This document provides a brief history of ferry services in Scotland and discusses the current tendering process for the 2016-2024 Caledonian MacBrayne ferry services contract. It notes that Calmac was established in 1973 and that the Scottish government has argued since 2000 that ferry services must be tendered to comply with EU regulations, despite opposition from Calmac and politicians. The current tender process began in July 2015 and will award a new contract in May 2016. The document outlines priorities for the STUC in opposing tendering requirements and promoting public ownership of ferry services. It questions whether tendering is actually necessary under EU law and argues the Scottish government's approach lacks understanding of commercial and EU legal issues regarding essential ferry services.

1. CALMAC – HOW DID
WE GET TO THIS
POINT?
Stephen Boyd, STUC
Highlands and Islands Conference, 12 September 2015

2. A very brief history…
 1851: David MacBrayne Ltd, initially known as
David Hutcheson & Co, founded
 1923: Caledonian Steam Packet Company
formed following merger of Caledonian
Railway & Glasgow and South Western
Railway
 1968: management of CSP transfers to
Scottish transport Group; gains control of
MacBrayne’s the following year
 1973: Caledonian MacBrayne established

3. Tendering
 1990’s: Tories had considered privatising Calmac but decided
it was unworkable
 2000: Scottish Executive argues services must be tendered
to comply with (1992) EU Maritime Cabotage Regulations
 Delay while implications of Altmark ruling considered; Scottish
Executive decides tendering must proceed; Executive
defeated in 2004 vote in Parliament but win at second
attempt
 2006: Calmac split into 2 companies: Caledonian Maritime
Assets Ltd (CMAL) owns vessels and infrastructure; Calmac
Ferries ltd operates services; offshores employment contracts
 2006/07: first tender exercise, after potential bidders drop out,
Calmac left as sole bidder and wins 2007-13 contract
 2012: current contract extended by 3 years to 2016

4. Current tender exercise
 Initial Invitation to Tender for 2016-2024 contract
published on 31 July
 Invitation to Submit Final Tender will issue on 14
December
 Winning bid announced in late May 2016
 Contract operational from October 2016
 ITT contains significant protections on jobs, terms
and conditions and pensions
 But, for the first time, Calmac faces genuine
competition; Serco unlikely to withdraw from
process

5. ISSUES FOR THE
STUC

6. Priorities for STUC
 Contesting the requirement to tender
 Highlighting the costs and inefficiencies of
tendering
 Highlighting the benefits of retaining Calmac
‘bundle’ of services
 Promoting publicly owned and accountable
services
 Jobs and conditions of employment
 Economic development of the Highlands and
Islands
 Promoting excellent health and safety
standards

7. “It’s difficult to overstate both
the scale of the failures in policy
making with respect to Scottish
ferries post-devolution, nor how
unnecessary such failures have
been” Professor Neil Kay

8. Is tendering necessary?
 Scottish Government argue tendering
necessary to comply with 1992 Maritime
Cabotage Regulations and State Aid law
 STUC, academics and many politicians
disagree. SNP opposed tendering in
opposition
 Scot Govt continues to use spurious
comparisons with other services e.g. Corsica
 Tendering very expensive, highly disruptive,
ultimately pointless exercise

9. Complying with EU law without
tendering
 Stop treating as simply a ‘transport issue’. This is
about the delivery of an essential (lifeline) public
service
 1992 Regulations do not mention tendering and there
is no reason in principle why alternatives should not
be pursued
 Strong economic case against tendering
 Domestic ferry services in most countries are treated
as essential public services and administered
appropriately; plenty of potential EU partners who
share view that tendering does not work for them
 Services will have to comply with Altmark criteria
 First Minister committed to revisiting requirement to
tender once current process is completed

10. Scottish Government approach …”not
predicated on a real understanding of
commercial logic and interests let alone
what EU permits and prohibits in this
context. In the absence of coherent
oversight the market will provide its own
solutions and one of the first lessons
students learn in Economics 101 is that you
cannot just rely on crossed fingers to ensure
that private interest aligns with the public