 Good morning, and welcome to the 28th meeting of the Public Audit and Post-legislative Scrutiny Committee in 2017. Can I ask everybody in the public gallery to switch off their electronic devices or at least switch them to silent so that they don't interfere with the work of the committee? Can I welcome Tavish Scott MSP, who is joining us for this morning's meeting, and can I ask the committee, Item 1, an agreement to take item 3 in private? Rydw i'n ymw炸 yn dagengio ddod o'r但u, ac mae nawr yn rydw i ddweud o'r ddafniogennydau gyda transbord ScotLand y Ffairies Services. Rydw i'n ddod o'r ddod o'r ddod o'r ddod o'r ddod o'r ddod o'r ddod o'r ddod o'r Ddod o'r driver ddechrau, darlod, gofyn, cyddigion i'r ddod o'r ddod o'r Ddod o'r ddod o'r disgol i'r Feid開始 iddol ei ddw ?s phithwyr Fershwerth yng ngyrs yn gydarcheg chi a wedi'i rolyg yr os könntenon fel Datg Patreon. Felly, gan dkrä καu'r THAT yna, gan ni i flod开始r, yn your beams a gyrdeitio ydyn nhw negol yma faol o'r unrhyw wych ei Demonhau yn fawr, unrhyw eich dod yn fastion hefyd â ddyrchol nuat...! we absolutely recognise that Ferries are an essential part of Scotland's transport network providing lifeline services for many island communities across Scotland. The team visited 10 such communities in the course of the audit and we absolutely recognise the importance of those services to those communities both on islands and on the mainland. In that context, we look at the spending and performance and, as the report points Felly, transport Scotland's spending on ferry services and assets has increased more than doubled in the past nine years now to more than £209 million in 2016-17. That is mainly down to a 185 per cent increase in spending on the Clyde and Hebride contract, primarily due to an increase in the number of services, new boats and the impact of the road equivalent tariff, which has significantly reduced the cost of ferry travel for communities and tourists. Despite the overall increase in ferry spending, transport Scotland does not routinely measure the contribution that ferry services make to social and economic outcomes. In the context of tightening public sector budgets and giving the vital nature of those services, we recommend in the report that transport Scotland considers ways to measure the impact of ferry services, which should help it to demonstrate whether its spending represents value for money. Overall, though, it is important to stress that we found that transport Scotland's ferry operators are performing well. 99 per cent of services run on time and communities who use the services are generally happy. However, despite numerous forums being in place for transport Scotland and others to communicate with ferry users, it was clear from our visits to those communities that many people do not understand how ferries operate in Scotland. On that point, we recommend that transport Scotland, along with the relevant partners, better communicate the various roles and responsibilities. Turning now to our points about long-term planning for ferry services and assets, transport Scotland has made significant progress in delivering its current 10-year ferries plan, which runs up until 2022. Although that is a good achievement, the plan focuses primarily on the Clyde and Hebridean network. There are many additional planned developments for ferries across the rest of Scotland, but the full cost of those developments is unclear, as is the full cost of harbour improvements that are likely to be required in the future. Therefore, we have recommended that transport Scotland develop a new long-term strategy for its Scotland-wide network of subsidised ferries. That should take into account the significant progress against the current ferries plan plus the planned developments into the future. The new strategy should help to determine and, importantly, prioritise future investment in services and assets. Finally, turning to procurement, the new Clyde and Hebridean ferry services contract started on time in October 2016, although we have identified some weaknesses in how transport Scotland managed the procurement project. That included delays in appointing some important staff, preparing business cases and providing bidders with information. Bidders were not always clear what was expected of them, and they submitted over 800 queries during the process. We make a number of recommendations to help transport Scotland to improve its approach to ferry procurement and contract management, including ensuring that it has the right people with the right expertise in place. We expect transport Scotland to pick those lessons up as part of the on-going review of procurement policy for ferries. As always, Graeme and I are very happy to answer any questions. If there are any questions that we struggle to answer today, we will write back to you as soon as we can. Thank you very much, Mr McKinlay. I wonder whether I could kick off the questioning. You talked about a Scotland-wide network of subsidised ferries. I am sure that you will appreciate that SPT run one ferry service, Kilcregan to Gourac. The Scottish Government has agreed in principle to take that over. Do you see anything that would stop that from happening, or do you think that there are synergies in doing so because it would fit within a wider ferry network? I guess that the first thing to say is that we did not specifically look at that route nor at some of the routes that were provided by councils or private sector providers as part of this report, because we were focusing on transport Scotland ones. We are aware of the issues in Gourac, Kilcregan, ferry, and it seems to me that the discussions that are on-going make absolute sense to see whether SPT continuing to provide that service is indeed the best way forward. I would imagine that the Government will want to look at that specific issue in the context of the procurement review that is currently on-going, but it is also a good example of why we think that the Government and Transport Scotland need to look at a longer-term ferries plan that looks at all ferry services rather than just at a bit of the network convener, because it seems to me that if there are some potential historical anomalies that have grown up over time, that is the opportunity to look at that again. That is very helpful. I move us on to value for money, because quite astonishing the amount of investment in ferries has increased by something like 115 per cent in real terms. I think that there are many Government departments that would bite off your hand for that kind of increase, yet passenger numbers have only increased by 0.3 per cent. Why is there this disparity and should we be seeing more passenger numbers? What is the level of subsidy that is therefore given to ferry passengers? The conclusion that we make convener on value for money is towards the end of the report in part 4, and where we got to is that it is difficult to determine whether Transport Scotland is spending on ferries is value for money. That is not to say that the additional investment has not delivered stuff at absolutely high, so there are new services, there is the road equivalent tariff, there are new boats, there have been upgrades to harbours, so you can see tangible things that the money has been spent on. Our challenge is—you mentioned the passenger numbers as a good example—how does the investment in those tangible things deliver improvements in terms of economy, economic growth and other social outcomes to the communities that they are serving. That is the bit that we think is missing in terms of the assessment and reporting on that. We mentioned at the end of the report on paragraph 1 to 2 that Transport Scotland is beginning to develop a thing called policy assessment framework that is designed to do that, and we would absolutely encourage a degree of urgency with that. As you say, convener, it is unusual for us to do audit work and for this committee to look at areas of public services that have experienced the level of increased investment where the story in lots of other places is about contraction. For that reason, it is important that we redouble our efforts to demonstrate value for money for that spend. Are you able to provide a passenger cost? We have not done so, but I can certainly have a look at that. It should, in theory, be possible. Just to give a little bit of a flavour to the numbers of the 115 per cent increase that you spoke about, most of that increase in spend relates to the Clyde and Hebrides ferry services, where the level of subsidy increased by something like 185 per cent over the 10 years to 1617. That is largely accounted for through increases in services, the introduction of new vessels and the introduction of road equivalent tariff. Overall, if you look at 2016-17 in isolation, the £210 million that Transport Scotland spent on ferry services in that year 2016-17. 63 per cent of that money was on subsidies to the Clyde and Hebrides. 16 per cent was on subsidies to the Northern Isle ferry services. 1 per cent to Gwyrddonun. 13 per cent was on loans to Caledonian Maritime Asset Ltd to procure new vessels. 7 per cent was on grants for harbour improvement works. That kind of breakdown is helpful to understand, but I am interested in being able to compare different forms of public transport. Typically, somebody told me that the per head passenger subsidy for a bus is 30 pence. Clearly, what we are seeing with ferries, although they are different forms of transport, is substantially greater, so it would be useful to have that ability to compare. We can certainly do it for the likes of Clyde and Hebrides on a whole. Whether or not we can do it on a route-by-route basis, I will need to go back and check. That would be very helpful information. Liam, first. Just on that specific point, because as well as per passenger, per passenger mile, if we are doing a comparison, would be perhaps as helpful as well. Okay, if that can be provided. Liam Kerr. Yeah, I just want to pick up on that point for me, because you say that the CalMac subsidy I think has doubled or has gone up by 185 per cent over the last 10 years. My understanding is that passenger numbers have increased by 0.3 per cent. Now, if that's correct, that's an awful lot of money going towards not a great deal of equivalent in passengers. And there's a subsidiary thing that concerns me, because I think I'm right in saying that after the introduction of RET, car numbers increased by 16.8 per cent. Is there any assessment being done on the impact of the extra traffic on island communities and the cost to presumably the local authorities there on the roads infrastructure of this extra traffic, but not the extra passengers? I'll ask Graham to come in on the second half of your point, Mr Kerr, about the valuation work that's been done in some places, but your point is, I guess, our central point around demonstrating value for money. So, as I say, absolutely you can see things that have been bought and paid for by the additional investment, but with a 0.3 per cent increase in passenger numbers, it does seem to me that it's the passengers that are going to be spending the money on islands and not the cars. So, it's interesting that the pattern that we've seen is a significant increase in cars and motorhomes and those other kinds of things. What we don't have enough sense of across the piece, there have been some evaluation work done, but what we don't have a strong enough sense of is what is the actual impact then on growth, for example, but equally there was a lot of coverage in the newspaper this summer, for example, about the impact on some communities about increased traffic and other things. That's a little bit anecdotal, maybe, but I think that it is something that the potential consequences of RET is that we would encourage Transport Scotland to look at. We know that they are looking at that in the context of the northern aisles where they are going to be reducing fares from 2018 onwards. Graham, do you want to say anything about the valuation? Before moving on to that, just to clarify, you're correct in saying that the 0.3 per cent increase in passenger numbers over the last 10 or so years, that's a Scotland-wide increase. If you look at the Clareham Hebrides in isolation, the number of passengers on those routes actually increased something like 7 per cent since 2006-2007. As you see, a 16 per cent increase in car numbers as well. As Fraser said in those introductory remarks, part of the audit we visited 10 different island communities and spoke to various representatives of their views of the ferry services. One of the things that we spoke to them about—obviously, the Clareham Hebrides people—was about the introduction of road equivalent tariff. There were some positive comments made, but equally some of the comments coming back from the island communities were around issues that they rose. For example, in many ways, the islanders were welcoming, increased traffic numbers and visitors to the islands, but there were negative consequences as well. For example, it was difficult sometimes to get on a ferry because of our full-up peak times, but equally they spoke about the impact on traffic congestion and road condition. No work, as far as I'm away, has been done to evaluate the precise impact of those things. RET was introduced initially on a pilot basis on a number of individual routes, and it has subsequently been rolled out. 2016 was the first year in which RET was available on all of the Clareham Hebrides routes, so it's a little too early for an overall examination of the benefits that have accrued as a result of introducing RET, but it's certainly something that we would be looking for Transport Scotland to examine. Colin Beattie There are several things that I'd like to touch on here. There are reports that seem to be like quite a few of the reports that we've seen in recent times, which are okay at the moment, but pressures in the future. I'm looking at the pension scheme. Is that pension scheme still open? It is. I find it quite... I'm watering it. In 2016, the employer's pension contribution rate has gone to 30.8 per cent. Is there any other area in the public sector that has been able to go to that level of contribution? I would like to give you a categorical answer, Mr Beattie, but it does seem unusual. I don't think that you find that in many places. I do find it quite extraordinary, because we have looked at this in different sectors of the public area. There's a consistent problem with pension fund deficits, and we've shrugged our shoulders and accepted that that's the way it is and sort itself out in the future, hopefully. That seems to be a very focused plan to eliminate the deficit by increasing contributions way above what the rest of the public sector is doing. Is there any justification for that other than a simple fact of closing it? Why should they be able to step from the rest of them? I'm not sure that we can answer that specific question, because it's out with our remit, Mr Beattie, to comment on the rights or wrongs of a particular pension scheme. The reason we talk about it in here is that it is absolutely one of the cost pressures that the service faces. It's not for us to suggest what they do about that, but we do recognise that it's a significant part of the cost pressures that the funding for ferry services will face in the future, based on current plans. Ultimately, the percentage contribution is informed by the value of the assets in the pension fund and the estimated liabilities of the pension fund. The increase in contribution rates was really introduced as a result of the scheme administrator's recommendations. Clearly, if the investment returns from the assets improve, the scheme deficit is likely to reduce over time, but if that doesn't happen, as the report says, we think that Transport Scotland will have to look at the pension scheme and to see what other options might be available for them. It seems to be saying here that the pension fund trustees are driving this, which implies that, ultimately down the line, Transport Scotland has had no choice but to pay in. If that's the case here, why isn't the case elsewhere in the public service? I don't think that the process is any different. The trustees are the people who are responsible for ensuring that pension schemes are viable into the future. The trustees of those schemes will then set policies and employers will then pay accordingly. I'm not sure that the process is really that different. What is different is that some of the numbers involve Mr Beattie, I guess that's the thing. However, in terms of the relationship between the trustees of the scheme and Transport Scotland, I'm not sure that that's very different to the local government pension scheme or any other. I'm afraid that it's correct that the local government pension scheme contributions have risen over the past few years. Similarly with further education colleges, the contribution rates have increased. Had they risen to this level? Not to that level, but perhaps—we haven't looked at the history, the full history of the pension scheme. The fact that the deficit has arisen, it will have arisen over time. I'm speculating, but the recent increase in contribution rates is perhaps a function of a failure to address the deficit in earlier years. I'm speculating, because we haven't looked at the history of the pension scheme. I'm moving on to harbour dues. It seems that the harbours have two main sources of funds, which are the subsidy from Transport Scotland, grants from Transport Scotland and the harbour dues, which charge the ferries. Do they have any other source of income? Those are working harbours. Many are run by harbour trusts, so they will livery dues on fishing boats, pleasure craft and so forth. Do we know what sort of proportion that is? It seems to me that the bulk of the money here is coming from Transport Scotland one way or the other. We don't have that information, no. We don't know, Mr Beattie. We've really concentrated on the Transport Scotland bit of that, and because many of them, as Graham says, are either privately owned or in trusts, it would be hard for us to figure out what the proportion of that is. Looking at paragraph 31, it says that Transport Scotland spent a total of 200 million on harbour dues between the contract years 2007, 2008 and 2015, 2016. Of which, 155 million was on harbours not owned by Seymol. Transport Scotland doesn't know how much of the harbour dues paid to these harbour owners have been used for improvement works. Doesn't seem very satisfactory. The risk that we're identifying there is the potential for almost paying twice. So there are the harbour dues and that is an entirely accepted part of operating the business, but we also cite examples in here where Transport Scotland have invested quite significantly to upgrade harbours and including harbours that they don't own, primarily to accommodate new vessels and new routes. I'm not suggesting that that's not a good thing to do. I think that what we're saying is that, as part of the long-term planning point, that needs to be considered more carefully in the future. I think that what that paragraph is saying is that it seems to us that it would be reasonable for Transport Scotland to have a stronger handle on what the money is being spent on in terms of upgrading the assets, even though they don't own them. We're equally in that paragraph here noting that Transport Scotland not only funds the upgrading of the non-seamall harbours, but it's paying higher levels of harbour dues, which you would think would be part of the reinvestment back into those harbours. So they are paying twice. I suppose that our challenge question for Transport Scotland, Mr Beattie, comes back to our point about value for money. That might be an entirely legitimate and good thing to do for all sorts of reasons. When we ask the question, it doesn't seem to be something that's really at the forefront of their minds and certainly we weren't able to find a good explanation for why that model works well. I think that would be our suggestion, our recommendation around that, is again to demonstrate the value for money of that spend. We're still looking at value for money. One of the things that really surprised me was paragraph 45 into 46 early, which says that the total amount of commercial vehicle travelling across all ferry routes is unknown. So we're happily measuring cars, but commercial vehicles must be significant. The same paragraph 46 does say that between 2007 and 2016, the number of commercial vehicles travelling across CHFS routes decreased by 22 per cent. How does that factor into their planning? Is there any evidence that that is being taken into account? Why is it dropping? It is a weakness that we recognise. We think that Transport Scotland could develop its information to get a better handle on commercial freight traffic, to understand what has been carried. If it were to do so, we believe that that would be at least a contribution to assist them to develop a better understanding of the value of the ferry services that they are subsidising. That paragraph emphasises the fact that there is a drop of 22 per cent, but in the last sense in contrast, the number of travelling on non-Transport Scotland's subsidised routes increased by 16 per cent. Why is that? That could be due to a number of factors. One of the explaining factors is that, up to 2012, the Gwreg Dynun route also carried vehicles. After 2012, it went to passengers only, so there probably has been a transfer of vehicle traffic to western ferries, which is a private operator that operates a little to the south of the Gwreg Dynun route. However, you are extrapolating that and speculating that that is the case. I would have expected that Transport Scotland would have had that information to their fingers, because it is so important to the development of the routes. The core point, Mr Beattie, is exactly that. In paragraph 117, we set out what the ferries plan says that the funding of ferry services is designed to do. There are four very straightforward and clear bullet points. Our challenge is that they do not yet have the measurement frameworks in place to tell us whether or not those things are happening. That section that you are highlighting is an example of one of the bits of data, one of the bits of performance measurement that we would argue that if the significant increase in investment, which is an entirely legitimate policy decision for government to make, is about increasing economic growth and all those other things, then we need better ways of measuring that, I think. Would you say, based on the information that is to hand, that Transport Scotland has sufficient information at the fingertips to be able to drive, in an appropriate way, the investment in development of routes? We think that that should be better developed, for sure. That, I think, is in a sense what we are trying to get at around the whole question on value for money in terms of the longer-term planning. The ferries plan was a very good step, and they have made good progress on that. A lot of that has been about delivering vessels, upgrading assets, and that is all good. I am not saying that they are not good things to have done. I think that the next bit is then making the connection between that investment and what difference is it actually making to businesses and communities and people who travel on those routes day in and day out. Liam Kerr Thank you, convener. Just very quickly, on something Colin Beattie said, you mentioned western ferries there, I think. Am I right in thinking that western ferries does not get any subsidy? I would like to look at procurement, if I may, in section 3 of your report. On page 32, key message 2 picks up, and Fraser McKinley picked up in his opening comments, that there were weaknesses in the CHIFS procurement exercise. Fraser McKinley alluded to 800 queries that came in during the tendering process. On page 33, it seems that there was a previous contract that set out a number of learning points that had not been picked up in this process. My first question is, were there, and if so, what were the additional costs that arose, both financial and or non-financial, resulting from the management of this procurement exercise? The extra cost being to bidders, to the CHIFS service or Transport Scotland? I will check with Graham Kerr, but I do not think that we can give you exact figures on those things, but in speaking to the bidders, they did say that it added cost to the process. It was not a straightforward bidding process. To be fair, one of the reasons that there were those levels of queries was that the route, the procurement method that Transport Scotland decided to adopt was designed to encourage dialogue and a bit of toon fro between Transport Scotland and the bidders, so you would expect a degree of that. However, there is no doubt that we think that that seems significant in terms of the numbers of queries that are speaking to the bidders. They said that they felt that they were having to pull together their bids without some important information, which was difficult. Inevitably, what they told us was that that added cost for them. I do not think that we can say much about what additional costs it might have brought to Transport Scotland, but there is no doubt that it was a very involved process. It managed to get it done on time, but it meant that, particularly towards the end of that process, it was pretty tight. Is not the problem here that this was, I think, earlier on, you mentioned that this was a new process. One of the things that concerns me is that if the client, in this case the Transport Scotland, the state, is not confident in what it is doing because it is a new process and is trying to put in place what we might call a novel contract, then the system is doomed to have problems and the bidders, in this case the two bidders, will incur cost, effectively, while Transport Scotland, in this case, learns on the job. That does not strike me as very fair to those bidding for a contract. Do you have any thoughts on that? Yes. We touch on the chosen procurement method on page 37, and there is no doubt that, at that point, it was new, it was novel. Transport Scotland did it for the right reasons, which was to encourage dialogue. However, one of the points that we make in the report is that, given that quite a lot of the conditions of the contract are well set in advance, as it is known—let me get this right—the competitive procedure within the negotiation route is designed, primarily, as I understand it, not a procurement expert, but designed for contracts where the requirements are not very clear and they are developed in a more collaborative process. It seems like a slightly odd fit, given that a lot of the requirements of the contract were quite clear from early on. To some extent, if you are trying something different, there is always a degree of learning, so I would not want to be too critical of them per se, for trying something different or innovative. I think that we had good reasons for that at the time. I also think that, as we set out in that bit of the report, it did also have some consequences about how that process went. Previously, going back to my original question, lessons have not been learned from the previous process, it would appear. Do you have any confidence that lessons have been learned now? Yes, I think that we are more confident of that. I think that the couple of reasons are that we can see that Transport Scotland is taking steps to take a more strategic approach to procurement. One of the points that we make in the report is that it has been quite piecemeal in the past. There have been people put on to run the procurement of a particular contract and they move on to something else. Given the scale of some of that procurement, we think that it is important that Transport Scotland takes a more strategic approach to the procurement and contract monitoring of ferries across the board. That links to the longer term national planning point. We can see already that, through the procurement review and other things that Transport Scotland are already making some good steps in that direction. I will just drop off procurement for a second, because you mentioned the learnings that are coming. You mentioned at page 40 that there were 350 commitments made by CalMac in their bid, but you then go on to say that Transport Scotland have not assessed whether those 350 commitments have actually been met. Am I reading that correctly? It is fair to say that this has been a point of some discussion with Transport Scotland, because their argument is that, because there was only one compliant bidder, successful bidder in the end, there was not a requirement to pre-contract or award to assess those 350 commitments. That is the point that we are making in the report. It is not that those 350 commitments are not being monitored because they are. Transport Scotland is confident that they are part of the contract and that the delivery of those commitments will be monitored as part of the contract. It is not that they are not being delivered. I think that our point is that there was not any assessment of those 350 at the point of awarding the contract. Transport Scotland's argument is that we did not need to, because by that point it was clear that there was only one compliant bid. I think that our argument would still have been helpful to have evaluated those commitments in terms of the value add that was going to be brought. That is about our central point about measuring the impact of all of this, not just individually, but overall, what are we going to get for our money? Just again, a small side point, if I may, that if there is only one compliant bid, effectively the process results in only one party being competent to or in a position to deliver on a contract, then if that party bids, you will give me the exact figures, but say 860 million for a contract and then comes back knowing that it has got the state over a barrel and says, actually I need another 120 million added on top of this, we are not in a terribly good position are we? We have to give in to the extra demands that was not budgeted for. So we would always want as competitive a market as possible, I guess, is the starting point, but in this case I think that Transport Scotland were clear that there was one compliant bid, they were clear that through other work and other routes we were able to assess the value for money, the efficiency of the bid, the successful bid from CalMac, and to be fair, the increase in the contract that subsequently came through had been known by everyone that was involved for some time because that was related to changes in timetables that everyone knew was coming, so I do not have a sense that the situation you have described which theoretically could happen, I do not get a sense that that is what has happened here, I think that the increase in the cost of the contract would have been an increase in the contract regardless of who was delivering it because it was tied to changes in timetables and services. Effectively, I think that quite reasonably, Transport Scotland had to draw line in the sand at a point in time and say that this is what the bid is, so that everyone is operating to the same playing field and you could not continually change those, but everyone then knew that once it comes into practice, into service, that was going to have to move on a bit. Final question, I will come back on point now, on procurement. My understanding is that at a general level, there is no waiting for incumbency. This troubles me because it seems to me that the only thing that incumbency will allow you to do is get from a long list into a short list to be considered for a future contract. If I am right on that, where is the incentive on the incumbent operator, whether it be ferries, whether it be trains, whatever, to invest towards the end of that contract, how confident are you that those new people who put the contract together in this case have sufficiently built in safeguards or paybacks towards the end of any of these contracts such that the incumbent has to continue delivering right up to the end? That is a great question, Mr Kerr, and I am not sure that I have thought about it, if I am absolutely honest, so I would be speaking off the top of my head, which is always a dangerous thing to do, so can I take that away and think about it? I would be really grateful. I think that it is a very interesting point, not just for this, but for all of our work across procurement, so we are very happy to take that away and have a think about it and come back to you. I would be grateful, thank you. Tavish Scott has the time. The key part is 350 commitments and our responsibility to monitor delivery of those commitments. The question is what is the consequence if some of those commitments are not delivered, but, as Fraser says, it is a good question. Okay, Tavish Scott had a supplementary question. Thank you very much. I was just about to say that I can think of an answer to that, but I am no longer the transport minister, so I am not going to try. I wonder if I can ask one supplementary convener. Is procurement in audit Scotland's view value for money? Does it provide value for money for the taxpayer? In general terms? In general, on ferry contracts. So I think that the conclusion that we have reached, Mr Scott, in the report, is that it is not demonstrated clearly enough. It would be on the Northern Isles ones, based on your case study 4, where it shows that the subsidy that used to go to CalMac prior to the most recent awards has been dramatically reduced. It has, although a good chunk of that reduction is not directly related to the operation of the contract. So I think that from memory in the report about a third of it, we have attributed to what you might call efficiencies and changes to the service. Other things are a reduction in timetable and a reduction in the cost of fuel. I am always a little bit cautious about making direct comparisons across the different routes, because they are very different. But what is clear is that, when you are procuring services that are hugely important to communities for this level of money, I think that there is more that they need to do to demonstrate the value for that money that is being spent. More than you do in terms of the procurement exercise? Well, I guess not so much on its own, but the procurement exercise as the vehicle through which you get value for money in the delivery of the service. But the alternative to procurement is for the Government to just run them all? I see what you mean. I think that regardless of whether there is a procurement exercise that this or not or our challenge would always be to any public service, you still need to demonstrate value for money. If you are not going through a market procurement exercise, there has to be another vehicle for demonstrating value for money. Thank you. On a positive note, the Audit Scotland report highlights that Transport Scotland has made significant progress against commitments in its various plans to develop various services and assets between 2013 and 2022. That is very good. That is welcome. I am struck by the fact in the report that you are highlighting that it is very difficult to quantify future spending, and there seems to be so little information about assets and so on. It appears from where I am sitting that an awful lot of people must be burying their heads in the sand. Can you provide a bit more insight into why there is so little information and why we are in this situation? I will ask Graham to come in, but I think that our sense is that they have got a sense of what they could spend on new vessels and services and upgrades well into the future. I think that the challenge that we have is the sense of which that is then prioritised and captured across all services and across the whole of the country, so I think that it is better in some places than others. I do not think that in some cases it is a complete absence, but, for example, there are consequential costs of things such as road equivalent tariff, which needs to be thought through. There is the immediate and direct subsidy for reducing the fare, but if we take the reduction in fares that are coming to the Northern Isles in 2018, as well as whatever the direct cost of that will be once they have decided on the reduction, there are their longer-term costs potentially depending on demand and behaviour and other things that have knock-on consequences in it. It is those kinds of costs that are, to be fair, difficult to pin down exactly, but we think that there is more that could be done to estimate those longer into the future. Graham, do you want to add anything to that? To some extent, it is a work in progress. There are lots of developments planned and under way. The precise costs of those developments will become clearer over time, but it is certainly the kind of thing that, as part of good financial management, Transport Scotland should be looking at now to at least estimate the consequences of some of those developments. In terms of what you have seen, does it look like good financial management to you? Yes, it came up at the time of the report launch. We are not critical in the report about the way in which the money is spent today and the way in which that is managed and looked after. They know where it has gone and what it is being spent on. That is not really the concern. I think that it is about that longer-term financial management and planning about the investment that we think is required. I think that Mr Beattie mentioned a genuine question about whether the level of increase and investment is sustainable in the current environment. Of course, it could be sustainable if the Government decides that that is what they want to prioritise their spending on, but that needs to be based on a stronger sense of longer-term planning for the whole of the ferries network and, importantly, what it is designed to achieve. I appreciate some of the future costs that are difficult to calculate, but in the report that you highlighted, in terms of assets, the condition of around half of the harbours is unknown, so surely work would be undertaken to get that kind of information. Why is there an absence of information on that? That is a great example of exactly the kind of thing that we think we need to do. Again, it is not straightforward because they do not own half the harbours there, as Graham said earlier, in different kinds of ownership, but they are used by Transport Scotland to subsidise ferries services. There are examples of decisions that have been taken about either a new vessel or a new route, and that requires significant upgrades or changes to harbours. Having a better sense of that up front about the condition of the asset across the piece, which will require lots of collaborative work in working in partnership with all those different owners, is an important part of the story. That is why we keep banging on about the national plan, which is genuinely national, which looks at not just the assets that are owned by or subsidised by Transport Scotland, but that needs to take account of the full range of equipment and assets that are out there. I would like to understand that point a little bit better. In terms of the barriers or the reasons why that audit work has not happened, the conditions and maintenance, is that because of the ownership structure or is that because that work has not been planned for? I think that it is really just the case that that work has not been carried out. The creation of Caledonian maritime asset limited provided a greater incentive to look at the condition of harbours to come up with an estimate of how much upgrading the harbours require. It would be a good thing if that principle was extended to those other harbours that seem all don't own. If officials are listening today, who is it that needs to get that memo and take that work forward? The ferries team needs to be looking at that. To be fair, that is exactly the some of the things that we have a degree of confidence about, that they are beginning to look at ferries in a more strategic way. In a sense, we would say the same thing to any public service organisation that has a decent asset management plan. Know the state of your current assets, know what your priorities are and know therefore what you need to spend and where you need to spend it into the future. This is exactly the same complicated slightly by the fact that they do not own them all, but the reality is that they use them. Therefore, it is important that Transport Scotland has a good, clear picture of that. Against the long-term planning, I am looking at key study 5 on page 49. I am getting the impression that there might be a wish list of projects relating to vessels and harbours. I am just getting a feeling that a lot of decisions might be on hold, because if you do not really know how much investment you require in the harbours, you cannot make the decisions about the vessel. I wonder if you are able to say to what extent you think there are decisions on hold and are things being kicked into the long grass? I do not think that we have had a sense of that. No, I do not think that that is the issue. I think that the case study that we have got in page 5 is an interesting case study. That is why we have pulled it out as one. It is a good example of ensuring that investment decisions are all joined up. It is one thing to decide on a new route or to decide on a new boat, but then you need to think about what that means for the harbour. Our sense is that, in the past, at times, those decisions have not been as joined up as they might have been, so you decide to build a longer boat and then we think that that needs a bigger or different upgrade to the harbour. That is an example where all that needs to be more joined up. That is both the case on individual areas but, again, looking right across the piece, that is the kind of joined up and strategic thinking that we are looking to encourage. Fraser said earlier that he spoke about the ferry's plan being a good initiative. It is an attempt to look at the future. What is the current demand on the ferry services? What is the likely future demand? What does that mean in terms of capital investment in new vessels and harbour upgrades and so forth? That is all good stuff. It is there, but, as we think now, the next step is to extend the principle of the ferry's plan, which is focused on the Clyde and the Western Isles, to make that an all-encompassing Scotland-wide ferry's plan, a ferry strategy, which speaks to and is compliant with the overall national transport strategy. I am interested to know that Scotland, did you assess if there is a sufficient number of ferries that are designed to withstand adverse weather incidents? No is the short answer. We obviously looked at and reported on the number of adverse weather and other relief incidents, but we have always been pretty clear that it is not our expertise to get into judgments about whether one boat is the right boat or another boat. We did hear a lot about that, it has to be said, when we visited communities. A lot of people anecdotally would say that some new boats are more or less able to berth in some places. I have family members on Rothsy, and I hear that a lot on that route, but we have not really been able to make an assessment of the extent to which that is the case or not. Something else that was flagged up to me when I was speaking to other MSPs who are more familiar with ferry services than I am is that the booking systems do not track how many people are unable to book a place because ferries are full. Again, is that something that you can confirm? Did you do any work on that? We did not look specifically at that issue, but we are aware that there have been issues with CalMac in his booking system. Again, that was something that many of the island groups that we spoke to raised. I think that we can later confirm that doing something about the booking system, improving the booking system, is one of the 350 commitments. I suppose that, lastly, the points that I have made around long-term planning are quite clear. It seems to be a recurring theme from other Audit Scotland reports that we have looked at NHS Workforce planning, self-directed support. Is that a recurring theme? What is the message that you would like to put out there? Absolutely. Colleagues in Government are probably fed up with us saying it, but it is not going to stop us from saying it. Are they listening? Yes, in some cases they probably are. To be fair on the ferry, there is a plan that is relatively long-term. It runs until 2022. It was a 10-year plan. Our encouragement to Transport Scotland is that we do not wait until 2022 to start writing a new one. We need to be looking at that soon so that there is no gap between the two. However, long-term planning has always been important. Given everything that we know about increasing demand and expectation, and almost certainly reducing finances, it seems to me that long-term planning is more important than ever. We will keep banging that drum, and we are hopeful that we are seeing signs of progress in some places. Last point. Again, looking at the recommendations that you have made beginning on page 6, particularly in terms of long-term strategy, they are very basic. It is like the nuts and bolts of what you would expect. I am a bit concerned that this has not really been covered already. What is the risk if those recommendations are not implemented quickly? I will not go over them all, but it is the points on page 6. We try to make the recommendations as clear as we possibly can so that they are actionable. I think that Transport Scotland has agreed with most of them, which is good. The risk is not necessarily directly to the services that people will experience day in, day out. The risk is that one around sustainability and value for money. That is why the recommendations start with the long-term strategy. It seems to us that ferries have enjoyed a significant increase in investment over the past 10 years. We are raising a question as to whether that can continue into the future. In order to make those decisions, we need a good long-term plan that is genuinely Scotland-wide that helps to prioritise how and where we are going to spend that money. I have got four questions. First of all, I ask that this is a fan of CalMac. Some people put it around that there is an issue around the cost structure of the company. For example, one of the allegations is that there are people on salaries around £70,000 a year, £70,000 a year, and only work needs to work about 16 weeks a year to get that £70,000. Is that true, or is it a myth? We do not know, but Neil is the short answer to that specific question. Should we not be finding out? What is interesting is that there is a discussion and a debate to be had, not necessarily about those kinds of numbers. What we did to hear very strongly from communities and CalMac is that those are very good-quality jobs in places where they are in pretty fragile communities. There is a benefit to having well-paid jobs in local communities, and CalMac is very clear about that. One of the things that CalMac evaluates towards the end of the report is the amount of money directly that CalMac employees bring into local economies, and that is important. The only thing that I would also say is that I come back to the value for money point. When you look at what the new contract and the Northern Isles ferry has done in different ways of working in efficiencies, when you look at some of the comparators on Gwric Dunwne, I think that there are some important questions to be asked there about efficiency and value for money. I genuinely cannot comment on the specific stories that we have all heard about how much people are paid. I do think that Transport Scotland and CalMac have a responsibility to demonstrate value for money in everything that they are doing. I agree with you that, irrespective of the salary level, the more of those people who live on the islands, the better for everybody, particularly for the island economy. However, there is no evidence that most of them live on the islands either. Surely, as the auditors, we should be getting to know that, even with the best will in the world, if it is a tall remotely true that there are people earning £70,000 for a 16-week year, you are not going to tell me because that is good for the islands that it is an acceptable situation from a public audit point of view. I agree with that, Mr Neil. If you or anyone else has any specific suggestions for us to go and look at them, we are happy to. I think that there should be a look at the cost structure to either put these myths to rest or to find out if it is true. Either way, I think that we need to know. Let's see other people nodding. I think that the job of the auditor is to find out. Happy to take that away, Mr Neil. In the context of this report, which is about the delivery of the service overall, we are not always going to get into that level of detail. However, as I say, if there is a specific concern about those kinds of things, I am happy to take that away and look at it. I think that we have got to explode the myth or find out if it is true and deal with it in either case. If it is not true, then it is a very unfair slight on CalMac, which, in my view, is an excellent institution. It is an institution as far as the people of Scotland are concerned. The second area of questioning that I have is just following up on something that Monica Lennon said and which the convener referred to. Is there a reduction in the number of passengers, which is obviously, from what Graham said earlier, a variable in the Clyde estuary, for example, with a significant increase in the number of passengers and traffic, but that would suggest that perhaps there is not, in the rest of Scotland, given the share of total traffic that the Clyde estuary makes up. Does that suggest that there has actually been a decline in passenger numbers elsewhere in the network? Do we have an understanding? Is this decline in passenger numbers and the overall small increase? Is it due to lack of capacity, as Monica referred to, people not being able to get on ferries, because they are not booking at time? I know that in the Arran ferry now you have to book well in advance to have any chance of getting on it. Is there a lack of capacity? Do we need, for example, in Arran being a good example, more service provision to increase the numbers, or is it lack of demand? Graham will help me with the numbers. Overall, we talk about Scotland-wide a very small increase in passenger numbers—0.3 per cent. In answer to one of the questions, I agree that the Clyde and Hebride element of that is a 7 per cent increase. Paragraph 42 on page 26 of the report gives a breakdown of the change in passenger numbers by individual network. However, where there is actually a static position or, indeed, a decline in numbers, is that due to a lack of capacity and there is a pent-up demand that is not being met, or is that due to a fundamental lack of reduction in demand? I am going to say that I am not sure that we know for sure. The capacity question is an interesting one because it is very route-specific. Over the piece, when you look at all sailings at all times of the year, you would argue that most ferry services are operating significantly under capacity, and some are operating nowhere near full capacity. However, as you say, there are pressure points in terms of route and at particular times of the year, which cause the problem. That is why targeted investment is really important, because you would not want to increase capacity across all everywhere that you need to target. We should all be trying to, including Transport Scotland, to get a better understanding, obvious route by route, as to why those trends are happening, to see what we can do about it. Certainly, when I worked in industry, if you had a following demand, one of the first things you would do is, number one, find out why. Secondly, look at ways of generating additional demand to get better use of the asset. In some cases—again, Graham will keep me right here—it is the fact that there have been fewer sailings, so there are fewer sailing. That is the case in Northern Isles, Graham. That is one of the reasons for a decrease there. Those fewer sailings are because of the contractual arrangements, because of lack of capacity or because of lack of demand. There is a competition from cheap airlines. Again, I do not think that I have an answer for you there, Mr Neil, but those are exactly the kind of things that you would want to unpick and understand for sure. I think that we need to get a good—and I think that Transport Scotland needs to get a good understanding of what lies behind those figures. The third area is the economic and social impact of RET. I take the point—I think that it was Graham that made the point earlier—perhaps in some areas, it is still a bit premature to get a full economic and social impact assessment. There are obviously downsides and upsides to RET. Anecdotally, from my own experience, I would say that the economy of RET has never been more successful as a result of RET, but that might be due to other factors. Is Transport Scotland planning to carry out an economic or the Government—an economic and social impact assessment of RET? Will that include the impact on free traffic, as well as passenger traffic? I do not know the answer to that one. I would expect that, under the normal circumstances of things that, if you are introducing a new service and a new initiative like that, there would, as a matter of course, be some kind of evaluation of the success of that initiative a couple of years down the line. To get a real assessment of the value for money from RET, my view is that it has been highly successful in terms of no purpose of it was to help the economy and the social fabric of the island communities. In my impression, it is an investment that is well worth making, but I think that we need evidence that that is the case. We set out in page 25, Mr Neil paragraph 37, 38 and 39, what Transport Scotland has done today, which was to evaluate the pilots, which did look good. That looked positive. Again, I think that there is something about the variability of impact across the different routes, which is why it is important in order to take what we think is your exact point, which is to take that more global assessment of the significant money that is being invested in RET and the RET variant that will go into Northern Isles next year. It is exactly that kind of evaluation that not only assesses how much it is costing and what it has done for passenger numbers, but then what is the knock-on impact to local economies. That is the key. Is that extra link that is missing at the moment? I think that, if we look at this purely from the narrow point of view of an accountancy exercise, I do not think that we get the full benefit of the positive aspect of RET, and I think that we now need to start looking at that. Because passenger numbers give you a bit of the story, but you would really want to understand, for example, spend per head when they are on island. The make-up of the passengers, if they are higher spending passengers, clearly that is better than lower spending. It tells you part of the story, but there needs to be a more sophisticated assessment of what the actual economic impact is of the numbers and trends once they are on island and spending their money. My final question is that, despite the substantial increase in investment in our ferry service, there is still an issue around the age profile of the ferries. In particular, in the 1980s and 1990s, we went through a period in which there was an investment starvation. We have not yet been able to catch up totally with the backlog that has been created as a result of that very lean period in terms of investment. Have you had an opportunity to look at, in 25 years' time, 10 years' time, the work of Seamall? Obviously, it is important in this in terms of raising the capital and so on, but what is the age profile improving and is it improving fast enough? I do not know if we have the specifics of that question. What Transport Scotland has is, and I will forget the name of the plan that we have just said. The initial replacement and deployment plan. That is designed to do exactly that, to look ahead to the future and see what investment is required. The Government has invested and continues to invest. We saw the launch at Ferguson's this week of new ferries. I do not know whether we can find out the detail for you in terms of the age, but that is one area in which Transport Scotland is aware of it and is looking ahead for exactly that reason. I think that it would be very useful to get that additional information, along with the additional information on the cost structure in particular, if some of those accusations are made about people earning £70,000 for 16-week years. That is true. Thanks very much, convener. Only a couple of questions. I think that colleagues have pretty well covered quite a lot of the territory here before me. On the passenger numbers issue, if you do not mind me just asking one on that, your taking is your starting point, 2007, I think, in your report. You say that passenger numbers have been up 0.3 per cent. That is foot passengers, I take it, not cars. Transport Scotland's report to us for the committee today suggests that their foot passenger numbers have been up 9 per cent in the last year. That is clearly in the first year of the RET. Does that mean that numbers were on decline significantly over the years since 2007 and then to spike in the first year of RET? Is that what we are seeing here and is that reflected in all the services? I will try to unpick that. The 0.3 per cent increase in passengers over the last 10 years is Scotland-wide numbers. If you look at the statistics, there has been a significant decrease in the number of passengers travelling on good at the noon. If you look at CalMac, the over the last 10 years CalMac passengers have gone up by 6.9 per cent over the piece. As you say, the number of CalMac passengers in 2016-17 increased by 9 per cent. Do we have a year-by-year breakdown over that period? I do not think that we have it in the report. We certainly can provide it. If your question, Mr Cofie, is what is the pattern over that period, then we certainly do not have it in the report, but we can provide that for you. It is such a discrepancy, is not it, in the two numbers? Transport Scotland is not saying that it is 9 per cent up in years as 0.3, but you are over 10 years. Well indeed, and the 9 per cent is just this last year, which, as you say, is the first year of RET equivalent. That may be the sign of an increasing trend, but I guess it is too early to tell whether it is a trend or whether it is something that has happened this year. That will be something that we will want to keep an eye on. Right. My other question was just in terms of your recommendations again that you have made. Do you get the sense that Transport Scotland is kind of embraced and signed up to your recommendations? I have got the sense that they have not really in the response that they have given the committee. I mean, they are suggesting that they are going to note your comments and we are already making progress and so on. Use your self-raiser said that they do not measure the social and economic impact that they, in their report, say that they make a significant contribution to the social, cultural and economic impact of the islands and so on. How can they see that if they are not measuring it? On the last point, Mr Coffey, that, in a sense, is our challenge, because that phrase or similar phrases like it appears in lots of places and, of course, being auditors, we then go and say, well, how are you demonstrating that, and that is where it does get a bit tricky. That is why we think that there is more to be done there. To be fair, as I mentioned, the policy assessment framework is a route that they will start trying to do. On your core question, I am confident that, particularly around the longer-term strategic planning point, the minister was at the Rural Economy and Connectivity Committee yesterday, where he again confirmed that they were committed to doing a longer-term strategy, which is very welcome. On that, from what they have said and from working with colleagues in Transport Scotland that they are genuinely committed to that, I think that that is a helpful recommendation. I think that the area around procurement has been a point of contention. I think that they do not necessarily agree with our conclusions, which is legitimate. That is fine. That happens sometimes. As you will see from their response, they mentioned the fact that they would want awards for it and other things. Having said that, I think that they are already taking steps in terms of procurement, as I said to Mr Kerr earlier, about taking a more strategic approach about learning lessons from that. I think that there were some specific points that we made, particularly around things such as the qualifications of people on the team, where I think that there might still be a bit of disagreement. Over the piece, our sense is that they are accepting of the report, accepting of the recommendations, and we will keep an eye on implementation. When you said that their performance is really good, we should acknowledge that right across the board. I think that your report is good too, and it offers opportunities for improvement that we expect the services to embrace. Where do you think that you would expect to see and what would you expect to see in a year's time, if you are coming back again to report to the committee? It is a frequently asked question here, but how would you expect to see that kind of performance improvement evidenced for us? As you say, Mr Coffey, it is not really about the performance of the ferry services per se. There are some areas that members will be aware of that could always improve and perform better. Over the piece, that is not really the issue. It is about demonstrating value for money and demonstrating the sustainability of it. Obviously, we will wait and see what the budget holds in the next few weeks. It seems to me that, if the trajectory of spend continues to be as it has been for the past 10 years, it is really important that Transport Scotland is able to demonstrate that that is sustainable and valuable for money. As I said, when we launched the report, this is money that could be spent on other things. We need to be clear that the additional £100 million that we are now spending is the best way of delivering sustainable growth into the island community. That is our challenge. It is not about the quality of the service or the quality of the boats. We have all benefited from that. It is about sustainability and value for money. Again, many of the areas have been covered. I will perhaps jump around a little bit. You talk about Transport Scotland all the time. There seems to be a sort of corporate veil of secrecy here. Who are you actually dealing with? Can you name the positions, if not the individuals, and giving you all those answers that you want to hold responsible? For clarity, there is absolutely no way that we are remaining to have a veil of secrecy over it, Mr Bowman. That is a pretty routine practice for us. We tend to name the corporate body, because that is what we audit. We do not audit the individuals, but we audit the corporate body. Graeme Can give you a sense of the kind of people we are dealing with. Ultimately, the chief executive of Transport Scotland is accountable for ferry services. Roy Brannan is the chief executive. There is a director within the senior management team with responsibility for ferries by the name of John Nicholls. There is a ferries team beneath that, who do the day-to-day stuff and report to John. What was Roy Brannan? I presume that you discussed the report with him. We go through the formal clearance process. Every report that we submit to the relevant accountable officer and the accountable officer writes back confirming the factual accuracy of the report. What did he say when you said that it is difficult to determine whether Transport Scotland's spending on ferries is value for money? That is pretty damning, isn't it? Well, I think that his response is recognising that there is more that they could do. I think that he would say that they are already doing something about that. I mentioned earlier the policy assessment framework, which is designed to do just that. As is often the case in those reports, a robust exchange of views about what we think and what they think. It is always very professional, and he, as I say, accepted the factual accuracy of the report. It is important to say that the judgments are the order to generals and we do not ask accountable officers to agree or disagree with the judgments. That is not for them to do. What they are agreeing with is the factual accuracy of the report, and that is what you have in front of you. I presume that you have seen the two-page response. You say that you have agreement. In here, I do not really see any agreement or they note, and we may take account of it. There is nothing like a plan that says that it has come up before. Those are the issues, and this is who is responsible, and this is how we deal with it, and this is why we deal with it. That sounds like agreement. That sounds like somebody has put together a, I would say, my term, pretty pathetic response, just saying how wonderfully well we are doing. You have maybe got some points, and we will think about them. I guess that it will be for the committee to decide what you want to do about the response from Transport Scotland to you. Do not get me wrong, Mr Bowman. I would like that response and all responses to be more specific and with a better action plan in place. Graham is the auditor of Transport Scotland for his sins, and so Graham is part of the annual audit process, which, as you know, happens all the time. We will be following up the recommendations in the report, so we have mechanisms in place to make sure that they are followed up. If our sense is that they are ignoring the recommendations or they are not implementing them, then we have that route to report to the auditor general and then, potentially, back on to the committee if that is who we get to. Can I just ask one or two specifics? There was a mention, I think, of the amount of money that goes into local communities. Is it £119? Towards the end, yes. £85.8 million being paid in direct and indirect salaries. What is the actual net cash? Is that the gross salary or is that the employer's total cost of the salary? I guess that if that is the equivalent of your quoted salary, by the time you take tax off and that sort of thing, the actual cash going in will be somewhat less. I can't answer that today. We'll go back and check the report. Is that their figure then? That's their figure, yes. That's a cal-neck figure. I think also just jumping around, you spoke about market procurement needed for value for money assessment. I think that one of you said that, did we actually have a market procurement when there was only one bidder? I didn't quite say that. I don't think that. I think that what I said was that if, in the absence of going to market for a procurement, you would still expect an organisation to be able to demonstrate the value for money of whatever they're doing. That was the point that I was trying to make. I think that, as I said to Mr Bowman, you would always want as competitive a tender process as you can. The reality is that there's only going to be so many people that are able to deliver the kind of service that is being delivered across Clyde and Hebride. It seems that there's only one service. In the end, there was only one service, because the circle bid was judged to be non-compliant. I think that what's therefore important, and in a sense that's why we keep banging on about the value for money, in a sense that makes it even more important that Transport Scotland is able to demonstrate value for money, that's why it's really important that we make the point about the 350 commitments. If anything, our view is that because there was only one compliant bid, it's even more important to have all those mechanisms in place than if there were two compliant bids, if you see what I mean. Does anybody actually look through to the operating efficiency of the routes, the vessels? The subsidy, presumably at the end of the day, reflects the results of the companies running the routes. Who monitors that they're running them as efficiently as they can? Transport Scotland has a monitoring responsibility over CalMac, but the size of the subsidy that is being paid to CalMac is obviously fixed to the contractual arrangements. Ultimately, the operational efficiency of CalMac is partly influenced by its thinking about how much subsidy it needs to run those services. Because it's a competitive procurement exercise, CalMac needs to think about how efficient its services are to minimise the amount of subsidy that it requires to allow it to win the contract. We're trying to appendix to Mr Bowman to set out the different roles and responsibilities, because, as I said right at the start, it's a very complex picture of how all this works with various organisations and subsidiaries. Transport Scotland is responsible for monitoring the performance of the ferry operators and managing the subsidy payments. Part of that needs to be about monitoring the performance and the cost of the subsidies against the contract. Throughout today and in this report, I think that Transport Scotland needs to want to assure itself—and this will be important in thinking about the procurement review that is currently on-going—that it is getting as efficient a service as it possibly can. We think that there's more scope in there for more targeted monitoring and evaluation of the kind of thing that you're talking about—the operational efficiencies of it. It may not have been part of what you're doing now, but is that subject to another review by yourselves at some point? Well, no plans at the moment, but again, through Graham's audit of Transport Scotland as an organisation, that's one of the things that we would want to keep an eye on, is how they're monitoring the chief's contract. I really importantly understand that the minister will be bringing out an interim report on procurement exercise in the next few weeks, so that's going to be really important for Northern Isles and for Gwyrdun, both of which are currently on hold. As I mentioned earlier on, it is striking that it would appear that the new contract in the Northern Isles has reduced the subsidy. Part of that is, as I said, to do with reductions in sailings and the price of fuel, but some of it is because they've changed the way things are running and appear to be more efficient. I think that there's a challenge role there for Transport Scotland and the ferries team being more strategic and managing those three contracts across the board more strategically to ensure that, if there are efficiencies in the lessons to be learned in one contract, we're able to apply those to others. Thank you very much. If there's any help convenience on that last point, I know that I'm not meant to do this, but say that if Northland gets it wrong with the freight exporters in Llerwick, that is getting fish, mussels, salmon farming out £300 million a year, we take them to task. I'm not sure what happens on the west coast, but there's a very active customer relationship between the operator and the shipping company in the North Isles. I couldn't speak for the west coast, but I commend that model to the committee. Two questions, if I may convener. The first is on Alec Neill's points about RET. A paragraph 40, Mr McKinley, used the Audit Scotland state. As the Government did not set clear objectives or targets for RET, it will be difficult to determine, etc. Is there any evidence that they've now done that? I entirely take your points about how do you assess a policy when the Government—this is not a criticism of Transport Scotland, this is the Government—should have said out what it wanted to do. The short answer to that is no, not really. I think the view taken at a policy level is that this is a good thing to do. Lower ferry fares are a good thing. I sense that that's our central challenge here, which is that it says at the back, as I mentioned earlier, that the ferry plan says that it's set out to do some things. Our simple question is, how do you know whether it's doing things or not? Okay, fine, thank you. The other one that I really wanted to ask about was, in Parol 116, you have made some very pertinent observations about future implications, which I think a number of colleagues already asked about. In particular, the last bullet point on freight. Freight is fundamental to these services, as Mr McKinley, you and your team very well know. You point out there that freight fare options have been reviewed and discussed since 2014. Is there any suggestion that review might come to a conclusion? You will be better getting that from Transport Scotland, Mr Scott, but having watched the Minister at the RAC Committee yesterday, there was no timetable given that he said that he's looking for more assurance about the impact of whatever decisions they make. So at the moment there's no time scale whatsoever. Can I understand your sentence when it says, the aim is to introduce a consistent freight fare structure, which means costs will increase on some routes and decrease in others. Did you mean in that sense across the west coast or across the whole of the ferry network in Scotland? I just wanted to understand what that meant. We can check, but I think that's everything. I think it's on a thing, yeah. I think it's across the board. You made a very clear point earlier on about the complete difference between Orkney to Lerwick to Aberdeen, as opposed to the routes that some of my colleagues were describing. Is that not material to that freight? Do you understand that that might be material to that freight fare review? I sure do. I mean, we are not at all close to the review, Mr Scott, so I can't really say much more about it, but I would anticipate that the review will take into account all of those factors. In auditing the service, was lots of colleagues have asked about passenger numbers and car numbers, but for me, the freight is the most… Northlink again can provide you with reams of statistics about how much. That's not the case on the west coast? That's correct. Northlink have, and I think, regularly report on freight numbers publicly, but that information is harder to come by. So they could provide the committee with anything that committee wanted in terms of freight changes and so on and so forth, but that wouldn't be the case. Would that be correct in thinking with the west coast? That's basically correct. Northlink, in particular, have a much better handle on the types of freight that has been carried compared to CalMac. Briefly, if I might come back on the value for money point that various members have raised, and I'm looking in particular at page 26, where it talks about what seems to me a competing service, and you'll correct me if I'm wrong on this, but it seems to me that between Gwrach and Dynun you have Argyll ferries, which is a subsidised service, running passenger-only ferries, which have seen a decline of 50 per cent in passenger numbers, a long-size and unsubsidised western ferry service, which has seen a passenger increase with cars on it as well, of 1 per cent, so an increase of 1 per cent against a 50 per cent decline. My understanding, and I can't remember where I read this, so you will correct me if I'm wrong on this, but the Argyll ferry runs at approximately a 7 per cent capacity. Now, if that's right, I'm sitting here as a taxpayer saying, am I paying for too big a vessel? Am I paying for a duplicate service? Am I paying for too many sailings? What's going on? My question is that there doesn't appear to be value for money, so what are Audit Scotland or Transport Scotland or any agency doing to assess, in the case of that particular route and, of course, the wider picture, whether the taxpayer is getting value for money for subsidising a competing service? That responsibility rests with Transport Scotland to do that, I think, first and foremost. The reason that we focus on Gwyrrach doing a little bit is that it is one of the few where there is a kind of almost direct comparator, and I say almost, and I'll explain that in a second, because it goes broadly speaking the same place, but there are some differences, it's a different kind of vessel, it's a different route, but certainly anecdotally there are, you hear a lot about the differences in the consistency of the service, the reliability of the services that are provided there, and as you say, the exhibits that we've got in exhibit 6 are very striking. I would anticipate, again, we're not party to it, but I would anticipate the current review of procurement policy to be thinking about that very carefully, because it is one of the few areas where there is already a successful and sustainable private sector provider, which is not the case in most other routes across, certainly not in the Clyde and Hebridean part of the business. The short answer to your question, Mr Kerr, is that that's exactly the kind of question that Transport Scotland should be asking itself as part of this review, and then when they think about what they're going to do with the tender for Gwyrwch Dynun, which I understand again from having watched a minister yesterday, they'll be looking to extend the current contract, because the review isn't going to be quite finished in time for the end of that. I would anticipate all the questions that you've asked being part of that review. Just to be absolutely clear, Transport Scotland is going to, as far as to the best of your knowledge, Transport Scotland will produce that value for money analysis in this review? No, I wouldn't go that far. I think that I would love them to, but they should be, is what you're telling me. I think that they should be in the same way that we say in this report that they should be able to demonstrate the value for money for all the services. I think that what's interesting about Gwyrwch Dynun and why it brings it into sharp focus is that there is a closer comparator in a way that doesn't exist anywhere else. For me, it's the same point, which is about your ability to demonstrate value for money, because of the services that run that route or are close together. It does bring it into sharper focus. I wonder whether I might just ask one final question. I didn't see anywhere in the report—I might have missed it—an assessment of the procurement of maintenance and repair of our ferries. The reason that I ask is that a lot of what used to be done in Scotland is now all, as far as I'm aware, done in Liverpool. I wondered whether you saw a process that underpinned that decision. It's not something that we looked at as part of the report. Sorry, convener. We didn't look at it. We didn't come across it. That's fine. It just seems to me an unfortunate loss of jobs elsewhere. There you go. I thank you both for your evidence this morning and I now move the committee into private session.