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Isles ferry tender process under fire as private company pulls bid

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Published Date:
30 January 2007
THE Executive's attempt to open up the Western Isles ferry routes to tender was in tatters last night after V.Ships, the last private sector bidder, pulled out, claiming the process was flawed.
The Scottish Executive put the Clyde and Hebrides routes out to tender as a single bundle after pressure from Europe to introduce competition. But yesterday V.Ships, the world's largest ship management firm, said it was withdrawing because the tender
process was too restrictive.

It is understood the Glasgow-based firm believed it had no chance of wresting the contract from Caledonian MacBrayne, the state-run operator. V.Ships lost out to CalMac on the Northern Isles routes, and after that experience, managers at V.Ships did not believe it was worth spending up to £1 million on another tender.

CalMac is now on course to win the contract uncontested. Ministers insisted last night that the tender process would continue as planned. But the withdrawal of V.Ships, following a similar decision by Western Ferries last May, casts serious doubt over the effectiveness of the bidding process.

The Executive's problems over the issue were compounded last night when Western Ferries announced it was submitting a formal complaint to Audit Scotland over CalMac's operating practices on the

Gourock to Dunoon route following an Executive acknowledgement that CalMac had subsidised the route unfairly.



Page 1 of 1

  • Last Updated: 30 January 2007 12:49 AM
  • Source: The Scotsman
  • Location: Edinburgh
  • Related Topics: Caledonian MacBrayne
 
1

Ted,

30/01/2007 07:36:03

Yey for CalMac! You should have had it all to begin with! This competition is a bit of Euro-nonsense, and in no way serves the people of the Highlands and islands.

2

Dave From Barra,

Western Isles 30/01/2007 08:37:08

That's the problem Ted. Because of the lack of competition, Calmac will continue to monopolise the west coast which means the paying customer i.e. me, Guga and a whole host of locals and visitors continue to pay high prices to a state subsidised company.

There was a glimmer of hope last year that Western Ferries or V ships could take over and with increased competition, the prices would come down.

Incidentally, Calmac moved their administration offshore (Gurnsey) to take advantage of lenient tax breaks and thats a tax break on tax payers money too!

3

Marag,

Stornoway 30/01/2007 09:21:56

Dave, that's not the whole story. £13m capital injection to prop up the capital base prior to the competition; £2m to consultants; a new corporate structure; and £1m in lost Class 1 NIC by moving the employing company to Guernsey.

Since when has a Government body been allowed to engage in tax avoidance??? Why is no politician screaming loud and long??

4

Loop,

Argyll 30/01/2007 09:23:17

The Fib Dems are responsible for this mess. George Lyon MSP for Argyll & Bute is also a minister. He is now saying that these things must be looked into. He is a joke. He was torn into in Dunoon last month along with the LibDem MP by a very angry crowd. I hope he gets a shock on the morning of May 4th. CalMac's monolpoly & subsidies must not continue. The people who rely on these lifeline services should be respected and catered for.

5

Dave From Barra,

Western Isles 30/01/2007 09:33:15

Marag

You tell me why they are allowed to avoid tax and effectively move tax payers money offshore! It's a disgrace but probably allowable given that Gurnsey is part of the UK and therefore completely above board.

6

PStour,

Glasgow 30/01/2007 10:12:07

Dave - There was never any possibility of real competition or price reductions. If a private company had won the tender a public sector monopoly would simply have been replaced with a private sector monopoly. The only competition was/is once every six years over the level of government subsidy required to run the same services at the same price to the passenger - no private company felt they could do this for any less than CalMac and make a bit of profit at the same time.

Marag - I agree that offshore crewing is ludicrous but in this case it makes no net difference to the UK government as a whole. Yes - the Treasury receives less NI contributions. But the cost of providing the services and thus the subsidy that the Scottish Exec pays to CalMac (or any other tender winner) is simply reduced by the same amount. The move was only made to give CalMac a level playing field with private sector bidders - all of whom would have costed their bids as using offshore crewing.

7

Dave From Barra,

Western Isles 30/01/2007 10:22:15

PStour

Given the spirit of the "level playing field" does that mean private ferry companies will be given massive public subsidies then in order to compete with Calmac?

Also, given that there were at least 2 other companies competing with Calmac, it could no longer be considered a monopoly, especially if one of the other companies actually won a route or 2. It would break open the Calmac monopoly and encourage competition. There are several routes to compete for.

However, I take on board what you have said (pun intended).

8

PStour,

Glasgow 30/01/2007 10:25:52

Loop - the subsidies are there because fares are not high enough to cover the cost of providing these lifeline services year-round. Whoever runs the services (CalMac or a private sector monopoly) will still need a subsidy. What do you expect might happen if the subsidies are withdrawn? I'd like to see fares reduced but that will mean the subsidy has to increase.

9

Dave From Barra,

Western Isles 30/01/2007 10:27:43

There is only one run that Calmac does that does not make a profit. The Ullapool Stornoway run. The rest make a profit or break even, the Ullapool-Stornoway run is run at a loss and it loses around £2million a year.

10

PStour,

Glasgow 30/01/2007 10:33:33

Dave - yes - whoever submitted the lowest bid (private or public) was to get the subsidy. If CalMac wasn't the lowest bidder (all a bit hypothetical now) it would have lost its subsidy and disappeared, and the subsidy would have been given to V-Ships - but that would still have left a monopoly, albeit a different one.

Its true you could tender the service on a route by route basis and have different companies running different routes. But you would still have a public or private monopoly on Oban - Barra, for instance. You may or may not get a different operator on South-Uist - Mallaig if that was reinstated, so some competition possibly, but unlikely to reduce prices below the maximum permitted by the Scottish Exec.

11

PStour,

Glasgow 30/01/2007 10:35:46

Dave - no, all CalMac's routes are unprofitable. It's true that Stornaway Ullapool is the most unprofitable.

Look at Gourock to Donoon (the 20 minute town-centre-to-town-centre version, not Western Ferries' shorter route). No company, public or private, felt they could operate a car-ferry on that route without a subsidy.

12

Dave From Barra,

Western Isles 30/01/2007 10:37:23

Given that I have a copy of Calmacs annual accounts next to me, I'm in the know, if you know what I mean?

13

PStour,

Glasgow 30/01/2007 10:50:21

Dave - the accounts are available on the CalMac website for all to see. All routes made an operating loss in 2005-2006 (the last year for which accounts are available - they are published in October). Ullapool Stornaway actually made an operating loss of £4512000. Oban-Castlebay/Lochboisdale was the next biggest loss: £3763000. The routes as a whole charge £34million less in fares than they cost to operate.

14

Loop,

Argyll 30/01/2007 11:48:45

8
I understand that the subsidies that CalMac recieves are meant to be the only way that they can operate. I don't see how Western Ferries are able to provode a reliable, frequent and cheap service without any on the Dunoon route. I'm sure this wouldn't be the case for all the routes though. As someone who uses CalMac every week I understand that some of the routes are unrofitable. I suggest that CalMac invest in some proper vessels that don't take ages to travel as well as introducing discounts for islanders and frequent travellers. You can travel to N. Ireland is 2 hours but it takes 5 hours to get to Tiree. It is a third rate service at its best. We diserve better services and the mess that the FibDems have made only illustrates how useless they are.
Also, if ou can, try and get a hold of the Napier report on CalMac as it makes some very good points.

15

PStour,

Glasgow 30/01/2007 12:19:22

Loop - I agree that Western ferries operate an efficient, profitable service. But they use the much shorter crossing which only takes 10 minutes. It's fine if you've got a car - but they don't operate a service that connects with rail services at Gourock and takes people to the town centre in Dunoon - a longer, more expensive route to operate. Even Western Ferries doesn't think it could provide that service without a subsidy. Also, the government has restricted CalMac to one sailing an hour - the result is that most of the lucrative car and lorry traffic goes on the short, frequent Western Ferries crossing, while the less-than-lucrative passenger traffic uses the CalMac service. Of course, it might be more efficient to make the CalMac service passenger only - but that would leave Western without any competition for car and lorry traffic and able to charge what they want - unlike CalMac whose fares are limited by the Executive.

16

PStour,

Glasgow 30/01/2007 12:35:27

Three of CalMac's ferries on the upper-Clyde crossings are very old and out-of-date - agreed. But there are good reasons why the ferry to Tiree takes longer than the ferry to Northern Ireland (though it's about 3 hours direct from Oban to Tiree not 5). CalMac's ferries on this route travel at 16 knots on this route. New conventional ferries to Northern Ireland travel at up to 24 knots. However, CalMac's ferries tend to be shorter and have shallow drafts - making them much less aerodynamic. This is necesssary to negotiate the small harbours and channels in the Western Isles - not because they are outdated compared to Northern Ireland ferries.

Of course, catamarans to Northen Ireland can travel at 40 knots and get there in 90 minutes. Unfortunately, the size of catamaran that could be operated to CalMac's ports would not be able to carry freight and would not be able to operate in bad weather - not great for a reliable service given the weather in this part of the world. They also use loads of fuel which is why several private operators around the UK are cutting back on their use.

17

Kenmac,

Oban 30/01/2007 16:21:20

CalMac is owned by the Scottish Executive (on behalf of you and me) and is entirely dependent upon them for finance. CalMac can't build replacement ferries without the SE sayso and the reason that Western Ferries operate so successfully is because they use utilitarian ferries on a shorter route without any restriction on service. Incredible though it may seem the CalMac service from Dunoon town centre to Gourock is longer, is restricted in its frequency and when it operates in the evening, by orders in the control of the Execiutive and uses out of date and time consuming side loading ferries because the Executive has not authorised their replacement.

18

Kenmac,

Oban 30/01/2007 16:24:17

Ferries are often capable of travelling faster than they normally are scheduled to travel. Like cars there is an optimum speed at which they can economically cruise and fuel costs are a significant factor and, increasingly, an environmental factor as well.

19

Dunoon Lad,

Dunoon 30/01/2007 18:22:16

I don`t understand why Western Ferries would have wanted to compete with themselves (without a subsidy) on the Dunoon to Gourock route? If they had returned a tender and been given the contract, would they have then cut back on the McInroy`s Point route?

They have said in the recent past that they were looking at starting up new routes - possibly services to Islay and Bute ?

20

Conan,

Here 01/02/2007 00:18:00

How about service from Oban to Montego Bay?


 

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