KC's report into 'rigged' ferry contract at Ferguson Marine clears CMAL of fraud

Barry Smith KC was appointed to investigate allegations of fraud at CMAL

A leading lawyer’s report into allegations a ferry contract was “rigged” has cleared Scotland’s ferry procurement body of fraud, but has identified “missteps” taken by the agency.

Barry Smith KC was hired to investigate allegations of fraud around the contract award for the Glen Sannox and Glen Rosa ferries, which are significantly over budget and more than five years’ late.

This followed a BBC Disclosure documentary last year that alleged the process for awarding the contract may have been rigged in favour of the Port Glasgow shipyard.

CMAL's report into how it handled the procurement for two ferries has been published.

The 40-page report is long-awaited and was published in full by CMAL after it waived legal privilege. However, the probe was limited to investigating to “establish whether there was any fraud and not wider questions relating to the procurement of the vessels”, as revealed in The Scotsman earlier this year.

The investigation has concluded that no individual was found to have acted fraudulently to allow Ferguson Marine to pass the early stage in the tender process. Attacking the findings, the BBC said it stood by its reporting and said the review excluded examination of their central allegations and mis-stated the broadcaster’s position.

In the report’s conclusions, the lawyer states: “It is clear to me that just as there is no evidence of a fraud by any individual, or individuals acting in concert, there is equally no evidence of any fraud corporately. It is the singular feature of the period under consideration that the CMAL board did not wish to award the contracts to FMEL [Ferguson Marine Engineering Limited] absent full coverage guarantees and that the Scottish ministers intervened.”

Mr Smith KC also states that employees were “genuinely offended by the allegations” and he found “no evidence” any CMAL employee “acted with dishonest or fraudulent intention”.

He said: “Ultimately, the question posed was whether a fraud was committed during the procurement process. I did not find evidence of fraud. That is not the same as saying that the procurement process was conducted perfectly.”

However, the report also states CMAL had the view during the procurement process and prior to the announcement the contract had been given the Ferguson’s that "Scottish ministers were determined that the contracts should go to FMEL”.

This finding will fuel political anger about the possibility the SNP’s desire to score political points got in the way of efficient spending of public money.

The lawyer accuses the BBC of misunderstanding the requirement of Ferguson’s to have a builder’s refund guarantee and states there was “no evidence” those within the vessels’ team or finance team at CMAL “sought to influence the other, or that there had been any collaboration between them” around discussions about the yard’s financial standing.

The report states, as reported by The Scotsman, that design consultants Houlder were the source of the key design document, which was copied almost entirely in full by Ferguson’s during the procurement process.

The decision by CMAL to hire Houlder was done without a contract and with no non-disclosure agreement. This was labelled as remarkable by Mr Smith, and allowed a copy of the document to be passed to Ferguson’s in full.

Mr Smith concludes: “It is superficially attractive to conclude that FMEL gained an advantage in the procurement process by having possession of the SOTR [Specification of Operational and Technical Requirements], but closer analysis of the process seems to me to cast doubt on that conclusion.

"The SOTR contained no critical additional information not contained in Sch.2; it was a poor-quality document, which its author declined to put a company name to; and, somewhat bizarrely, when assessed by CalMac against the SOTR, the FMEL bid ranked second.”

Another central allegation of the BBC documentary was that Ferguson’s were allowed to materially alter their bid weeks after the tender had been submitted. Mr Smith said other shipyards were also given the chance to clarify certain points, but states the offer of clarification to FMEL “does rather stand out”.

He concluded: “If ‘revise’ is to be given its ordinary meaning, ‘to reconsider and amend’, I am bound to conclude that the FMEL bid was revised – or an opportunity for such was provided – as well as for the other two shortlisted shipyards.

"I cannot draw any conclusion on the more serious allegation that FMEL were allowed to submit what amounted to a new bid. However, I accept that the view of the-then senior technical manager [that it was not] was genuinely held.”

He added this was “not entirely satisfactory”, but there was no evidence of fraud. However, Mr Smith said this revision was “bound to have some effect” on the eventual decision to award the contract to Ferguson’s.

Kevin Hobbs, chief executive of CMAL said: “We welcome the findings of Barry Smith KC‘s independent investigation, which has established no evidence of fraud in the procurement of vessels 801 and 802.

“We do, however, recognise that the report identifies a number of missteps over the course of the procurement during 2014 and 2015, and mitigations have been in place for several years to ensure these do not happen again. For example, all parties involved in a CMAL competitive tender are required to sign a confidentiality agreement, and all clarification meetings with bidders are now carried out using the same method of communication.

“The KC’s report recognises the CMAL team at the time of this procurement as diligent, dedicated, hard-working individuals, which we stand by entirely. This is also true of current team, who are firmly focussed on the delivery of these vessels, working closely with Fergusons to ensure they enter service as soon as possible.”

A spokesperson for the BBC said: “We note the contents of this report by Barry Smith KC. The BBC declined to take part in this review after it became clear Mr Smith’s terms of reference, which had been agreed by CMAL, explicitly excluded the central allegations made in our film. Those allegations questioned whether the ferries contract was awarded fairly and within procurement rules.

“We note that Mr Smith, in his conclusions, mis-states the BBC’s published position, and clears CMAL of criminal fraud, an allegation we did not publish. We would be happy to share our evidence with any formal, independent inquiry into the allegations that we did publish.

"The BBC stands by all of the journalism in the programme.”

An Audit Scotland spokesperson said: "We will be considering the findings of the King's Counsel's review in detail. We note his statement that he did not find evidence of fraud.”

A Transport Scotland spokesperson said: “We note the report by Barry Smith KC has been published in full by CMAL. It will be for the CMAL board to consider and review the report and determine any further action or lessons learned. We will also consider the report in detail.”