying the service!

    And where the government failed, the professional charity managers are doing their best to succeed…

  26. From the Daily Record;

    “McColl wanted the Scottish Government to pay half the extra costs in return for a stake in the company but ministers refused, citing EU state aid and procurement rules.”

    Ah hah hah hah…contd p94.

  27. @Bloke in Wales August 13, 2019 at 12:31 pm

    +1 RNLI Strategy seems to be “Sack all non Woke-PC-SJW volunteer Lifeboat crew, then we can do nice fluffy green things without having to talk to bigoted oiks”

    I no longer donate to RNLI

Leave a Reply

Name and email are required. Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.