4th December 2020 Sent by email to: [email protected] on behalf of the former management of Ferguson Marine Engineering Limited Edward Mountain Convener Rural Economy and Connectivity Committee Scottish Parliament Dear Mr Mountain INQUIRY INTO THE CONSTRUCTION AND PROCUREMENT OF FERRY VESSELS IN SCOTLAND We write to raise a number of matters of concern arising from evidence given to the committee subsequent to our own appearance before it. Ministers who were not involved during the period of dispute between FMEL and CMAL were called to give evidence to the Committee on the final day of the Inquiry. Whilst it may be legitimate or appropriate for them to answer questions about current and future plans for CMAL, CalMac, Ferguson and the Ferry Strategy, it is, with respect, inappropriate for them to give second hand evidence on past events of which they have no direct knowledge, particularly where they presume to be qualified to apportion blame. That is inappropriate both because it is not the stated objective of the proceedings before the committee, and because even if it were those purporting to give such evidence have no proper basis to give it. We make this point with particular reference to what was said by Paul Wheelhouse. We will submit under separate cover comments for clarification of Mr Tim Hair’s follow up letter to the Committee dated 3rd February 2020 and Mr Kevin Hobbs’ email to the Committee dated 23rd April 2020. We will also submit marked-up copies of (1) the letter from the Cabinet Secretary for the Economy, Fair Work and Culture dated 1st September 2020; and (2) The written submission from Scottish Ministers dated 12thAugust 2020: For the reasons more fully set out in those comments we invite the committee to the conclusion that those documents are factually inaccurate and grossly misleading. Mr Tim Hair presented a report which was ill-informed, grossly misleading and unfairly slanted. Our previous response to that report is appended to this email for ease of reference. The purpose of Mr Hair’s report appeared to be to seek to discredit reports and comments made by Commodore Luke van Beek, and/or to defend the action taken by the Scottish Government. It will be recalled that Commodore van Beek was genuinely an expert, genuinely independent, and indeed was initially appointed by the Scottish Government. He was not supportive of the Government’s case for Nationalisation of FMEL. The strategic arguments for the Nationalisation were flawed and based on inaccurate assertions and assumptions. PwC put forward 3 options to the Government to resolve the impasse: · Retender the contract · Nationalisation · Arbitration Commodore van Beek said:- “In my opinion (with the experience of all 3 of these options) Arbitration offers the lowest price increase and shortest time delay to ferry delivery. It also avoids any long term Government involvement in the shipyard whilst allowing work to continue.” Following his appointment, Mr Hair proceeded to remove most of the Senior Executive Team. Regardless of his personal opinion, these were all highly competent professional and accredited individuals with a great deal of knowledge of the history and details of the issues that had arisen with the contracts for 801 & 802 including the catalogue of challenges originating from the inadequacy of the conceptual design by CMAL. What is even more concerning is that these challenges are ongoing, even at this stage of the project. These talented individuals were removed in an unprofessional and disrespectful way. They were in all practical senses forced to sign Non-Disclosure Agreements. These were proffered as a condition of receiving compensation for termination of employment. Each individual was left with the invidious choice of accepting the NDA or pursuing litigation to obtain the payments to which they were entitled It is evident that the aim was to silence them from speaking out about CMAL and/or the current way in which the Ferguson’s business was being managed. On 3rd February 2020, Mr Hair wrote to you in response to an email from your Clerk dated 28th January asking for follow up information relating to his evidence at the Committee. Mr Hair had stated:- “I am not aware of any non-disclosure agreements signed by people who report to me who remain in employment in the organisation.” Of course, the point in question was not about people who remain in the organisation but about the senior managers whose employment he was terminating being required to sign NDAs prior to receiving severance payments for which they qualified. Those NDAs went far beyond the ‘Duty of Confidence Agreement’ which was highlighted in his letter as part of their conditions of employment with the previous owners of the business. His follow-up continued to refer to employees who remain in employment in the organisation. This did not address the issue at which the committee’s question was directed. It is hard to believe that Mr Hair did not understand the issue on which the committee sought clarification. His response is properly to be classed as evasive. The final two Senior Managers from the original team to be removed from their jobs by Mr Hair are David Thomas (Head of Production) and Sharon Coyle (Head of HR). Both are talented, highly competent professionals whose main ‘crime’ appears to be that they were perceived to be critical of Mr Hair’s competence to successfully manage the business in a cost effective and timely manner. David Thomas has an impeccable and extensive track record in shipbuilding and engineering and we were delighted to have been able to recruit such a high calibre individual to be the Head of Production at FMEL. He is currently suspended from his day-to-day duties. Sharon Coyle is a talented HR professional,with a lengthy and unblemished track record. She did a first class job. The manner in which she was removed was highly unprofessional and against all good HR practice. This can easily be corroborated by others who witnessed her removal from the business. The committee might reasonably ask what the odds are that the entirety of the senior management team were all simultaneously incompetent such that it was necessary to terminate the employment of all of them. Against the wider context it seems very substantially more likely that there has been a concerted clear out and silencing of anyone in a position to give informed and accurate first hand evidence. On 23rd April 2020 Kevin Hobbs, CEO of CMAL, sent an email to Steve Farrell, Clerk to the Rural Economy and Connectivity Committee, claiming that 801 & 802 were not proto-type or novel. In his email Mr Hobbs selectively quotes from Paragraph 1.1.7 of the BCTQ report:- “By the end of 2015 there were 30 LNG fuelled passenger and vehicle ferries in service. Of these 27 were in operation in Norway and the Baltic. By 2020 a further 23 LNG fuelled passenger and vehicle ferries will have entered service.” Mr Hobbs selectively omitted the remainder of Paragraph 1.1.7 which concludes:- “There are currently no such vessels under construction in the UK, other than the CMAL vessels, for operating in UK waters. The vessels specified by CMAL were highly innovative and were to be introduced into a regulatory operational environment which had no experience of LNG as a fuel.” In the summary of findings in Paragraph 2.1.5 of the BCTQ report they went on to say:- “It is clear that these vessels are unique, prototype, and complex one-off vessels. Even without the added complexity of the dual fuel LNG aspects of the vessels they involve a complex set of specification requirements. It would not be unusual in the industry for there to be significant growth in the cost of construction for such complex vessels, particularly where the concept design has not been well defined. In our experience of ship construction and new building disputes, cost growth in excess of 20% of the original contract price would not be exceptional.” Box 8 on page 2 of the contract specified Lloyds Register (L.R) as the preferred classification society. L.R had no specific rules for LNG fuelled vessels. They had no previous experience with the classification of innovative LNG fuelled ferries. These vessels were first in class in the UK. They were prototypes in any accepted sense of the word. They were required by Lloyds to comply with procedures set out in LR’s Assessment of Risk Based Design (ARBD). This was required by Lloyds for “Novel or Complex Designs for which prescriptive rules and regulations do not currently apply” ie prototypes. FMEL’s highly qualified Naval Architects and Marine Engineers; BCTQ’s extremely well qualified Naval Architects and Marine Engineers; and Lloyds Register’s experienced Naval Architects and Marine Engineers have all classed these vessels as Highly Complex Vessels and Prototypes. In all such consideration it is important to note that Mr Hobbs has no qualifications in either Naval Architecture or Marine Engineering. Questions which should be asked, and Answers from inside the Yard: Our interest in the future of the yard and the wellbeing of a loyal workforce has led us to monitor what has been, and is, going on at the yard since Nationalisation. For obvious reasons, we are not at this stage attributing the comments set out below to individual employees. It is obvious that in light of what has happened to date that such employees would face retribution. But the comments can be substantiated in any detailed inquiry process. Q. Has the final design specification for both vessels now been clarified and signed off? A.