 We have apologies from Monica Lennon. Sarah Boyack is attending in her place as a Scottish Labour substitute member. I also would acknowledge that Graham Simpson is here primarily to, I believe, ask questions on the issue to do with Ferries. Welcome to you both. The first item on Welcome to you both. The first item on the agenda is the decision on taking business in private. That's the consideration of whether to take item 6 in private. Item six is consideration of the evidence we will hear under item 4, which is to do with the ferries. Do we agree to take this item in private?" We are agreed. Our next item of business is a consideration of a draft statutory instrument. the Renewables Obligations Scotland amendment ordered 2024. For this session I'm very pleased to welcome Julian Martin, the Minister for Energy, Just Transition and Fair Work. Joined by Karen Dixon, the Scottish Government official who is responsible for energy and markets policy and Aidan McCrae, the energy and markets policy officer. Thank you for joining us today. The instrument is laid under the affirmative procedure, which means it cannot come into force unless the Parliament approves it. Following the evidence session, the committee will be invited at the next agenda item to consider a motion for the committee to recommend the instrument be approved. I remind everyone that officials can speak under this item but not in the debate that follows. Minister, I think that you want to make a brief opening statement. I'd like to make a brief statement just to outline what's been done today. It's the order under consideration to say it's a minor amendment to the Renewables Obligations Scotland order 2009. The Renewables Obligations scheme provides revenue to renewable generators through the trading of renewables obligations certificates or ROCs. Suppliers purchase ROCs either directly or through traders from generators who are awarded them by off-gem in proportion to their electricity output. The cost of the scheme is then recouped by suppliers through energy bills. The number of ROCs suppliers must provide to off-gem in relation to electricity supply is referred to as the obligation level. It must be published by Scottish ministers before 1 October each year, giving at least six months notice to suppliers before the obligation year begins. The amendment is necessary to allow for the 2024-25 obligation level to be altered to reflect changes in UK Government legislation introducing a new 100 per cent energy intensive industries exemption. It ensures that the Scottish Renewables Obligations level aligns with the UK legislation and the new 100 per cent energy intensive industries exemption. It also ensures alignment with the scheme in England and Wales with a parallel amendment that has been made by the UK Government. I therefore believe that this amendment is necessary, proportionate and will be happy to take any questions that members have. There are a few questions, and the Deputy convener, Ben Macpherson, is going to start with the first one. We, as a committee, noted that there were only two responses to the Scottish Government consultation, but I am aware of how much proactive engagement the Scottish Government does generally with stakeholders, including yourselves, of course. I was hoping that you could reassure us that the Government is confident that all necessary and appropriate steps have been taken to hear the views of stakeholders and that you have obtained the feedback that you would want to get this right. The most important thing is that we provide certainty. As I have outlined in my opening remarks, we want to work in tandem with what the UK Government is doing to provide that certainty and to do joint consultation on it. One of the things that I think is a concern when you have energy intensive industries is that, particularly in a situation that we have at the moment where we have high fuel prices, there is the possibility that if you do not give those exemptions, then we could find that those particular sectors are not profitable anymore and that we might have to consider things such as job losses and that is everything that we want to avoid. We have particularly large manufacturing sectors that are affected and that obviously consume a great deal of energy, so it protects them to a certain extent and protects those jobs. Thank you, Sarah. I think that you have some questions. Thank you very much, convener. Just to ask about the impact of us passing this order today, how will it affect the actual price of electricity for these plants that are going to be affected? How much is your calculation that it will actually save energy intensive industry in Scotland? I have got some figures here. In terms of, I can imagine domestic, because obviously it is recouped through domestic that it is going to have very little impact on domestic fuel bills at all. I am just going to have a look at what I have got. Sorry, not about domestic fuel bills, I was going to ask about those plants. The 100 per cent exemption will reduce eligible business electricity costs between £5 per megawatt hour and £7 per megawatt hour. If you think about the huge amount of fuel that has been used by particular industries, that will amount to quite a substantial sum. How many industries are we talking about here? It is around about 43 in Scotland. What proportion of our total Scottish consumption is this that it will impact on? I will just need to check my notes on that, Ms Boyack. I do not think that I have that information to hand. Obviously, you are making a decision today on it, if we can find that information and provide that to the committee. It is more just to get a sense of exactly how it all fits in. That would be useful. The industries that are involved have already been set, so that will not allow anyone else to come into that. They have already agreed and set, so 85 per cent is now going to be 100 per cent exemption. We have seen in the last couple of years where particular energy intensive industries have found it quite difficult to keep employing the people that they do into keeping tea populations from losing money. Partly about digging in and just trying to get some backdrop as we make this decision, so that is still useful. I hope that it is not going to be critical in you making a decision on the next item, but it would, minister, just be helpful to have those details clarified afterwards. We have got this on record, Mark. You have got some questions, I believe. I was just going to ask about—I will just try to get my head round how it will incentivise industry to, hopefully, electrify, so to move away from oil-powered or whatever power systems towards electrification. Is this act as incentive, or is it more about reducing the cost of industries that have already got high electricity costs, rather than fuel-switching, decarbonisation plans? We have already obviously everything around the decarbonisation of energy. Is it devolved to us in terms of our economic department, particularly the high energy systems sectors such as manufacturing in particular in Scotland? I am not sure that this particular instrument is really about incentivising anything. I think that it is about protecting jobs when it comes down to it. We have large manufacturing food production, for example, and, obviously, free stock production as well. As opposed to the original point behind this, it was getting subsidy for renewables in the first place. However, this particular exemption is about making sure that we do not have these large manufacturing. They are particularly affected by inflation at the moment, high fuel costs in particular, and there are thousands of jobs associated with these manufacturing, so this is about protecting them in the face of quite a lot of pressures. I am just trying to work out how this really helps industry to make the investments that they need to make to reduce their energy costs or to switch to low-carbon sources. I think that the original UK policy was not the British industry supercharger. I am just wondering how all of this really helps the supercharger industry in the transition, reducing their energy costs, moving into more of a low-carbon space. At the moment, it seems to be saying, well, this is all quite expensive. Let's not put more costs on, but what is the solution to that? Is it all just reducing energy and investing in future? The solutions to that lie in other schemes of the work that we are doing to work with sectors in reducing energy. If you look at the landscape in Scotland around business support, for example, or any kind of procurement, there are incentives in there for decarbonisation. We are obviously working on a green energy industrial strategy at the moment. There will be incentives in that as well. Across the piece of all the incentives that are there that the Scottish Government has put forward with our enterprise agencies in particular, there are incentivisations in there. That particular instrument is really, to my mind, and my interpretation of this instrument is really about just really keeping these manufacturing and energy intensive industries, just taking away one of the pressures that's there for them, particularly in a landscape globally, where we have fluctuating energy prices, which at the moment are out with our control. However, as we look into the future and obviously have more renewable electricity, in particular in Scotland, those pressures will decrease. Does the exemption just not add costs to domestic and other electricity users? It adds a very small amount to—and it's important to mention, Mr Lumsden, that this would be across the UK. Households typically account for about 40 per cent of oil costs recovered by suppliers. However, the average cost is currently about £77.50 per year on to an electricity bill. However, having that exemption is likely to cost an extra pound or two on to that. I can understand that we don't want a situation where household bills are affected by things like that. However, the reason behind that is that there's an awful lot more at stake if we don't have an exemption because those particular sectors that are affected by this employ a great deal of people, not just in Scotland but throughout the UK, particularly in manufacturing. We want to jointly—the UK Government and the Scottish Government working together have decided to—well, the UK Government has decided to increase the exemption to 100 per cent. Historically, it has been the case that the Scottish Government has not gone a different path from this. We want to stay the same way that we have agreed to do it alongside. What we don't want is also carbon leakage. We have a landscape in the UK or Scotland where it is increasingly unprofitable for those industries to exist in Scotland. The chances are that they will go elsewhere. It won't just be carbon leakage, it will be economic leakage as well. This is just a way in which we can protect those industries from their overheads being so onerous that they might have to think about taking their operations elsewhere. Do you have sympathy for billpayers who have to pay this renewable obligation but large consumers of electric are exempt? The UK Government analysis suggests that the amount that would go on to a domestic bill would be 80 pence or £1.10 per year for the average household. You balance that £80 added on to a bill, £1.10 added on to a bill within a year versus the potential for what I have just described of people losing their jobs. I think that that seems to be a pretty fair balance. I am always concerned about the effect that there are on household bills, but I would say that looking at the REMA work that has been done in the UK Government at the moment and the reform of the energy markets in general, is far more critical in terms of the worries that Mr Lumson describes. Actually decoupling the price of gas and electricity would have more of an effect on household bills than anything that that particular instrument does. I am just trying to highlight the fairness of it. You have consumers having to pay the obligation, but large consumers—I am not just talking about going from 85 per cent to 100 per cent of the exemption—are paying nothing at all, but you have consumers paying their children. What I would put to Mr Lumson is that this is a UK instrument that we are following. If we did not follow this, what might be the effect of that on Scottish industries, like high-intensive, energy-intensive industries? I would imagine that Mr Lumson would be the first to be critical of this. He might look to a situation where there is 100 per cent exemption in the rest of the UK, and there is only an 85 per cent exemption in Scotland. He might decide to relocate their operations. I imagine that that is something that Mr Lumson would join me in being concerned about, so that is why we are actually agreeing to the UK instrument. Minister, my question was that it is fair that householders are shouldering this burden. I never think that it is particularly fair when householders have to shoulder any kind of burden. What I am suggesting is that the view of the energy markets is far more critical in that regard, and I look forward to Mr Lumson joining me in asking for protections for consumers, particularly things like a social tariff, which would mean that we have vulnerable consumers protected from any kind of price increases. That would be far more effective and far more fair, in my view, than 80 pence or £1.10 has been put on to a bill in order to save highly skilled manufacturing jobs in Scotland. The more shoulders you spread it over, the smaller the cost is. On that note, we perhaps move on to agenda item 3 unless there is anything that committee members want to do. Agenda item 3 is a debate on the motion calling for the committee to recommend approval of the draft renewable obligation Scotland amendment. Minister, you have spoken to the amendment, but I will give you another chance to speak to it if you'd like to. No, I won't take that chance. I think I've said everything I need to say. Well, I want to know if there's any other members that... Sorry, you're right. The clerks are entirely right. You need to move the motion. Thank you. Just ask other members if anyone wants to make any comments prior to the post the ones they made earlier or any other members. So, no? Good. Minister, do you feel... Give you the opportunity to sum up if you'd like to, if you feel that you would like to. No, I'm happy to leave it as it is. So, the question therefore to the committee is that motion S6M-11992, in the name of Julian Martin, be approved. Are we all agreed? We are agreed and now the committee will report on the outcome of this instrument in due course. And I'm going to ask the committee to delegate the authority to the deputy convener to finalise the report for publication. Is the committee happy to do that? Yes, they are. So, that's good. Thank you, Minister, and thank you for your officials for attending. And I'll now briefly suspend the meeting before our next item. Thank you, Minister. Welcome back to everyone. Our next item of business is an evidence session with Ferguson Marine, Paul Glasgow Ltd, following the company's latest quarterly update on the MV Glenn Sanex, Hal Ato 1, and MV Glenn Rosa Hal Ato 2. I'm very pleased to welcome from Ferguson Marine, Andrew Miller, the chairman, Simon Cunningham, the non-executive director and chairman of the Audit and Risk Committee and David Timon, the chief executive officer. Thank you for joining us this morning. I'm sure it was voluntary, but I would like to put on the record that Jackie Dunbar and I, on behalf of the committee, visited the yard on Friday. And thank you for hosting us. I would say it was extremely interesting from our point of view. And having first looked at the ferries many years ago and following their progress for a considerable amount of time on the various committees that I've been on, probably more than any other individual MSP, I suspect. It was really interesting to see where we got to, so thank you. I would also welcome Graham Simpson, as I said earlier, who's joining us for this session, and you'll be able to get to ask some questions at the end. Before we move on to questions, I'm going to invite Andrew Miller to make a brief opening statement. Thank you, convener, for inviting us here today in terms of the committee's questions surrounding FMPG. I'm the proud to be chair of FMPG, and I've been in the role for the last 12 months. We welcomed your visit on Friday. Thank you for coming along, and we found it mutually beneficial on both sides. You've already introduced my two colleagues, so I wouldn't waste any time reintroducing them, but I'm sure that Jackie and you would see from your visit just how far we've come on Glen Sannock and also 802. During the last six months, I've spent a lot of time replacing the vacancies that have been on the board at Ferguson Marine with individuals who have the capacity, who have the commitment and also the necessary skills to drive the business forward with its change that's required. David has been CEO for the last two years, and he's the accountable officer, as you know, for the enterprise. I also want to introduce two very important people behind me, Alex and John from the GMB union, who have been most helpful to my office during the last 12 months that I've been there. Thank you for coming along today. I remind the committee, as we all sit here, that as chair, I have responsibilities which are broad and deep. 70 per cent of our employees live in the PA14 postcode area, and FMPG has a massive economic impact on the community in which we serve, and has a proud tradition spanning 124 years. I recognise my responsibility to Ferguson Marine, our employees and the local community. I, in the whole team at the yard, also recognise that Glenn Sannock and Hull 802 are of critical importance to the communities that they serve, and I'm determined for this to happen as quickly as possible. It's well documented that construction of these two ferries has been a difficult journey. Since taking over as chair, I have done all in my power to rectify the situation and steer the yard in the right direction. For seven years, I acted as chair of Glasgow Pressby Airport Group, like FMPG, a state-owned asset owned by the Scottish Government. During that time, I was consistently aware, constantly aware, that funding was from the public purse, and the objective was for that business to put its own food on the table. The Pressby Airport had lost its way, but now it has a strategic future and no longer a burden on the public purse. I'm determined that FMPG can follow a similar path and achieve a sustainable, economic future. Thank you very much. I think that I met you at Pressby Airport as well, when we were discussing the £43 million that had been put into the airport or thereby. David, I'm going to give you the opportunity. I mean, it was disappointing not to get the update till yesterday. We were looking for it on Friday, but what it's telling us, I think, is that it's going to cost more money for the Glen Sanex, and it's going to be possibly slightly later delivery, marginally later, and 802, because of the lessons learned, maybe slightly cheaper, and maybe slightly later as well. Do you want to just... Have I got that right? Have I got it wrong? Yes, convener. Good morning, everybody. The update we gave you yesterday, apologies that we couldn't do it last week, but there's an interim update. I will give you a proper quarterly report at the end of March on the due date. Yes, the costs have risen on Glen Sanex by a small amount, two to four per cent, since the numbers we had at this committee last October, 142 rising to between 145 and 149. We will be practically complete of building the ship by the end of March. Commissioning will run through in the months afterwards, mainly on the LNG system, and the rest of the time in April-May will be handover trials and further testing and client acceptance trials. That hopefully moves handover to before the end of May or into June. As I put in the letter to you yesterday, we may need some time after the end of May for final handover and acceptance trials. On 802, there's a cascade impact of 801 slipping back a few months, and so we've moved the delivery date on 802 to no later than September 25. But as I said out to you in your visit on Friday, we are in a much stronger place on the second ship. We've learnt all the lessons from Glen Sanex, and I hope it's a delivery challenge putting the ship together rather than learning and engineering and finishing the design work that we've had to do on Glen Sanex. So we're optimistic on 802, then set ourselves a different target to a cost not to exceed and an aspiration to do it less than that, and to be up to three months earlier than the September date. Okay, so worst case scenario could cost another seven million is what you're saying on the Glen Sanex, and what slightly concerns me is you're saying middle of June. Now my understanding is that CalMac have had crews employed since 2020, a captain and some of the officers, but they're still going to take 10 weeks to run through what they need to run through. So if it's the middle of June, just say that that would mean that the earliest, my maths would suggest, September that 801 could come into service just in time to have missed the summer rush. Is that my way of mark on that? I think you need to check with CalMac really on their operational plans. They've been public in saying they want between one and two months of familiarisation before service begins. My target is to hand over to SG with CalMac being their technical representation as early as we can end of May into June, and then what it takes for CalMac to hand over to CalMac, you need to ask others. Well, I think they made it clear at earlier things that it would take them 10 weeks to do the training, and if I misrepresented them, I'm sure I can expect to flurry of emails after this, but it does appear that it ain't going to be till the end of August that at the earliest, assuming they've got somewhere to put the boat and somewhere of refuelling it. So, just before we move on, I would like to just make an observation and then have one for the question. Earlier this year, the committee questioned you about the Marine Coast Guard Agency and the obligations that they required for escape hatches, and you did, in fairness, show us quite clearly on Friday where those were. I would say, as convener of the committee, I was disappointed to have to be in a position on behalf of the committee to write to the Marine Coast Guard Agency and also yourselves and also the Scottish Government to identify where the problems had arisen and when they were known about. I would probably suffice just to say, and I'm not asking you to comment on it. I think there was a certain amount of smoke and mirrors in that, and I think that was extremely disappointing. But we are where we are. Can you just confirm to me the original design for 801? I just need to check my figures. I think it was for 1,000 passengers, 127 cars and 16 HDVs. Is that what's going to be on the Glenn Sannots when it's delivered to Seymal in Midgyn? Is that the capacity? The carrying capacity of cars and lorries is right. That's one of the loading conditions that the master has. The ship's master will have a number of options in the way in which he configures the loading. My understanding is that the bid documentation prior to contract in 2015 asked for up to 1,000 passengers. Our contract was actually at 960 passengers, or the contract with FML was 960 contracts novated to us when FMPG was formed in 2019. Since then, the MCA, our approvals are to a maximum of 929 after we've moved the seating and the escape routes and the doorways. Seymal and CalMac have set out that they require 852, and that's what we're building. I'll come back to the passengers if I'm made, just to confirm that if you had 127 cars on the ferry, you will have the scope to have 16 HDVs. No, I don't think both at the same time. Well, that was the original spec, is my understanding. I will need to check that. I've got those two numbers in my head, 16 lorries and 127 cars. As you've seen on the vessel, there are four tween decks, and with two of the tween decks raised to create height clearance for the lorries in two lanes. I'm not sure that we have 127 alongside. I will check and come back to you. My concern is the original tender documents that went out to all the yards specified, as you rightly say, up to 1,000 passengers. Some of the tender documents which were, sorry, the bid returns for building ferries actually was for less passengers and for less vehicles, and they were cheaper and quicker. So we're in a situation now that we've got ourselves where it's taken considerably longer, considerably more money, and we have less passengers, potentially less cars and potentially less HDVs. That, if I was an islander, I'd be pretty angst by that. Would you not? I understand the islander's comments. With the way the tween decks work, you can put all four tween decks up to the deck head height and create clearance throughout the whole of the car deck for lorries only. So the subject to weight loadings, there will be a larger permutation of lorries potentially with cars just on the lower level. With all four tween decks in place, you can only carry cars. I'll come back to you and confirm what those variations might be. Okay, I'm just slightly concerned, but because those specifications, as far as the vehicles and the passengers concerned, drove the overall length of the ship at 102 metres, 900 tonnes, and I was demanding a 6.5 knots. So it appears that if you change all of it, you might have changed the whole spec of the ship, which to me then questions the whole process of tendering. I understand you have to respond to issues, but we're getting a more expensive boat with less passengers on it, less cars on it, less lorries on it, and it's big enough for the original size, and there's so many moving parts in there. The benefit of the committee here, if I can clarify, the way a ship is allowed to operate will be a sophisticated bit of software that the master and chief engineer has available to check that the loading conditions, permutations of number of lorries, number of cars, number of passengers are all safe, and that's in the stability booklets and the loading conditions for the vessel. The permutations with the flexibility of the different car decks will be different. It won't be running with a set amount of lorries and cars. He'll be able to have flexibility during winter months, perhaps mostly lorry cargo during summer months, a lot of foot passengers and cars. David, I accept that fully, and there might not always be 127 cars, but the original spec was that the maximum that they would want is 1000 passengers, 127 cars and 16 lorries, and if we don't have the ability to do that in any permutation as far as passengers concerned, and we might be limited on the cars, the islanders may feel a little bit peeved. I'm going to come back with more questions at the end. There are lots of other committee members that want to ask questions, and I'm going to come to Sarah to start with Sarah. Thanks very much, convener. I'm not sure who the best person is to ask this question, but I want to ask some questions about the LNG installations on the boat. Thinking particularly about your update that you sent us at the beginning of February this year, which said that supply of the final parts of the LNG piping systems should have taken place in the last quarter of 2023 but was delayed. It was just to ask when you first became aware of the issue and what action was taken to prevent this issue from delaying the project. Thank you. We contracted with a prime contractor for the design and supply of the LNG system. That's the pipework, the storage tank, the means of turning the very cold liquid into high-pressure gas. That was all supplied by a different contractor, the same contractor that manufactured the engines that run on the dual fuel. The pipework to get the low-temperature liquid into the tank, the vent pipework to take the very cold air up and safely away from passengers and crew up through the masts, and then the pipework for the high-pressure gas to move from the conversion unit to the engines to be able to supply fuel to the engines. That was all contracted by the specialist company, the European contractor, with the UK subcontractor. From about September, October onwards, we were finding it difficult to keep contact with the prime contractor who was just not returning emails. The LNG market internationally is incredibly busy. A lot of European resources are in Asia, building ships, there's a huge amount of LNG work going on in the Asian shipyards, and UK contractors are in demand and European contractors are in demand. We found it very frustrating that we couldn't get the prime contractor to respond for the last bit of the supply of pipework for the gas lines. With the designer being completed, we just needed the supply of this very specialised low-temperature steel and the layout and the design of it. This had to go through classification approval, so whatever we got in the equipment needed to be, the final installation drawings needed to be approved as well. That process we were trying to complete in the period of October to December. We were able to unravel the contracting structure and get the UK subcontractor to come on site and do the work direct for us starting in January, but, unfortunately, it took us between October and December to restructure that contract. That contract has been on board in the yard since 8 January and we'll finish the installation of the last bit of the gas lines before the end of March. That's really useful. It sounds like this is very detailed knowledge and experience that's required that we don't really have from the inception of it right through the delivery of it in the UK or in Scotland. Did you discuss delivering the 801 without LNG capacity with CMAL or Transport Scotland? What was your response if you managed to have that conversation because it's quite a big delay built into the whole project? We didn't discuss it for this latter stage. I updated this committee more than a year ago when we were waiting for some vacuum skid components in the system to be delivered that we thought that might be an option to commission the vessel first with single fuel and then switch to dual fuel. The client-side CMAL, CalMac, very much wanted us to stick to the contract, stick to the specification and hand over a dual fuel vessel and that's what we're aiming to do. I suppose a question to them would be about the increased energy efficiency of this, to what extent that's a key issue for this project. Is it something that's going to be useful going forward for other ships that will be constructed in the UK? That's better addressed to CMAL and CalMac up. My job is to build to the specification. Okay, thanks very much. That's helpful. Thank you, convener, and I also thank you for taking the time for hosting the convener and I on Friday. I've personally found it very beneficial. I'd also like to thank Alex and John, who took some time out of their grandparenting duties to come along and to answer any questions that Edward and I had, the convener and I had, and I truly did find that beneficial, so thank you very much, gentlemen. If I can carry on from what Sarah was asking about the LNG contractor, can I ask if there was any penalty imposed on them for failing to meet their contractual requirements? In regards to robust processes as a whole, how do you actually manage contractor performance, not just with LNG but the other contractors that you have? I will leave it to you, gentlemen, to decide who is best to answer. I'm still in the hot seat. Could I ask you to maybe pull your microphone down just slightly because I must be going deaf, convener, I'm finding it difficult to hear. Is that a bit better? Thank you. All of our 10 prime contractors, whether it's for LNG, for electrical, for piping, heating and ventilation, outfitting, they're all on framework contracts that I inherited, that were signed post-administration in 2020-2021. Some transferred across from Ferguson Marine Engineering but new contracts were set up by my predecessor in 2020 in recovery from administration. Most of those contracts have rates for management overheads, supervision, hourly rates, daily rates for trade skills and terms and conditions for supply of materials. So we call off individual work scopes against those framework contracts across the whole last couple of years of building the ships, last four years under FMPG. We're trying to, we have successfully set up different contracts for most of 802 where we can define larger scopes of work, get secure prices for bigger packages of work in advance. The structure for the last two years, as I've mentioned in previous committee here and in previous correspondences, when we haven't been able to define large packages of work, it's been very hard to get fixed prices against that and we call off smaller packages on demand. In your question about the LNG supplier, we are still negotiating with that prime contractor how much we're going to pay him on overdue invoices and I'm taking a fairly tough line on the fact that they've messed us about. The switch to the subcontractor was fortunate and we had an available resource in the UK where we could continue. Okay, thank you. I'm glad to see the robust nature that you're moving forward with. Again, thank you for Friday where you were very open and honest when you were showing us the designs of the fire exits in the stairwells that weren't compliant with what was actually needed. Seymal has indicated that the marine coastguard agency has said that it would cost about £1 million to rectify. Do you agree with that estimate or how much do you think that all that work will take, how much money will it take to rectify those issues? I think what Seymal will be referring to is that they asked me what the cost of dealing with the extra stairwells and the 17 doors that have been changed in the passageways, that has totaled just over a million. I'm sure that's where Seymal got that information from and yes, I concur with that. The rework to put those additional staircases in, disrupting or moving other equipment to enable those spaces that you saw when visiting the ship, buying new doors, changing the corridor widths, changing door frames, all of that total just over a million. Okay, thank you very much. Just before we move off that, can you just get a bit of clarity when Tim Hare negotiated the contracts and they sound like they were piecemeal contracts? Are those the sort of contracts you'd negotiate? When we've got a clear scope of work, we're trying to get a fixed price. So you've been very circumspect here and I'm going to push you on this slightly. Do you think he was in a position because the yard was in receivership and therefore contractors had the ability to call the shots rather than him? I think he was in difficult circumstances recovering from administration when he'd only just appointed ICEs as the new designers producing production design and detailed design drawings and trying to get contractors to do anything other than offer day rates, weekly rates and management charges would have been difficult. So yes, I'm sure he had quite a battle in setting up these as I call framework contracts where you call off work within the framework. Not something you'd recommend. If I was in the same position straight out of administration, I'd probably be faced with the same agenda. We've got the benefit now of knowing what we need to do on 802 and we're trying to get the contractors on 802 set up differently. So as framework contracts like his contract was a framework contract, he could pull down money when he did work? I can't comment on that. Okay, we'll leave that then. Douglas, you've got some questions. I just want to follow up on that question about the framework contracts. In terms of 802, you said it's done differently now. So when were you able to put a fixed price contract in place for the 802 as opposed to framework contracts? We're still negotiating with some of the contractors. It'd be wrong of me to pick on individual contractors in this public domain, but I'm pleased to say we have some fixed price contracts agreed against fixed scopes of work and that's a big percentage of the overall subcontract to work on 802. We're still negotiating with the others as we close down the final design. So if it's still being negotiated, can we have any confidence in the price and that you've given us for 802? If the negotiations are still taking place? I've got confidence in the numbers, but perhaps my colleague Simon would like to join in on the process of how we've got confidence. From a board perspective, we have risk registers which highlight the risks, a lot of them relating to the contractual aspects of that. We ask appropriate questions of management and that is recorded. There are ranges within each of those items, each for those risks in the risk register. We have gone into the details as a board to understand the workpacks, the 10,000 or so, the whole structure, the critical paths towards completion. The range from the 150, which was mentioned in the letter to the 140 target, a lot of that relates to how successfully we can manage those contracts. I think that would be a fair way of describing it. I guess that that would be clearer once you get some of those tender documents back to have a more fuller confidence in the pricing that it's going to do. Yes, and I think that we already have much greater confidence than we did have. To a substantial extent, David can confirm that the contractures that we're using, proposing to use on 802, are the same contractures that we have used on 801, so they have learned with us in terms of the issues that we've faced on 801. We're simply looking to establish firmer contracts with them, which will enable us to deliver some of the efficiencies that are referred to in the letter that we issued yesterday. Moving on to a different topic, the sea trials, I think that Mr Tideman, your quote, has been overwhelmingly positive so far. Can you give us a bit more information on how the sea trials are going and have they highlighted any need for any remedial work so far? They have been overwhelmingly positive. I enjoyed putting those words out four long days, starting gently on the first day, of course, but by the Friday at the fourth day we were doing fairly aggressive full-helmed port, full-helmed to starboard, zigzagging, manoeuvres at maximum speed, really testing the ship, and very reassured that we didn't break anything and that the ship proved to be very reliable, even to the point where we were testing noise and vibration, running full of stern at full power at nearly 10 knots. I'm sure you've all been on ferries where you can feel the vessel shaking as they come in and out of harbours and power is applied. I can really confirm that the Glen Sannocks is a smooth and quiet ship and I wasn't on board myself, regrettably. I'll try and be on some of the other trials, but I think this is a ship we're all going to be proud of. So no real issues have came from the sea trials as yet? No, nothing is yet. And will you need to redo some of those sea trials once the LNG system is back up and running? Will that be something else you have to do? I don't see that as an issue. Again, maybe for the benefit of the committee just to put it into context. What we do in the sea trials is first of all as the builders team with the client on board, CalMac on board as well, Clyde ports authority, pilots, various other authorities on board, but we're running the trials to test the engines at first of all 50% maximum speed, 70%, 100%, then switching between the power from one engine to both propeller shafts, the other engine to both propeller shafts. There are 16 different modes of connecting a power into the propellers and into the thrusters and we go through all those permutations, but we're doing them manually in this first set of operations. There's a lot of automation in this vessel, sophisticated automation, so you can choose from the bridge. I'd like to be in mode one or mode two, but the next set of trials is to test those electronics and to, we know mechanically the ship works, but we now go through the next phase of, well, that's what happens if mode one fails. Does it switch automatically properly to mode two, that type of testing? And then finally, we go through acceptance trials with the client on board formally going through, are you going to accept the vessel? But I guess you can't test all those modes without having the LNG. Sorry, I missed your LNG question. I think the LNG has taken a disproportionate level to me in the vessel. It's a well proven technology. It works. It's been used on vessels all over the world. This is the first one we've commissioned in a UK yard and that's the learning curve and we've got appropriate experts helping us with that commissioning process. When we go to test, all we'll be doing is a little like a hybrid car switching from running from petrol to running to batteries. As a user, you won't really notice the difference. We will just be switching from diesel to gas running the engines or running the generators. Okay. I think you mentioned earlier, so the other one is then due back into dry dock after the sea trials. Can you maybe explain what's that for? Is it any remedial work that's going to be taken place once it's back in dry dock and maybe some of that was all planned for already? There's two reasons for going into dry dock. One, the final underwater survey with the certifying authorities. We're just literally walking the underneath of the ship and they'll be physically checking rudders, propellers, those things that are underwater. So there's a visual inspection for one, two days in dry dock and the other main purpose is to clean the vessel. She hasn't been in dry dock for a year and we know she's carrying quite a bit of underwater weed and we're expecting that that does limit the speed that we experienced two weeks ago in trials and I expect her to be up to proper performance when we come out clean on 7 April. So there's nothing that's came up in the sea trials that you know it's going to be used for the dry docking period. It's just a routine final part of the process. Okay, that sounds good. I think you've mentioned before in terms of 801 and 802, there's now there's going to be certain components on there that are no longer under warranty due to the age and probably a lack of use. Is this still a concern for you that some components are out of warranty and how are you going to address that? I think we need to put warranty carefully in context. Ferguson has a warranty responsibility in the contract to the client to support the vessel for 12 months. Normally you would be able to rely on the individual manufacturers of the engines, the thrusters, the electronics to support some of that warranty with their warranty, their undertakings to Ferguson. Because the engines were bought in 2016, those warranties have expired. We still have the front-end responsibility to support the ship and we may have the need to call on the engine manufacturer, for example, to come and support something that's broken or failed on the engine. The difference will be that we will have to pay for that rather than the supplier doing it on his budget. We have some warranties that have survived and been renewed and we've taken the opportunity in the last 12 months, for example, when Glenn Sanox went into dry dock a year ago, we took the propeller shafts out, took propellers to pieces, we took the thrusters out that have been installed on the ship before she was launched in 2017, we put the new ones available for 802 from the warehouse on to Glenn Sanox and we've refurbished the ones that have been in the water for five years ready to go on to the second ship. All of that has been done with the appropriate certifying authorities and we've seen that involved in checking the components. When you're building a vessel, in terms of warranties, how much does a manufacturer normally give you for engines and things? Is it a three-year warranty, five-year, how does it work? It varies between one and two years. Okay, thank you. Thank you for that. So, just so I understand before we move on from that, that when 802 gets handed over, you'll have 12 months warranty which you'll be responsible for. Yes. So, it probably says the importance about keeping a focus of marine fleet, otherwise there'll be no one to fix the warranty. Maybe that'll be more expensive. Anyway, on that happy note, Mark, you've got some question. Yeah, can I ask you about the contingency budget then? How much of that has been used and then putting the ING issue to one side? Is that contingency budget going to be sufficient? Is there any danger that it's not going to be enough? So, the way we look at that from a board perspective is looking at the project risk registers, which set out the different aspects of uncertainty relating to the contract to completion. For each of those, which are categorised on a red amber green sort of basis, we're able to look at what impact that might have on the timeframes and what impact that might have on the costs. So, for 801 and 802, the board gets the two risk registers which run through the different components of that, and on the basis of the likelihood assessment of the impact, we're able to identify what the range, if you like, of cost variation that might be with regard to each of those, and that feeds into effectively the contingency between our target costs, for example the 140 on 802 as it currently sits, and the upper limit, the 150 that we have stated. So, there's a lot of detail that the board is getting information on effectively a monthly basis to show progress on each of those as we go forward. What the board did do on 802 in January, one of the board members was in on the yard for effectively about a few days to really go through in a great amount of detail with the business plan of 402. So, we have a much more detailed understanding of exactly what the individual steps are and the different components and therefore able to look at the risks associated with that. We've mentioned 10,000 work packs. We've seen the sort of evidence of that. We've seen how that flows into critical paths and we updated the risk register. Four of the board members were out for a day going through all of that and updating their risk register so we're comfortable with what we have on that front. On sanics, clearly with the success of cheat sea trials, the uncertainties associated with that are obviously reducing. We're getting greater confidence and assurance that the risks that were previously identified are not going to come, not going to be realised. We've already mentioned that the LNG and the subcontractor component of that is being one of the elements of risk that remains. We're getting weekly reports at the moment at a board level on how each of the individual uncertainties that relate to those risks are being managed and the progress. So, we're plenty of visibility and increasing confidence that on 801 on sanics we will deliver. Obviously, if there are any major changes in that, you can notify this committee on the back of those board papers. We have had good correspondence with yourselves but, obviously, if that picture changes. As I say, the board has weekly visibility on the progress on certain sanics at the moment and the LNG commissioning. I think that there's one other red risk at the moment that relates to the installation, the completion of the installation of a lift. There's only red risks in the respect for the coverage at the moment. That's fine. David, last time you were in front of committee, you were making the case for capital investment in the yard to keep the yard competitive going forward. Can you give us an update on where that's at in terms of your plans, alternative sources of investment, Scottish Government commitment? I can talk technically, as sure Andrew, can give you a bit of answer on the process. We know that the yard needs to be improved and there are various levels that that can be done. We're quite capable of building the next range of small ferries with the current facilities. We could do it better if we have some upgrade to the layout to cranes and a few of the facilities. The larger plan that was put on the table last year was for a much more sophisticated upgrade that would put us into a broader competitive position for building larger and more complex vessels in the future. The journey and the decisions between the lower level and the more sophisticated level, I'll let Andrew comment on that. Can you give us an update just to remind the committee what the capital investment you were looking for at a year ago? A bit of a year ago, can you hear me? A bit of a year ago the plans were submitted, which were quite chunky, I'd call it chunky. I think one of the issues with the enterprise has been that it's been myopically focused in completing 801 and 802. The understanding of the future has been somewhat thwarted, but I'll focus. What we've done since that first capex, which was quite chunky for the shareholder to digest, especially the backdrop of global ship building. The UK is not the epicentre, of course, the epicentre of the 50s. Just to clarify, that was 25.9 million roughly, wasn't it, if I remember rightly? Absolutely. Now that the board is up to strength, what we've been doing is working on chunking down some of these market opportunities, chunking down the capex, looking at short, longer capex applications to try and find a sweet spot. That requires quite a lot of input and help from the market in terms of the skillset that we need. Building a model, a competent financial model for the enterprise, has been quite challenging, but we have that now, so we have the ability to run certain scenarios. The future of shipbuilding globally is quite—for instance, one of our major competitors doesn't have any capacity in the yards until late 2027 because it happens to be the most buoyant time in 50 years in terms of commissioning vessels. Of course, most of them have military applications with higher margins than us, and there's a good reason why we're the last commercial ship yard in Scotland, especially if you can consider what's happened since the 1960s. We're working through that with Riga, a lot of Riga, to make sure that we can navigate the sweet spot. Clearly, we're looking to put our food on our table through performance, and that's proving slightly difficult given the market that we're in our history and background. Everything that shows us about the future is not on large ferries. The ferries are a bit too big for the company to digest, but we're very aware where the market is in the future, where the work in income streams could come along. The big moment of debate is obviously the small ferry programme and how we effectively bid for that work with a slight contamination of our cost base based on building the large, fairly Rolls-Royce ferries, if you get my drift. I'm keen to push on the figure, so Mark has it. Do you have a figure for Capex for the small ferries programme? Well, the answer to that is… Do you want to ask that, Simon? I will give it to David. There are different levels of Capex that will deliver different levels of efficiency in different timeframes, and we would like to get to as maximum efficiency as soon as possible, but in practice that may not be achievable. We need some Capex to increase the efficiency to get us started, I think that would be a fair way of stating, and then in due course. I'm going to butt out and let parts of that to Mark. I'm sorry for jumping in. I'll go into this. No, that's okay. We'll get around it eventually. I suppose that what I'm hearing from yourself, David, is that the yard is able to bid for the small vessels replacement programme with the facilities that you have at the moment. Is that right? Even with limited or no investment, you're still able to bid for that? Or is there something in the short-term investment that's required at the yard which would enhance your bid or would enhance it a little bit, but with an eye on more medium-term opportunities? Or I'm just trying to unpick what is there a barrier here to the yard actually bidding for that programme? I don't believe there's a barrier to bid, and I'm sure Alex and John behind me would support that. They were part of the team that built the three small hybrid vessels between eight and 12 years ago, very successfully with the old Ferguson shipbuilders facilities, but the facilities that we have now we could be quite capable of building the seven small ferries that are in the pipeline coming up. We will be more efficient if we can make a few changes, and as Andrew said, we're modelling those changes, whether it's anything between £50,000 on improving some of the software systems and a full-on shipyard management system at £1.5 million. In the software terms, there's a range of options. There's a range of options, similarly on what we might do with cranes, on plate handling, burning tables, and we're running through those scenarios. We will be more efficient if we spend some money. What is absolutely necessary to get the small ferry programme started? I use that word deliberately, because we could upgrade the yard in parallel with starting a programme of seven small vessels. When you were last in committee, you talked about what that small vessels programme would involve electric propulsion systems being more easier, but they can be produced off-site and then brought in in more of a modular fashion. What changes would you see at the yard to carry out a programme like that, whether there be changes in terms of the way the workforce gets orientated or retrained in certain areas? I'm trying to envisage what has to happen at the yard for you to pivot on to that programme and to move fully into that for a period of time while you're building up for the medium and longer-term possibilities. I think an electric ferry will be a large bought-in battery bank, bought-in electric motors for the propulsion systems. I believe there will be four, one in each corner. Then you've got the switchboard systems that distribute that electric power and the way in which it might be a small generator as a backup for generating electricity on board, not just from the battery bank and using that for what I call hotel services, which would be keeping the lights on in passenger areas, the navigation systems and so on. A lot of the small ferry design will be bought in from specialist suppliers and then it's an installation activity for Ferguson. The efficiency of the yard is in two parts, therefore it's about the efficiency of putting the steel structure together and the efficiency of managing the supply chain and the installation work. I think we are capable of doing both a lot better than we've been doing on these two large ferries because they're so much more complicated. We've proved ourselves well with the hybrid vessels, which are just a version of the same challenge, but in some ways it's easier with just electrical power. Mm-hmm. Which bits of those two sides of the work you think require more investment and focus within the organisation? Which bits you're right ready to go with? Which bits require more time, more adaption, more support? The small ferry programme is relatively simple in terms of the amount of equipment to be bought in. You're not buying thousands and thousands of components as we've done on these large ferries. It's a programme that could be run on a laptop. It's that level of simplicity in comparison with the very sophisticated programme that we've had to run on these complex vessels over the last few years. The steelwork side is about facilities, cranes, handling, and that type of routine. We could certainly benefit from upgrading our burning table for cutting the steel to begin with, some of the handling methods of lifting plates in and moving them around through the yard. That's where I'd like to see some improvement in the handling facilities. The rest is relatively simple to manage a low sophisticated programme such as the small ferries. As I said, we could largely do that on laptops. Then we have the opportunity over the coming years to say, actually, what do we want to upgrade further to take on more sophisticated vessels in three or four years' time? David, just to push your wee bit on that before I go to Bob. I understand that if you invest in the yard and you make things easier to do, it means that the contracts that you bid for, you can be cheaper because it's more efficient and more worthwhile. It's the underlying part of your message there that if the Government doesn't invest in those items, then you're not going to be as cheap as other people on building small ferries or if I completely misunderstood that. I'm trying to stay focused on the delivery challenge of running the yard rather than giving a message. Certainly, if we improve our means of productivity throughput, we will be able to price more competitively. Thank you, that's what I was after. Bob. Which is kind of where I was wanting to come in but, first of all, someone out there will be watching this exchange and we keep talking about CAPEX. Can we not speak in code? Can you just be clear what you mean by CAPEX? Sorry, convener, but let's not codify this now that it's not accessible to the general public. I think that's really important. I think that we've had some reassurances that the small vessels programme will be of a nature where it's more stable, there's less risks and there's more certainty over delivery already compared to those two complex vehicles. I think that Mr Ryskell established that in exchange very well. There was a bid for £23 million of sole capital money to upgrade the yard to make it more competitive for bidding for anything commercial, including the seven vessels that may come from the Scottish Government. In any other suggestion, Mr Milley was talking about the initial bid was clunky. Again, can we not speak in euphemisms? What do you mean by clunky? That's right, I apologise, chunky. No, no, no. It was too high. I didn't know clunky was a technical term, but it's cutting down either through time or spreading the CAPEX into smaller modules. You can deliver the same. Of course, longer time, you know, more efficiency. So it's taking different levels of capital expenditure and applying different volumes of activity. So the small ferry brings one thing. You missed out, it's about volume as well. The volume of that ferry programme allows greater efficiency in terms of handling the work. So in my head, what I've got is the £23 million that whatever, let's say, today's prices invested now would do everything you want to the yard to do, but that could be phased in over a longer period of time to get different efficiencies, making it more palatable to the public purse. Palatable to the public purse, but the longer the time, obviously, the inefficiencies sometimes can be counterproductive. Okay, so the question I would have, I don't really have to answer this in a roundabout way, but for every £1 of capital investment the public purse was to give Ferguson, does that take a pound off the cost that's going to cost the taxpayer to deliver these small vessels in the first place? Because that's what we want to know, because if you're saying we can deliver them more efficiently, that hopefully means speedier to a higher standard and cheaper as well. So for every £1 of capital investment, the Government gives Ferguson, does that actually have a pound off the overall cost? I'm an economist, but I don't think I can answer that question because it's quite complex and difficult to be able to do that. Someone can give a light and shade to the answer. In reality, that's exactly the modelling that we're doing at the moment. We're looking at various scenarios and looking at various levels of capital expenditure that we could utilise and how that would impact on the efficiency, the effects of the costs of delivering various options, the small ferries being one of those. That's exactly the information that we're pulling together and we will be discussing with the Scottish Government and the shareholder and setting out those various scenarios. So exactly, if we invest x million in doing this, then to what extent will that impact on the pricing of a contract for a small ferry, for example? So, without giving how much you can shave off the tender that Ferguson could make for the small vessels fleet, can you give an idea about the relationship between capital investment from the Scottish Government and cost savings on any future procurement? Well, I think it's very not a very satisfactory answer to that question, but clearly, if the capital expenditure that we were looking to invest was not going to make any difference and it wouldn't be worth doing it, it is clearly going to make a difference at different levels and the modelling that we're doing at the moment and the different scenarios that we'll be discussing with the Scottish Government sets out exactly that, and that is in progress. We've got a time frame over the next three to four weeks, I guess, is roughly what we're looking at in terms of the modelling for that. Thank you, the convener. Just the briefest of comments rather than a follow-up question, because I'm not trying to be awkward in relation to this question, but it appeared to me that under your tutelage Ferguson's and the workforce representatives that I can see sitting in the public gallery is welcome through a real difficult period, a quick learning curve in recent years, fixing a lot of errors that was made by predecessors and very close to being robust health at Ferguson's, but for additional taxpayer money to go in, we have to be very clear and transparent about what we're getting from our money and it almost feels as if Ferguson's could be held to a higher standard than otherwise would have been the case because of what's happened previously, so I do hope, convener, that we get to position where a proper capital investment could be made and we can be clear about the efficiencies that would give the yard and we are in a position to retain strategic commercial shipbuilding in Scotland and the workforce, but we do need that transparency over what we get from our money, convener. Government as well, Bob, would have to look very carefully at state aid rules about investing in yards that we're then bidding for contracts, which it becomes an issue because we've struggled to understand that as a committee and I'm sure the government will want to layer that. I'm looking around the committee to see if there's any further questions before I bring Graham in and I'm not seeing any, so Graham, I wouldn't say the floor is yours, but some questions for me. Thank you very much, convener. Thanks for all the questions so far that's been really interesting. I just actually want to follow up on this line of discussion about the extra investment because, Mr Tideman, you've been quite clear for some time now of the need for extra investment. If I can quote what you said when you last came to the committee, and these are your words, you were talking about the previous cabinet secretary, Neil Gray, and you said that Neil Gray needs to come back to us as soon as possible. The productivity is low in the yard, as we know. We know we're not as competitive as other yards that have modern plating lines and modern facilities. We'll not get to decent productivity until 2026. That's presumably if you've got the money that you were asking for, which makes pricing work for more ferries much harder the longer we've postponed it the harder it gets. Are we not still in that position? Yes, I stand by those words, Graham. What we were discussing then was the two-year lead time for a plating line, and I think for the, put it into context for committee here, that plating line, that 25 million upgrade, was turning Ferguson's facility into a small version of what BAE have in Govan. A sophisticated, automated plating line buildings lay out to work like that, and that would have enabled us to build a large section of a warship or any other sophisticated vessel. It's called a grand block. You build a section of the ship, and to be able to do that cost effectively and efficiently, you need automated plating lines because the volume of work is large and the handling needs a large, and that's where I think the yard needs to aim, still aim to be in three, four years' time. The journey towards that is best enabled by two things that we've talked about before, the small ferry program, which is repeatable work, and we can get into a rhythm of building hopefully up to seven vessels and then follow on vessels in the ferry market, and in parallel with that we can do smaller work for the military supply chain. We can handle that smaller work without the sophisticated plating line, but to be fully competitive in the future we do need a sophisticated upgrade. We can get part of the journey over the coming years without that, and we can certainly build the small ferries to a reasonable productivity with what we've got or a smaller upgrade. And as my colleagues have said, that's what the board is modelling and working on over the next month. Okay, I mean you've been clear, and indeed the unions have been clear, that we need to you know have build a future for this yard and it needs to be modern and efficient, and you wouldn't argue that it is modern and efficient now, but that in order to get to that point it needs further investment. You were pretty clear that it needed a pretty quick decision on that, that was rejected. I just wonder how you see the future now, given that that 25 million was turned down, if we're going to muddle along with what we've got and have smaller amounts of investment spread over a number of years, how is the yard going to turn itself around on that basis? I think the sophisticated plating line is about positioning the yard for the broader, more complex vessel in the future, whether those are wind farm support vessels, offshore patrol craft or the broader market, or larger and more complicated ferries. The lead time for that type of equipment is the same as it was when we were talking in October, it's 18 months to two years, and so I stand by my words that if we don't join that procurement queue we keep delaying the date by which we might have that type of equipment installed. I think if we can get the small ferries contract secured in coming months it would take us a year, 18 months planning before we would cut steel, so there is a time window that we need to get moving on even for the small ferry programme and we could upgrade the yard on an interim basis, stage one if you like so it's not wasted money, stage one which would improve productivity, we could do that without buying sophisticated equipment on long lead times, and so we could improve the yard significantly over coming months and next two years in parallel with completing 802. And do you think that as things stand you would be competitive with other yards across the world when you pitch for those small ferries, price wise and time wise? Right at the moment I think we will be a small premium, we're trying to quantify that at the moment but we will be a premium to some of the cheaper yards in Europe. Okay that's useful, Mr Cunningham I just wanted to ask you, you said something earlier you were working on producing some figures over the next three to four weeks is that right? Yeah so that's the modelling for the future business plan looking at the impact of different levels of capex we'd have on productivity and what that would enable the yard to be able to to look at going forward. And is that a plan that's going to be put to government then? Yes. So in four weeks time you'll be? Well not four weeks, they've got their own component part, it's just our part in terms of the operation. I think the intention is somewhere around about May towards the end of May. The complexity is the market testing and the state aid issue which is quite a detailed model to produce along with the capex, along with the market data to see what level of assumed subsidy would be, that's the complexity. So you've confused me. Well it's between the two of you. Well I think the time frame that we're working to with regards to the models that we're working on at the moment, I think that is a three or four weeks time frame. So you'll have your figures ready in four weeks but then you're not going to give those figures to the government until May. No no there's a decision making progress which clearly is about affordability, budgets, et cetera which they've got to roll into a bigger model. We can't produce the business plan with the capex and you know do it on their own. We need their support. What are you going to say? Something else? No I think that the time frame that we're working to, the time frame that our team at Board of Islands are working on in terms of modelling is a three or four week period and we're getting updates on that and discussions on that on a weekly basis at a board level. Just before you ask your next question can you just clarify me? You said you put these figures to the Scottish Government so does that mean you go straight to Mary McCallan who's in charge of it or do you have to report somebody else who then has to report somebody else who then has to report somebody else and then it gets to Mary McCallan. I don't understand the procedure perhaps you could explain that to me. We work with the sponsoring department you know in all issues. So that's Transport Scotland? No no that is the strategic asset management group I think we call it. I can't remember. So it goes straight to them and then they take it to the Cabinet Secretary? They ask question and answer, he goes through a rigorous process, we clarify some things etc and they get to the stage of comfort and I believe he goes with a recommendation to the minister. Okay so it's just one filter? Hey but there's many people in that filter. Okay so there's lots of filters within one filter sorry Graham I interrupted you. No I think you're probably as confused as I am by this you know we have figures yep you prepare your figures in four weeks time um I'm just still not clear what happens after that. Why is there a delay between you producing your figures and those figures going to the Government? Well I mean I'm sorry but I was going to say that um my little light's going on off here um you know whether it's a commercial business and you've got shareholders you come up with a capital investment plan, you present it to the shareholders, there might be many, might be a felicalistic company and you ask them is this rate of return in these numbers acceptable the dividend acceptable over a period of time and the shareholders might be yep that's good we'll back that investment plan on a way we go and that's the process of the capital expenditure model that we're actually going through just now working very hard about it. Okay that hasn't really cleared things up for me to be honest but how do you want us to make it clearer? Well I just uh you need to make it clearer if you've you produce your figures in four weeks time surely at that point you would then be taking that to the government. Yes yes straight away. Sorry yes so the government will have various scenarios various options that we will have modelled in three four weeks time not sure exactly what the deadline is and at that point I would imagine the government will want to come back and discuss with us various aspects of the proposals that we have put forward and there will then be a discussion process presumably before the government turn in position to make some sort of assessment on the various scenarios that we have presented to them. Okay we've got that. Does that help? Yeah that's fine. Right I've just got one more thing I want to ask because Murray McCallan wrote to the convener of this committee and the convener of the public audit committee yesterday in that letter she says the former cabinet secretary Neil Gray impressed upon the CEO that further delays and cost increases would be inexcusable inexcusable but there have been further delays and cost increases so has the government at any point said you have to stop spending more? No the record the asked us to improve the situation that we had that was Neil's sorry Neil's previous minister's instructions. Okay she also says in this letter that she'll be seeking an urgent conversation with you Mr Miller so you've got that to look forward to. We've already had a conversation by way of introduction. Okay right thank you convener. Thank you Graham you're a very disruptive influence on this committee because subsequent to your questions there's a whole heap of members who want to ask more questions so I don't know whether I welcome your attendance or not. I'm going to start with Sarah, Bob, Ben followed by Douglas in that order so Sarah. Thanks very much convener. Yeah a couple of questions sparked by Graham Simpson's intervention because obviously we've been focusing on the 801 and the 802 ferries today but the responses to some of Graham's questions have prompted some other questions in my head which is about additional opportunities in terms of construction at the yard. You mentioned wind farm support vessels obviously a huge part of Scotland's economy going forward both importing but also moving wind products wind farm products around the country around our seas with a different developments are going to take place which could be on or off shore and then the other thing that prompted a thought there was about repair and maintenance for existing ferries because that's not been mentioned today and it's not just about building new ferries it's about having ferries that run on time that are safe and that can be innovated or can be upgraded going forward so there's two other opportunities in terms of the market one which is potentially through CMAL the other which is potentially through the wind farm and the renewables industry so just a bit of comment on whether that is part of the opportunity for the yard going forward and we've had a lot of discussion or Q&A about additional infrastructure needed to what extent would that additional infrastructure to upgrade the yard give the opportunity to actually have a new market that would be part of the yard going forward I'll answer those the wind farm market is very attractive there's a lot of vessels going to be bought by the industry by the market operators and there are a lot of vessels already in build we've been in discussion with one Scottish operator who is committed to buying I think 20 25 vessels over the extended period and they lease them into the market they've got ships in build in Vietnam and in Spain at the moment we've had some discussions about that design and whether we could build them in Ferguson we are significantly more expensive than Vietnam as you might expect we are closer to the Spanish prices but still a premium we couldn't be competitive for that type and scale of vessel they're nearly the same size as Glen Sanex and 802 without improving the plating line and the handling facilities at a higher level of sophistication the ctvs as they're called the crew transfer vessels the smaller ones that move move crews in and out of the wind farm operations we're capable of building those they're more like a small ferry there are a number of yards that are already well established in that market and have got their prices down and their their drum beat going they've they've already gathered momentum trying to enter that market is possible but again needs some careful strategic planning to be into that those markets are there one one operator that is committed to Scottish wind farms wants a sophisticated vessel for delivery in 20 29 the design work of that wouldn't start until summer 27 26 those construction starting in 27 so that's that doesn't solve our immediate short term issue we've looked at offshore patrol vessels for various foreign navies coastguards again there's one on the radar at the moment for would start work in 26 for delivery in 28 both of those have the risk of us repeating some of the 801 802 learning because they're first of class vessels and I'd like to learn to walk again before we try and run can I just say I'm nervous that people from the economy committee might be listening into this thing because we're probably right at the margins of where we can be as far as the scrutiny goes of 801 and 802 talking about the yard's future although I find it very interesting I don't want the convener of the economy committee breathing down my neck but bear that in mind committee members I'll take the pain if I have to Sarah sorry yeah that's been very helpful and the other bit I was thinking about because I was thinking about ferries but not just those two ferries was about repair and maintenance of existing ferries if that's for somebody else well I think you've asked a question I'm not going to stop you doing it I'll just take the pain from the convener of the economy committee down okay maintenance is a different business and it requires different facilities in a lot of shipyards if you try and mix service operations with new building it's not always a success okay I just thought I'd ask thank you thank you Sarah who was the next bob you were next community much more mundane question going back to a some clarification in glenn sannis and glenn rose I don't have other members of equations on this topic so we don't know no no I'm happy for you to okay I wish to exchange with with the convener over what was in the tender for the two ferries that will shortly be completed in relation to seats and I think he was making the point we're paying more and getting less and I wasn't sure how to get some clarity around that if you like so I think mr miller said that the tender criteria was up to 1000 seats so sorry that was a tideman so it didn't have to be a thousand seats was up to a thousand seats so can you just confirm what was in the original tender document and also that I try to roll this together community but that was reduced due to other works that hasn't done relation to fire safety any vacation different things and I think that was reduced to nine to six I think he said but that your client requested 852 so it's just to be clear that the client is still getting the capacity seating wise that it requires and technically there's a flexibility to add a small amount of additional seating if you need be would I have a capture of that correctly yes I think that's right be I can't be accurate on the tender documents because that before my time and was with Ferguson marine engineering limited not our current company I understand it to be a thousand our contracts certainly said 960 and going back to your point convener earlier the contracts for carrying capacity is also set as a dead weight capacity in in total number of tons and if my memory serves me right it's 800 878 tons is the dead weight carrying capacity that we're obliged to to meet with cars lorries or whatever combination on the passengers yes 960 was reduced to 929 and but that meant a higher density of seating and actually lowering the standard of seating and the 960 was a client specification in the right at the start from CML and it's their decision to reduce it to 852 and you'd need to ask them of their seasonal patterns and why that's enough okay so technically you've surpassed the current requirements of of your client in relation to seating yes okay and in relation to i forget the numbers wrong was 127 cars and 16 lorries was it always intended that it was going to be a complicated exchange between yourself thinking the community was always intended that the original design would have 127 cars and 16 lorries all at the same time because my understanding that wasn't the case my understanding i will allow this to continue but i'm just putting it on record i'm pretty sure i remember the contract and the specification so i would ask you just to be careful mr dorris because you're pushing slightly on something which i think you're saying may be incorrect but i will research it afterwards i'm not pushing anything i'm happy we told them wrong so i'm not i'm kind of suggesting politely that that you may want to think carefully about the questions you're asking so i'm just making sure i don't think this should be contentious at all i'm just wanting clarity i assume you're not trying to curtail my line of questioning which is quite a mundane line of questioning actually just want clarity convener okay thank you so if it was actually a case of let's just get that clarity just now then did the original document say 127 cars and 16 lorries all at the same time? to convener's right then i'm happy to apologise convener but i just wanted clarity on it i wasn't saying you're wrong my understanding mr dorris my understanding and i'm pretty sure that i was correct that it was 1 000 passengers 127 cars and 16 lorries which was the original specification that was put out to tender it may have been changed subject to tender but that was the original tender documents that was submitted to the committee i said earlier that i would clarify this i would know the numbers of 127 and 16 tons i also know the dead weight carrying capacity which is a there's an overall weight of which there could be a variety of permutations of cars and lorries and passengers i said earlier that i come back to this committee and clarify that that's right is overall tonnage the same so i mean clearly what i got from your exchange this i want to relate clarity on convener to be honest is like you can't just put all weight bearing vehicles and lorries have to be placed strategically and safely on you know on the vessels to make it see worthy and safe for everyone traveling on them so is the max tonnage that the vessels can take has that remained the same or has that had to be reduced we haven't had to reduce the target tonnage in the dead weight that's will be verified in the final handover trials of what the carrying capacity is we're still aiming to meet contract on carrying capacity it's only the number of passengers that has been reduced right i can hear let me apologize to yourself i've a little bit prickly and we're exchanged there because i wasn't trying to undermine your line of questioning i jain was going to give that clarity so i better understood it so if i've done that my apologies to you can do that thank you thank you bob the next questions from the deputy convener pan thank you um just on the same area of questioning that the convener raised and and mr doris just raised as well when you do write to the committee it'd be grateful if you could emphasise the benefits of the flexibility that you spoke about in answer to the convener you may want to touch on that now but as you alluded to in your answer to the convener the different times of the year will create a different demand on what will want to be transported more lorries in the winter i think you said more passengers in the summer i think that's an important flexibility within the vessel and an important aspect of the capacity that you you may want to elaborate on in your correspondence or even now i think that information is better coming from seamal or calmak i don't have access to the data and the historic records of what led them to to ask for a thousand passengers in the first place they have that market data in that operation way i can talk about the permutations that are that we're building and i'll happily do that in the response thank you and i think that that would be very helpful because the fact that the vessel has that flexibility is an important point to emphasise i would argue okay last question convener it's my brush thank you it was stated earlier that the market for defense vessels is is there um there's likely to be more defense spending by the united kingdom and other Governments in the period ahead have you had any dialogue with the ministry of defence any correspondence not directly with the ministry of defense we've had conversations with both babcock and bae and i sit on the national shipbuilding office strategic shipbuilding enterprise group so i've got access to some of the planning of uk shipbuilding there is a lot of work in the military program and we could be a good subcontractor in that supply chain okay thank you thank you thanks ben uh douglas and then mark thank you hopefully just a quick question it's back to the capital investment in the new play plating line does that investment if it doesn't come through does that make returning the yard back to private ownership more difficult and is that actually still the board's i'd say aim is still to to move it back to private ownership well it's still there's still the aim to return the business to private ownership but clearly with a you know it's sort of better than break even situation with the long term future obviously depends on the market and where we are but that's that's the intention so then does this lack of capital support then make that more difficult on the long term it does definitely the short term as we try and move the yard towards better levels of efficiency it doesn't help put it that way so in terms of if you were to give some so i estimate when the yard could go back into private ownership are we talking five years 10 years or what would you think that's a difficult one as well it depends on the capex on the market the market's strong right it's as strong as it's been in the last few years there's plenty of work out there it's our ability to grab that work and produce it efficiently efficiently and that will take some time it'll be probably no less than maybe no less than 18 months probably near five years right but without that capital investment that's going to be harder for the government it is it is harder and you know david knows we keep our eye nears on the market and we have lots of conversations with people about being a a jobbing shop to help them get over the the lack of capacity in the uk generally for that tends to be in the military side and the military side have a suggest i've got lower tolerances you know in terms of manufacture because their margins are a lot higher so there's more technical sophistication required okay thanks gamina thank you mark you had some questions yeah just further to that i'm thinking you're beyond government investment which other are the sources of investment are you looking at in terms of investment in the plating line and and those medium term improvements to the government of the the first protocol definitely because they are a shareholder one would expect that their rates of return would be somewhat lower than some of the commercial lenders in the marketplace and we would have to be very brave in terms of how we exploited these open market opportunities but the government's the first protocol okay any other questions looking around the room a couple of questions from me david when we were at the yard you you stress the learning experience that had taken place on the lessons from 801 so that the mistakes weren't replicated in 802 which is why i understand that 802 sat on the sat on the slipway for longer so more of it could be built on dry land which which made things easier is that an accurate comment it is easier to build on a slipway than when it's afloat certainly and the more we can do on dry land until we become at the maximum we're comfortable of launching at maximum weight which is where we'll reach in 9th of april so she'll be launched on the 9th of april mainly due to weight and that'll be the heaviest ship ever launched in the shipyard in its 124 year history and we'll go on the high tide then and then we'll continue on the key side okay so you've learned lessons or the arts learned lessons on these very i think you described Rolls Royce ferries as you've been going along my my concern is that you i think you came into the yard on the 1st of febru 2022 probably seems a lifetime ago but there was a lot of learning that didn't appear to go on from about 2019 regarding the errors that were happening on 801 do you have any comment on that i think the restart from administration was complicated and made harder with the pandemic and we were in transition then from completing what's known as basic design where the fundamental naval architecture the structure the principal dimensions of the vessel they were all nailed down by Ferguson marine engineering on most of them there were still some gaps and my predecessor had the complexity of appointing new designers in febru 2020 to pick up all of the detailed design pick up the historic records from previous designers and then produce all the production design drawings there were 20 when i arrived in march febru 2022 we had 27 000 drawings and more than a thousand design queries on the table and that's what i started with and that had surfaced in the previous in the two years prior to my appointment okay so um you went through a huge learning process um well i'm concerned is to understand if the client went through a huge learning process as well the client being seamal because it appears that uh over the period from 2000 well the original award of the contract to 2020 their learning experience was fairly limited or weren't they involved in it you're better addressing that question to seamal we the seamal representatives were on site uh watching the bill during the Ferguson marine engineering time and as you're aware i seconded one of their senior people into my team in the first month of arriving as a means of getting the two of us aligned and sharing the knowledge on both sides of the table not only were they on site their headquarters were less than 600 meters away so it was a brisk walk surely if there was a issue to identify what it was indeed okay the final question i have is the learning experience i want to stay on this um i'm questioning the learning experience of uh watching uh ferries being built across the world with stage payments probably about five seems to be the industry norm um have we learned from the should we learn from the experience and have we learned from the experience of why 18 stage payments on on each ferry is perhaps not the way forward i can't comment on that because it relates to fml period uh we're on a reimbursable monthly contract since administration okay but if you were to tender for a new job would you be looking for 18 stage payments and would you expect a client to accept it from you i think i'd expect a client to ask for less stage payments so five like everyone else in the world five to ten is my experience in other projects so plumbing for 15 and then asking for an additional three on each of them might not might not work can't comment okay thank you very much um unless there are any other questions from uh the committee i'm going to briefly pause the meeting i'd ask committee members to be back at 11 25 so we can complete the next bit in private and then go into sorry in public and then go into private so thank you very much to those attending and i'll see committee members back at 11 25 thank you and welcome back here on next item of business a consideration of two type one consent notifications uh the biocidal products health and safety amendment and transitional provisions regulations 2024 and the retained EU law revocation reform act 2023 revocation regulations 2024 these are two instances of the UK government seeking the Scottish government's consent to legislative state in an area of devolved competence the parliament was notified of the biocidal products proposal on the 24th of January and the retained EU law proposal on the 30th January in both cases the Scottish government has indicated it proposes to consent to these instruments being made in the manner indicated by the UK government the committee's role is to decide whether it agrees with the Scottish government if members are content with consent to be given for the UK SIs being made in the manner proposed by the UK government the committee will write to the Scottish government accordingly in writing to the Scottish government on both UK SIs we have the option to pose questions, highlight issues or to ask to be kept up to date on the relevant developments if the committee is not content with the proposals however it may make one of the recommendations outlined in the respective clause notes for the instruments I'm going to invite if there's any members have got any views firstly on the biocidal products UK SIs and I think Sarah you indicated you had yeah thank you very much convener I want to thank the committee clerks for the papers that they've sent us which I think are really useful and taken us through this proposal and I want to say at the outset that I don't have any objections to it but I did have one or two questions about the extent to which stakeholders are able to be consulted because of the comment that it's not expected to have any significant impact on stakeholders and it's good to see the Scottish and UK government agreeing these are seen as entirely obsolete statutory instruments but just I would like a bit more feedback afterwards about what monitoring is done because if you look at some of these statutory instruments they're over 20 years old others are a lot more recent that's how is this monitored going forward I think the benefits are clearly going to be less need for animal testing but I would just like to see a bit more monitoring on this and the impact of us passing this statutory instrument today because it's quite unusual in terms of parliamentary accountability not to have feedback from stakeholders and I think there's a gap here I understand the logistics and the we need to get this through because otherwise Scotland would miss out but they would be my comments having read the background papers thank you very much sorry does any other member have any comments so I'm going to move to a substantive question which is is the committee consent that the provision set out in the notification should be made in relation to the proposed UK statutory instrument are we all agreed okay so we are agreed so what we'll do is we'll write to the Scottish government to notify them of that and we'll ask them what monitoring will be carried out as a result of the effect of these ASIs not only from the government and stakeholders and we'll include that in the letter to them so moving on to the next question is any member's view on the retained EU law UK ASI does anyone have any comments mark yeah thanks to doona I'm content to support this on clear understanding that this does not result in any divergence between the UK and the EU and that the revocation of these measures are purely technical in nature and that these measures are indeed now redundant and that's why they're being included within this SI so any other member have any comments so I'm going to move to a substantive question for this item as the committee can pretend that the provision set out in the notifications should be made in the proposed UK statutory instrument we are agreed I'm not seeing any dissent so what we'll do is we'll write to the Scottish government to that to that effect and we'll also include with that a question to make sure seeking clarity that it makes sure there's no divergence as per their legislation regarding the EU so if that is happy I'm now going to conclude that this part of the public meeting and we're going to move into private session