 I welcome everybody to this, the 20th meeting of the Public Audit Committee in 2022. The first item on our agenda is for the committee to consider whether to take agenda items 4 and 5 in private, are we all agreed? We are agreed, thank you very much. We have two evidence sessions this morning, and the first is a continuation of our inquiries into the Audit Scotland report into new vessels for the Clyde and Hebrides arrangements to deliver vessels 801 and 802. We have with us this morning, I am pleased to say, in the room joining us, Kevin Hobbs, the chief executive officer of CMAL. Morag McNeill, Morag, you are the interim chair of the board. We have also got Eric Ostergrad, who was formerly the chair of CMAL and is now the chair of David McBrain, Ltd. I am going to invite Morag to give us a short opening statement. I just wanted to, for the record, thank you for providing us with a written submission, which we have found very helpful. It is in front of us and it is published on the website. I think that we got some further material yesterday and we have got to go through a due process to make sure that it is cleansed data-wise and so on. We have not been able to publish that yet, and neither therefore can we refer to that this morning, but we hope to be able to do that over the course of the next few days. Having done that, it may mean that we will return to you to seek further particulars and search a bit more into what you have provided with us and even inviting you back to give us more or 11s, but we will just see how things go this morning. Can I now invite Morag McNeill to give us a short opening statement before we get to questions? Thank you very much, convener, and good morning all. Thank you for inviting us to share evidence with the committee today and to answer the committee's questions. We will endeavour to answer all questions today if we can. If we are unable to do so, we will respond in writing to the committee as is normal practice. As you mentioned, I am Morag McNeill. I am currently the interim chair of the CML board and I have been a non-executive director on the board since 2014. I am joined by Eric Bosker, my predecessor, as chair of the board. Eric and I were imposed when the dual fuel ferries contracts were awarded. I am joined by Kevin Hobbs, CML's chief executive. Kevin joined CML in April 2016, several months after the contracts were awarded, but he has a solid understanding of the issues that emerged in the early stages of the construction of the vessels and thereafter. We have obviously been involved previously in both the rural economy and connectivity committee's hearings and we were extensively questioned by and asked to provide evidence to Audit Scotland and whose report is, if we consider, fair and balanced and to which we welcome. We are acutely aware that the delay in completion of these vessels is having a significant impact on island communities. They are quite rightly frustrated and worried. I would have ever said that the problems that arose around the MV Glen Sannocks and Holytoe 2 are not representative of our past and current vessels and harvours projects and the quality of our work to support Scotland's ferry infrastructure. We have submitted lengthy written evidence to the committee as we are concerned about the accuracy of some of the information that was shared in previous sessions. That is perhaps understandable as many of those who have appeared before the committee were not imposed at the time that contracts were awarded. A number of those matters are addressed in our written submission but I would highlight particularly the announcement of Ferguson's as the preferred bidder and the subsequent award of the contracts, the issues around the refund guarantee, the acceleration of milestone payments, the dispute resolution process and the fact that the payments of instalments of the 30 million Scottish Government loan were personally sanctioned by the expert appointed by DJ economy against designated progress events that had in reality not been achieved by Ferguson's. We are also happy to address the more technical aspects of the choice of LNG fuel, which was the requirement of Calmax vessel specification and the sequencing of the construction of the vessels. If it will assist the committee, I am more than happy for committee members to direct questions to me and I will bring colleagues in as required. The committee is free to direct questions to my colleagues. Thank you very much indeed and I think that sets out quite a lot of the ground that we do want to cover this morning. Just to pick up on one point that you made, Moragmaneel, do you accept the recommendations of the Audit Scotland report? I am now going to turn to the deputy convener, Sharon Dowie, who has a series of questions to put. Back to procurement, you mentioned that in your opening statement. One of the stated aims in your website is to be cost effective. To what extent do you consider the procurement of vessels 801 and 802 to be cost effective? We believe that the procurement process did provide for value for money and that was part of the procurement evaluation. We have made some improvements in our procurement process, but we believe that the procurement was thorough and robust. I will perhaps ask Kevin to say something more about the procurement. The procurement itself was anonymised. Obviously, it is a fixed price contract, a design and build contract, an international standard BIMCO contract. That process was gone through. I was not imposed at the time, but that is what we always do. The £97 million that you will ask later on why it is no longer £97 million that was deemed at the time as the best value for money. In section 3 of the submission that you gave us at the beginning of the week, section 3 is on the provision of the refund guarantee. In section 3.6, you stated that Seamall had no awareness or involvement in any of the exchanges, and that was the exchanges referred to between MSPs, etc., on the non-provision of the refund guarantee from FML. Can you tell me when it was that you found out that FML was not given the builders' refund guarantee and at that point why you did not go back to the tendering process? We became aware that they could not provide a CBC guarantee on 21 August. We were not aware until around 25 September that they were also having problems in producing a guarantee from a bank or an insurance company, and they gave their final position in relation to that on 7 October, by which time they had already preferred bidder, and we had stood down the other bidders. The point that you found out that they were not going to give you the builders' refund guarantee and that was part of the tendering process, why did you not cancel the contract at that point and go back to the tendering process? In the communication that you have sent through or that we have seen seem to be your preferred choice? That was indeed the preferred option. So why did it not happen? Because the minister authorised us to proceed. What minister was it? My understanding is that it was the transport minister, but we are not cited on the conversations that Transport Scotland had with the minister. What we have is a letter authorising us to proceed to award the contract by the Scottish ministers as shareholder, as so shareholder of CMAL, and that has contained the letter that John Nicholls wrote at the time that the contract was awarded. So why did you not get a copy of the paperwork? It is actually saying the paperwork somewhere in here that you did ask for a letter of comfort, so the chair requested that Transport Scotland provide CMAL with a letter of comfort if required. John Nicholl agreed that a letter of comfort would be provided to CMAL, but there does not seem to be a lot of communication or evidence to show that the letter of comfort was put in. We do have the letter of comfort as the letter that John Nicholls wrote at the time of the award of the contract. And you were happy to accept that at the time? The award that the letter from John Nicholls said that ministers had approved the contents of that letter, had read and approved the contents of the letter, and we relied on that. That letter did two things. It gave a shareholder authorisation under the Articles of Association of CMAL, which was an instruction to proceed by the minister. It also gave CMAL an unconditional financial undertaking, unlimited in time and amount, to protect the solvency of CMAL if there was a problem with the contract. I was heavily involved in the drafting of that letter. I am a lawyer by training. So that letter was agreed. Some of it was drafted by me. It was also reviewed by Scottish Government legal department and approved by them. So at the time, were you happy to go forward with the contractor? Did you feel that you were being forced into it? Our preference was to retender. We were authorised by our shareholder to proceed. That was an instruction to proceed. I was just asking this, but in section 6.9, CMAL were told that they should not seek a ministerial direction by the ministers in relation to contract award to the vessels to FMAL. However, the board was concerned that the contracts in those circumstances and said to seek a letter from the ministers holding CMAL harmless in the event that the contracts encountered the financial and technical issues identified in the risks paper. I am still going back to it. I do not understand why, at that point, you seemed very, very concerned. I still do not understand why CMAL did not just go in and cancel the contract. Because we were authorised to proceed by the minister, we were given a direct instruction in the letter from John Nicholls, as our shareholder. If your shareholder instructs you to do something— That is what you do. You do. Basically, you were told to go in. We were authorised to enter into the contract. In some of the further evidence that we got when we were speaking to Roy Brannan, he has basically said that Transport Scotland did not have a role in the contract. It was between CMAL as a buyer and FMAL as a builder. CMAL had to satisfy itself, that it was able to enter into that contract and resolve whatever issues were apparent. So Roy Brannan is basically saying that it was not to do with ministers, it was not to do with Transport Scotland. The decision was with CMAL. I would disagree with that. Do you disagree with that? On the ministerial direction point, if I may, we were told not to ask for a ministerial direction. That is true, but I was not entirely sure in any event that ministerial direction was competent in relation to the board of an NDPB. I think that David Middleton perhaps alluded to that and has written evidence to the committee, but what clearly was competent was a shareholder authorisation in relation to the shareholders' reserve powers under the articles of association. That protects the directors in terms of their fiduciary duties, so that was what we sought. It was a shareholder authorisation by the Scottish ministers, and that is contained in the letter from John Nicholls. I might come back to more questions in that later on. Can I just ask the current procurement process how fit for purpose is the current ferry procurement process in Scotland and how does it compare to other countries? Again, that is on previous evidence that we have had, where we are now procuring ferries from Turkey, but the ferries that we have procured are double the price that Norway is paying. I will ask Kevin to answer that question, if I may. That is simply not true. The ferries that we have ordered are very specific. We went through a robust procurement process. Basically, the price of the ferries that we have ordered is £45.5 million. The ferries that are being built for Norwegian waters are a completely different specification, and they are £33 million, but the technical specification for waters in Scotland across the Minch, as an example, are completely different to vessels that are being built for fields. It is comparing apples and pears. It is not a good comparison at all, and £33.5 million is not double £45.5 million. Can I just follow up some of those lines of question from Sharon Dowey and go back to the point about written authority or not written authority and the difference between instruction from your sole shareholder and written authority? To all intents and purposes, it was equivalent, was it not, because your advice was being overridden? Our advice was the preferred option most to retender, as Eric said in his letter. I think that some evidence has been given while that was two weeks before we got to a final position. With CBC and FMEL, and therefore the matter to dissolve themselves to our satisfaction, that is not the case. That was why the risk letter went along with the submission from Transport Scotland, and that referred again to Eric's email of September, because we were still very far away from what is the market standard, builders refund guarantee. There was no recommendation contained in those papers from CML. Just to supplement what Mauregg is saying, when you look at what is written in section 617, as explained in the risk paper, CML was not content with the final draft contract in these circumstances. The ministerial approval process was not normal. CML made no recommendation to Transport Scotland to the minister. Now, when I heard Roy Brandon's evidence, he stated as far as I recall that CML was content with the contract, and we were not. But the combination of the undertakings that was given to us as a company by ministers combined with the end contents of the contract made it up. It basically was back-to-back seen from our perspective in terms of guarantees. Stating that we were content with the contract is not correct. We were not, and that was clearly expressed also in the email that was submitted to both members and members of Transport Scotland at the time. Had we not had the undertakings contained in that letter? Just for the record, you mentioned evidence that we have received, which suggested that Mr Osgaard's letter was two weeks, 12 days before the decision was taken by ministers. His submission says that, while Mr Osgaard's email may have expressed your frustration, the email makes clear that it dated from two weeks earlier—it was 12 days—and before the latest round of negotiations, the Auditor General's report does not make that fact clear and it could be taken to read as a final position, but you are telling us this morning that was the final position of the board. Yes, because the mitigation did not address the key concern in Eric's email, which was that we do not have a 100 per cent builders' refund guarantee. That is why that letter was referred to again in the submissions that we made. Mr Osgaard, according to one biography that I have read of you, it was when you were appointed to the board of the Isle of Man's steam packet company that you are described as possessing, I quote, extensive experience with a number of European shipping concerns in a career that has spanned over 30 years in shipping. Have you ever known a ship to be built without a builders' refund guarantee? Not that I recollect. In the context of what we have heard this morning, what we have seen in the written submission, did you at any point consider resigning as a share of Seymal? I did not. I have heard statements about that, that the board was threatening to resign, and I do not know who has dreamed that up, but that has not been the case. I think that there was reference in relation to mediation, which we may come on to at some point in these discussions, that there had been a letter sent by lawyers saying that the board has threatened to resign en masse. That is absolutely not true. Okay, so that was evidence that we heard from Jim McCall, I think, who said that he had been in a private meeting with Derek Mackay, where the civil servants had been asked to leave, and he'd been told that there was what he described as a legal letter from the board of Seymal threatening resignation en masse. We know not of any existence of such letter. We did not send any such letter. We did not instruct any such letter to be sent, and the board did not threaten to resign en masse. Again, just for the record, Mr Ostergaard, neither did you, as chair of the board, notwithstanding the very strong terms of the letter. You sent an email on 26 September in the afternoon saying quite starkly, in my opinion, that the best option would be to bin the present result and start from scratch on the basis of our initial requirements. Those are quite strong terms, are they? And when that advice was overridden, you didn't consider your position at that point? Well, as I said before, we got what we needed. It was obvious that there was an interest from the Scottish Government to see that that contract was awarded to FMEL, and I presume for consideration of economic development and job creations with the yard and in the area of the yard, and those soft contractors that would be involved in the contract. So, from a Government perspective, that has probably been their interest. When we were looking at it as directors of the company, we had to safeguard that we were acting within the company's act and taking care of the company's interest. If you would look at the contract in isolation, that was not satisfying our tests to do that. But in the combination with the undertakings from the Scottish Government and the guarantees provided by FMEL, we were up to the opinion that we would not put the company at risk and thereby we were prepared to enter into it. We have also expressly said that that guarantee that was provided was not into market standards. We have got an attachment in an email that was sent to ministers, which is a note from FMEL at the time back in October 2015, which says that, without guarantees for all payments made, there is a substantial risk. Under normal circumstances, it is probably unlikely that a company of the size of FMEL would take on this risk. So, it says under normal circumstances, what were the abnormal circumstances that you were operating under? The circumstance was that we got an unconditional financial guarantee from the Scottish Government to put us in funds that, if there was a problem, FMEL would not be insolvent. Okay, we may return to some of those things. I think that Craig Hoy wants to come in at this point. Thank you, convener. Mr Ostergaard, your reputation has been quite a tough cookie in this industry. Somebody who understands the industry and somebody who would fight its corner. I asked Roy Brennan when he came before us from Transport Scotland in relation to the correspondence that he had. I asked him if I advised you not to do something in pretty strong terms and then you proceed to do it. I am either being ignored or am I not. The response that we got there was from Mr Brennan was, are you referring to the letter from the chair at the end of September and to the subsequent exchanges that went to the minister? As I understand it, he said, from the moment that the chair expressed concern to the point at which the advice went up to the minister, quite a bit of negotiation had taken place between FMEL and FMEL on getting the contract to a place where both parties were content. He then goes on, at that point, FMEL was content to award the contract and was seeking approval from the minister to do so. That approval was sought and given to FMEL and FMEL responded to it. The board accepted that and then signed the contract on 19 October. Was Mr Brennan giving a misleading account there? That was what I just referred to, because as I recall the statement from Roy Brennan not having it in writing, but as far as I understood, he said that the board was content with the contract and we were not. If we had not been given the undertakings from the Scottish Government, we would not have placed that order. Specifically, he is saying that you sought the authorisation to proceed from ministers, which we got, and Moran McNeill was telling us that ministers told you that the deal was authorising that you should proceed, so you were effectively overruled, weren't you? We did not take a decision not to award the contract, and that sounds like a double negative. I'm sorry. I know you're a lawyer, but we're getting it to lawyer speaking. We got to a point where we had got to the position of negotiation with FMEL, and they were going no further. At that point, it's fair to say that Transport Scotland were keen to get something to the minister. We agreed that we would write the risk paper, which referred to Eric's email. We would agree the terms of the letter of comfort and all of the board members and FMEL were absolutely unanimous that we would not proceed without that letter and that that would go via Transport Scotland to the minister. However, there is no recommendation to award the contract. The normal approval process would be that we get the contract to the point at which we are happy with it. We then recommend to Transport Scotland that the minister approves the award and we enter into the voted loan agreement. That was not what happened here, and to that extent it was not the normal process. The normal process is not to get a letter in the form that we got it with a shareholder authorisation and a financial undertaking in it, or indeed to have to change the voted loan agreement at the last minute to provide that the loan would not be repayable until the vessels were actually in service. That is not a normal process. I think that Kevin Stewart would like to come in. Obviously, I was not here at the time, but I have done a lot of research on this, as you can probably imagine. What happened between the preferred bidder and the contract, which took basically the best part of two months, was that the executive team with the board negotiated with FMEL Holdings and Clyde Blowers to make that contract as good as it could be. The initial position was that there was no refund guarantee. Where we ended up was a 25% refund guarantee. The initial position was that the final payment, which ordinarily is 20%, was offering 0.5%. That improved to 25%. We also agreed with them that, as any material equipment or machinery came across the arts doorstep effectively, we vested it. Vesting means that it is then legally in our ownership. We did move from a position of being extremely uncomfortable to more comfortable. Were we completely comfortable? Absolutely not. I was not there at the time, but it is very clear that the normal process is that we go through an assessment, we make a recommendation, and we get a voted loan letter. This was doing an assessment, being unhappy, not recommending it. We then went into a process of negotiation and we came out of the other end being happier than we started off, but were we 100% happy? Absolutely not. I think that, just to follow up on what Kevin said, I think that Roy Brannan said, and the minister approved it. An approval would not have been enough for us. Had the minister simply come back and said, approved, we would not have proceeded on the basis of that. We wanted a letter which had an authorisation and a financial undertaking. Mr Brannan's account effectively says that he went to the minister and sought his approval. You were recommending to proceed with those vessels. That is what you would read into Mr Brannan's statement, right? That is not correct. Did you ask to see ministers in the closing phases of the negotiation? Did you ask to sit down with ministers and express your concerns to them face to face? Eric Emill said that he would be more than happy to sit down and speak to ministers, and that offer was not taken up. Were you given any reason as to why that was not taken up? No, I am just sorry. So the normal process is that we have a sponsor, which is Transport Scotland. That sponsor attends our board meeting. Our correspondence generally is between CML and the sponsor team. What the sponsor team does is make recommendations to the minister. We are not involved in that. We would very rarely see anything that goes between Transport Scotland and ministers. Our direct line of communication under normal circumstances and all circumstances is with our sponsor team. There is annually, under normal circumstances, not in a pandemic, we have the minister attend a board meeting once a year for a period of time. So our direct communication in those respects is not directly with the minister who is with our sponsor. It is a bigger belief that when you get to an intense period of negotiations such as this where there are clearly issues that you wouldn't just connect the two main parties. Did anybody from CML attend a ceremony to mark the preferred bidder status being awarded? Of the preferred bidder? The preferred bidder status being... None of the non-executives did. Why was that? Because we were concerned that it would appear to be a face-accomply at that point, you will see from our submission that our preference was for that to be done on a confidential basis and for there not to be a public announcement. We thought that there was risk to the procurement process because we had not issued the alcatel stance the letters yet and inevitably a negotiation that is undertaken in a very public domain makes it quite difficult. So would you say that by announcing it with such fanfare that ministers were effectively forcing your hand? It made negotiations more difficult. So that was the reason and particularly because by then we knew that we were in discussions on a refund guarantee. At that point, prior to 31 August, all that we were hearing from CBC and FMEO was that CBC could not grant a guarantee. We weren't hearing at that stage there was no guarantee on offer, but you will see from the board minutes of the 25th of August CMA board meeting, which took place at Victoria Quay, that we were very concerned about it. The refund guarantee was discussed, but Transport Scotland was clear that the announcement was going ahead. Just in relation to the issue of the contract, if you didn't ask to speak to a minister and you didn't have further negotiations with Transport Scotland, what were those last 24 hours like? Just talk me through them. What dynamic was taking place internally within the organisation? At which point? At that 24 hours where it appears that you changed when, I think, it's October the 8th to the 9th from memory. What sort of discussions were you having within the organisation? We were having exchanges of emails with, I think, from memory. Eric Zending, one saying, the minister clearly wants to do this. The board member saying, well, if we're going to do this, we need an authorisation letter and we need the letter of comfort, and until we get that, we're not proceeding. So there were a variety of emails that went back and forth, I think, over a period of 24 hours. There seems to be some dispute around this issue about the board's refund guarantee, because Derek Mackay and an email to Stuart McMillan suggested that a boarder's refund guarantee waive the requirement in the past for a boarder's refund guarantee, and that that really wasn't pertinent or relevant to the discussions. Is that something you're aware of? We were completely unaware of that until it came out in evidence. So why would Derek Mackay have that impression and communicate that to Stuart McMillan? I can't comment on Derek Mackay's thinking or why he said that. We have no knowledge of it at all. But FML was obviously told us that they told relevant parties that they couldn't provide a builders refund guarantee. They had not told us until the point at which they said they had a problem with the CPC guarantee. I'll let Kevin come in. So the standard BIMCO new build con has in it basically the contract, it is logically amended in some circumstances, but the actual process at ITT, the invitations tender, asks very very clearly to all the tenderers, is there any problems with what we are proposing, and they made no comment at that stage whatsoever as to the fact that they would struggle with a builders refund guarantee, so they stayed silent on that. That is normal practice in shipbuilding and in other contracts as well, because we do civil engineering contracts. If somebody stays silent, then it is tacit acceptance of what is written. We had no clue, and to be perfectly frank, if any of the bidders would have turned around and said, we cannot provide a refund guarantee, they would have been redlined and struck out. So what we were seeing when we were doing the assessment was from all the bidders, they could provide refund guarantees. It was only after the preferred bidder status was given that all of a sudden the rules were changing in front of our eyes. I wasn't there, but I can see exactly what happened. That is not a good starting place, as you can probably imagine for a contract, which is, yes, we promise to do things. FMEL, knowingly and willingly, entered into that contract. There are all sorts of things that have been said after the contract, but the reality is that what we saw in the bid was very clear that they could provide what was needed. They made no comment about the fact that they could not. There is something fishy about that. Effectively, you have got the minister and, in the end, the person who wins the contract having one account of the fundamental issue of the bidder's refund guarantee, and you, as the agency responsible, are blissfully unaware of that. There is something fishy in this, is not it? I cannot comment on whether it is fishy or not. It is just the position. It is unconventional. It is not normal practice, but we were not involved. As I said, until we heard the evidence, that was the first time that we had any inkling that there had been any discussion. We were not made aware of it. Transport Scotland did not make us aware of it. I cannot comment on whether Transport Scotland knew. Just one final question before I put my hand back. Obviously, there are lots of contradictory accounts of what went wrong, why it went wrong, but Jim McCaw says that one of the fundamental issues as to why the two vessels have gone so far over a budget and so far off track in terms of schedule is that your alleged meddling in the construction process is to blame. Did you tell FML in what order to build things? I will give that one to Kevin. No, not at all. This is a very standard international contract and it is a design and build contract. It says what is written on the tin, so it effectively is up to the builder to decide how they want to build the vessel. What we have seen in the narrative recently and in the past is that there has been significant changes in views of how the vessel is going to be constructed. I think there has been the rewriting of history in relation to our involvement. We do not meddle, we cannot meddle, but of course when something goes catastrophically wrong, it is very easy to slope your shoulders and blame somebody else. It is in our evidence, but ordinarily, within a contract, we would accept that there will be some changes from time to time. That is about 3 per cent of the contract, so in this instance it is £2.9 million. The changes that we agreed amounted to £1.55 million, and I will not get too technical here because it will take too much time, but we had 111 changes that were discussed between us. 30 of them, we both agreed, would not go forward. 45 of those changes were, as a result of things at CBC and FMEL, wanted to change. That left the balance for us, which was 36. Basically, that is a normal process. We would expect, with other contracts and in international shipbuilding, 3 per cent's worth of changes, which is £2.9 million versus £1.55 million. That is far below what you would ordinarily expect within a contract, so we do not accept any comment about us meddling or interfering. I think that there was complete confusion by the shipyard, and let us be honest about it. Mr McCall has no shipbuilding pedigree whatsoever. We are going to pursue those issues in a moment, but can I just take you back to the 31st of August announcement? We now know from internal emails that were released in 2019 that there was an email to Keith Brown on 20 August 2015, copying in Alexander Anderson, the senior special adviser to the First Minister, under the heading of presentational issues. It says that, paragraph 16, it would be appropriate for Mr McCall as Minister for Transport and Islands to lead on this announcement, but we know that 11 days later, the First Minister was accompanying Mr McCall and presumably giving lead on this announcement. What did you know about what was going on behind the scenes at the Scottish Government at that point? Not terribly much. We received an email on the 21st of August from our then chief executive, Tom Docherty, to say that Richard Hatfield of Transport Scotland had gone to Keith Brown to seek approval. We were not aware of that until we were told that expose factor. At that point, the email then said that the PR machine is getting into gear, and the public announcement is going to be on 31 August, and the First Minister will be doing that. From memory, we knew on 21 August that the First Minister would be making that announcement. Again, Tom Docherty explained the risks to Richard Hatfield and Transport Scotland about doing that so publicly when we were still in negotiations with our preferred bidder on a number of technical aspects as well as a number of issues on the contract, but we were told that it was going ahead. If there is an internal email that recommends that Mr McCall make leading the announcement on 20 August, you are saying that by the next day there has been an intervention, which meant that the First Minister was leading on the announcement? What the email said from Tom Docherty was that our PR consultants had been contacted by the First Minister's press officer. I took it to mean that it was going to be the First Minister making the announcement. I do not think that that email expressly said that it was, but certainly the press officer had been in contact with our PR agents. Were you invited to that event as non-executive members of the board? I do not think that we were. Actually, I think that there were limited spaces, and I do not think that we were the most important people on the platform. I am just trying to establish whether there was a boycott or not. I think that there were issues around the number of places available, but we were concerned that it was going to be seen as a ffata company with the public when we still had significant miles to go on the contract. As Kevin said before, there were nearly two months of negotiations ahead of us, so we did not consider at that stage the contract negotiations being completed at all. Was your non-attendance because of a lack of spaces, or was it because you had some misgivings about it, or you felt that it would compromise the negotiations that you were involved in? I cannot speak for the other directors. I was uncomfortable. To be honest, I do not know whether I was out travelling or why I could not attend, but I share Morick's concerns that it could be interpreted in the wrong way. Had you been available to attend, would you have attended? I do not know. I do not think so. I think that we discussed it at a certain stage. Yes, I think that there is an email exchange where we decided that we would not, but I do not think that we were invited and declined. Tom asked whether we wanted to come or not, in which case he would have to find a space on the platform, and I think that we said no. So it is when is an invitation, not an invitation. Mr Beattie wants to ask some questions. The main line of my questioning. I would like to just clarify in my own head one or two points that we have already been talking about. First of all, it is about the decision making on this contract. We know that Scotland has had access to all the same exchanges and documentation and so on as everybody else. On 21 April, Audit Scotland said in a quote that they were clear in our judgment that there was no formal written authority. The main area of contention relates to that approval. The Seymal paper says that Seymal was effectively instructed to proceed with the purchase from FML despite the concerns raised. Again, as explained in the risk paper, Seymal was not content with the final draft contracts. In those circumstances, the ministerial approval process was not normal. Seymal made no recommendation to Transport Scotland or to the minister. There is a clear trail of key decisions and the basis on what they were taking. We have all seen all the documents that are being published. I particularly look at the letter from Transport Scotland that Seymal dated 9 October 2015 that says, I quote, that the Scottish ministers have also seen and understood that paper, that is Seymal risks paper, and have noted and accepted the various technical and commercial risks identified and assessed by Seymal and have indicated that they are content for Seymal to proceed with the award of the contracts. Now, it is clear from the published documents that ministers were advised of the risks identified by Seymal. They were advised of the mitigations that were put in place and came to a decision on that basis. Is that fair? Is that a fair assessment? Yes. Good. Thank you. That was an easy one. The other thing was— You are all that easy. Here is another easy one for you. Coming back to the BRG, which is obviously a great bone of contention in this, when and how did Seymal first become aware that FML was unable to provide a full BRG? Well, we got the indications back in the end of focus too. Yes, I think that there are stages to this. On 21 August, which was ironically the day that we were told that the First Minister was going to attend the event and announce it on 31 August, so the email from Tom Docherty advising us of that came in at 5 past 5. The email from CBC's lawyers came to our vessels director, Andrew Duncan, at 5.38, so about half an hour later. That was the first that we knew that CBC would not grant a parent company guarantee. What we did not know at that point until much, much later, and we were talking post Eric's email of September that they could not provide any form of builders refund guarantee from a bank or from anyone. What we were going to get was a surety bond from InvestTech for 25 per cent of the price. That was really after, as Kevin has alluded to, a huge amount of negotiation, really pushing them, with our lawyers really pushing them, both to get the refund guarantee and also to mitigate some of the effects of not having a full refund guarantee. I think that around about 6 or 7 October we absolutely hit the buffers at that point. There was no further movement. It was CBC and FMEL saying that this is it. Just a clarification, which year was that? 2015. Were you aware that, in March 2015, the Scottish ministers advised FMEL that a full BRG was not required? No. When was that? March 2015. That cannot. This is a brilliant session that is made by Mr McCall. Completely unaware. So you were not aware from the outset that FMEL could not provide a full BRG? Could I just refer to that one just for my clarification? So that was even before that the preferred bidder had been selected, if you say March 2015. That's during the ITT? Yes, that's one point. We were not aware. That is the reported letter and or discussion between Darren McHine, Stuart McMillan, so at which we absolutely have had no awareness of until this inquiry actually, so six years later. Now Mr McCall's evidence in 16 June, he said that you were aware from the outset that FMEL could not provide a BRG. Is that correct? That is not correct. At the pre-foc qualification stage, did FMEL explicitly state that it could or could not provide the full BRG, which was a requisite for shortlisting to the ITT stage? At that point they made no comment on. It's a PQQ. I think they said that we note the requirement for a guarantee. So they did not raise it, they didn't question that as a cause. At that point they did not say that they could not give us a guarantee. And it was reasonable for you to assume at that point that it wasn't a matter of contention. So normal contractual negotiations, unless there is a comment to the contrary, you accept that the framework which you're putting forward in the four corners of the contractor accepted unless somebody says that they will not be accepted. And that's normal? That is normal practice in contractual law full stop. Not just shipbuilding, but any form of contractual. So at the ITT stage FMEL had not stated one way or the other as to whether a BRG was available, therefore there was an assumption it was. Indeed. In line with any other, be there. Okay, that's fair enough. I'd like to turn to the money, which is always far more interesting. Obviously there were comments in the report of 9 December 2020 by the Rural Economy and Connectivity Committee, which highlighted the fact that certain milestone payments, stage payments, were somehow out of order. And the clear finding there was that they were being constructed in such a way that they would qualify for payments, not necessarily in the order they should have been done and so on. We've also heard that this is normal for the industry. Is it normal for the industry? Last Kevin to answer that one. Yes, is the answer. So it is very, very normal to enter into negotiations over milestone payments. At the end of the day, you will only pay what is required, which in this instance was 97 million pounds. But it is often the case that there is a negotiation between the buyer and the shipbuilder that basically says at what stage is money to be paid. It wasn't out of order at all. Shipbuilding contracts historically, and I genuinely mean historically, is five payments of 20%. I've been involved in many, many shipbuilding contracts where there is 10, 12, 15, 20 different payments because at the end of the day, you want the contract to succeed. So as long as you're not overpaying, there is nothing wrong with negotiating different milestone payments. Those payments were absolutely in sequence. So if you look at the milestone payments, 25% of the steel, 50% of the steel, 75%, 100%. So that is not abnormal at all. Amal Amar, Leymann, and I have no idea how to build a ship, but in any contract, the milestones are there to say that a certain sequence of events have taken place leading up to that critical point when the payment is triggered. The Rural Economy and Connectivity Committee at the time did not find that was the case and took evidence that that was not the case. So how is it okay in the industry? I'm trying to understand that. If you're doing one isolated event, which is going to result in a payment, and you have another isolated event that's going to result in a payment, but the bits between are not done, that seems odd to me. I don't understand. Well, they are done. There's a misinterpretation by the previous committee, but they were done. So we receive certificates at any point in time, whether it's this contract or any contract that we do in shipbuilding or civil engineering, to say that a payment is due. And we cannot interrupt that. That is contract law. So if something has happened, if a milestone has been reached, we have to pay that amount of money. And you took legal advice on that, I believe. Of course. And that implies by taking legal advice that you had some doubts about it. No, we take legal advice every day of the week. So there was nothing specifically unusual in taking legal advice as to whether you were obliged to pay these milestone payments? No. Okay. You paid FML 83.25 million, that's about 85 per cent to the contract value. 82.5 plus 750,000 for the variations of contracts. Okay. That is explained in the other papers, so yes. Why, then, wasn't 85 per cent to the ship's bill? There's a number of moving parts here. So you will recall that, as I said earlier on, that the final payment was due to be 25 per cent of the contract value that was negotiated. You will also see in our written submission that, at a point in time, we accelerated some payments to FML, which basically changed the contract. So the final payment went from 25 per cent to only 10 per cent, which was a £14.55 million difference. Can I just check that with Semael's decision? Semael eventually agreed to it, but it is in the Audit Scotland report that the acceleration was requested by FML, by Jim McCall, as I understand, and Derek Mackay agreed that before it had been approved by the Semael board, the Semael board subsequently rejected that proposal twice. What we eventually agreed to was accelerated payments against specific invoices for specific equipment, because we were concerned that, at that stage, FML was clearly not paying its suppliers—there was a backlog of suppliers, they couldn't get equipment on order—and that there was a concern that FML might have a liquidator or an administrator appointed to it. The last thing that we wanted was £14 million of public money sitting in FML's bank account, so what we agreed to do—Kevin MacDonald can talk to the very leporious process that we went through to ensure that we sat next to FML and when we transferred money into their bank account, it was immediately transferred out to pay suppliers, and that was done instantaneously. We also refused to pay any of FML's direct costs, so all of the money that was accelerated was used to buy equipment that we then invested ownership in and which is now being installed or has been installed on the vessels. Do we have evidence of Derek Mackay's approval? I mean, presumably, he must have signed off on something to authorise the change in the terms. We were not cited on anything. Did anything come from Transport Scotland? A request to change the payment to accelerate the payments, which, as I said, we would refuse to do twice. We did receive a letter of comfort. Another letter of comfort. The original one was around the contract signing, the other one was the change from the final delivery payment of 25% to 10%. We received another letter of comfort, which I think is in the pack, within the appendices that basically narrates that that was acceptable, because at the end of the day, we get voted loans from the Government, so we are effectively using public money. We need to have a trail that says that if there is a substantive change and £14.55 million is a substantive change, we need to have approval to do that, because we do not have that type of money. We draw money from the Government via the voted loan system. What checks can I and did seem all make prior to making these milestone payments over the simply against invoice? Are you talking about the £14.55 million or are you talking about any milestone payment? I am talking about any milestone payment. We have a side team, a project director, and it is agreed as to whether a milestone has been reached or it is not. We receive a request and a certificate from the yard, and we have to sign that off as it is being met. To do that, you visit the works? Yes. We have between three and six people on site permanently. That is normal building practice. Effectively, they are checking the quality of the build. They are checking the checking against the specification, etc. We have people on that site, not 24-7, but for 12 hours a day, every single day, seven days a week. You were satisfied that the milestones had been achieved and that the payments were justified up to 85 per cent of the value of the vessel. Did you ever challenge FML on how the money was being spent? No. Given what was uncovered about them not paying their suppliers and so on, what was it, £9 million or something like that? If we are talking about the 14.55, we received four arch-leaver folders, myself and Jim Anderson, who is the director of vessels. We spent 18 hours a day times two days literally going through each individual one, and we sifted out those which we could recognise as being part of our new build contract versus some that weren't. If I give you an example of that within the package, there were some invoices which related to the redevelopment of the yard and the head office and stuff like that. We went through a sifting process of reading every single invoice and verifying whether that was actually to do with our vessel because at the time there were other vessels being built as well. We basically ended up with two large piles which are payable and not payable effectively. When we ended up with the payable amounts of the 14.55, about £9.5 million, there was a backlog of invoices. We knew that this was happening because we had been contacted by international suppliers and local suppliers to say that they weren't being paid over several months, so we knew that there were some problems. At the time of nationalisation, there was obviously every indication that the vessels were way, way from being ready to get launched. Did you have any questions about the amount of public funds that had been paid in there and the lack of progress on those vessels, the fact that they were far behind where they should have been? Surely the milestones and the robust checks that took place should have thrown up really quite clearly. Some of those works weren't happening. Yes, of course. We had concerns throughout the contract. You will see in our written evidence that we were first flagging concerns back in December 2015. What we would consider normal shipbuilding practice was not being followed. Yes, we were concerned. Part of the story to 82.5 also includes the accelerated 14.55. If the 25% would have remained in place, it wouldn't have been 82.55, so it would have effectively been 68 at that stage. We are not touching the loans that came from the Scottish Government as well. My understanding is that you are not part of that particular discussion. We were completely unsighted. Surely there must be some linkage between the significant milestones that trigger the payments and not just checking the invoices and so forth, but the quality of what has been done. Was there quality control in there? If there was, why wasn't it evident at the point of nationalisation? What we would say is that the quality of the build is not in question. You have heard evidence previously that the guys on the ground do the welding, the steel cutting, etc. They were going about their daily business. This is a catastrophic failure of management. It is not a catastrophic failure of the workforce. At what point did you identify that catastrophic failure of management? I arrived in March 2016. I have said already that we were flagging up problems in December 2015, so that is me reading emails and a hand-over from the previous chief executive. The way that the shipyard was going about the build at risk was not normal ship building practice, as we had seen it previously. Between us, whether it is Eric or myself or our vessels team, we have literally hundreds of years' worth of experience. I am anxious to bring Willie in. There are only 60 minutes in this hour, so I am afraid that I will have to cut you off at that point. If we have time, I will bring you back in, but I do want to bring in Willie Coffey, who I know has a whole series of questions that he wants to put to you. I have hoped to get into this issue about quality and the statement that you have made in your submission, Morag, where you say quite clearly your view that the primary cause of the vessel's delay in cost-over runs is a catastrophic contractor failure between October 15 and October 19, and we are beginning to get into that space and that territory there with Colin. Could you explain to the committee why you are saying such strong words and could you offer to the committee a few examples to justify those comments? I will go back to Mr Peter here. We have heard where has the money gone quite a lot. I think that the best way that I can explain it is that we believe that the money has been spent within the business for sure. Catastrophic failure is a strong word for sure, but what we were seeing basically was units being built in the shed that were basically built at risk. We had not commented on the drawings that we have presented with and neither had the class society, which is Lloyd's. If you can imagine, if you build something under cover, it might cost one unit of price. When you move out into the open air to join the vessel up, it costs two units of price, and when it's afloat, it will cost four units of price. What we were seeing basically was units being built at risk, not signed off by us, not signed off by Lloyd's. What that meant was that when they were inspected, there were many, many mistakes. Mr McCall says that we interfered. This is not interference. This is actually pointing out that this is a unit that has been built incorrectly. If you can imagine one unit of cost, it then takes another unit of cost to undo it. It then takes another unit of cost to do it properly. You can easily see that what should cost one unit of cost becomes three units of cost. That is the simplest way that I can explain what was going on. There were mistakes made at the outset by the builder because they did not have approved drawings, and when the units were inspected, they were riddled with errors that had to be undone and then redone again. Effectively, some of that was happening in the sheds, but if it's happening out on the birth, which is the new build birth and the launch birth, that's going to cost twice as much, and if it's afloat, it costs four times as much. If you want to follow the money and where has the money gone, the money effectively was wasted. That's what's happened. Does that explain adequately? It's getting there, Kevin. It's difficult for us. In response to Colin Beattie there, he said that these were management failures, not workforce failures. However, the specification for the ship and the construction, surely the specifications were followed by the workforce. Where is the actual failure? Is it the management's failure to give the workforce incorrect specifications? The management team, the planning team, the technical team delivers packages of work to the workforce to construct the vessel. The workforce follows what they've been told to do, and if that is wrong, it is not the workforce's fault. It is the fact that the planning and or the technical detail has been sent down to the shop flooring correctly. That was where the problem lies, which is why we say that it is a management failure and not a workforce failure. Are you saying there were errors in the design and specification for the vessels? Are there errors there? Yes, and this gets slightly technical. Remember all the way through this, this is a design and build contract. We do something called a concept design, and what a concept design actually does at the end of the day is it specifies very clearly that what we're being asked to be built can physically be built. It's physics. We cannot ask somebody to build something that cannot be built, and maybe a silly example, but we can say that 100-metre-long ship, which has got a beam of 18 metres, we can't ask somebody to build it and it's got to take a million passengers. It won't happen, and you can say, well, we want this thing to be built and it's got to take 5,000 cars. That's not going to happen either, so the concept design is us proving to ourselves that what we're asking any shipyard to bid for is fair and reasonable and can physically be delivered. I could turn to the thorny issue of the cables that have come up several times at the committee, but the Auditor General's report highlighted in paragraph 138 that the process identified that some of the 1,400 cables that FML had installed at the end of 2018 were too short to reach the required equipment. I put that point to Mr McCall last week, I think it was. Mr McCall's response to that was that the specification constantly changed and equipment was moved around, thereby making the cables shorter as a result. So, could I ask for your view on that comment so that we can get that on the record? Yes, so there are an awful lot of cables on a ship and the cables which were installed at that point in time was about 30km out of 250km of cables. I mean, these are enormous numbers, as you can probably imagine, and there were two things happened very, very simply. Some of the cables that were installed were simply too short to reach the equipment that they were supposed to be connected to. So that was part one of the story. Part two of the story is that the original installer, after administration, did not come back to sight, so there was a change from a company called Consberg to Wartsiller and the systems that Wartsiller and the control panels at Wartsiller have, in some instances, only a few had to be in different compartments because they were differently configured. So, there were short cables full stop and there was also some moving of equipment. Mr McCall says, we moved the equipment. No, we didn't. It was a design and build contract. It was up to the shipyard to decide how that was going to be built. So, again, this is not interference from us. This is a shipyard working with this contractor specifying in which compartment a control panel is going, and in a few instances the control panel ended up in a different compartment. Naturally, then, the cables are too short. But bearing in mind, 30 kilometres of cables installed versus 250 kilometres, that is 12 and a half per cent only. Thank goodness. Sorry. Could we just wait a minute to the helicopter? Does that answer the question? Thanks very much. It sounds as though it's a little bit of both, though. My interpretation of that to cables were short, but equipment was in different places as well, so it seems to be because they were both. Yes, that is true. We didn't move the equipment. We didn't move the equipment. That is the responsibility. Or ask for the equipment to be moved. On the broader issue about quality and quality standards, there is also commentary in the Auditor General's report about little or no linkage to quality standards, no linkage between milestones, events and quality checks. I think that there is a comment initially that quality initially was good, but from October 17 years, it was beginning to highlight many quality issues, and those then led to the owner observation reports, of which there were many and numerous of those. Could you just say something about the issue about the application of quality standards and whether you considered it was correct, appropriate, fit for purpose, etc., or whether it wasn't? The answer to that very simply is generally, yes, it was fine. When the yard got into difficulties, they started to cut some corners. That is when we started saying, well, hold on a minute, we have owner's observation reports, this is not normal building practice, it is not normal standard, so it is a two-part story. When everything was fine and the shipyard was operating as it should do, then there wasn't any issues, but issues did start arising when evidently they started to get into financial difficulty. That manifested itself in a cutting corners, but actually the production of the ship slowed down substantially, because fairly obviously, if you can't pay your subcontractors, they're not on-site building the ship. In any process of constructing anything, you're bound to get comments, requests for change, specification changes perhaps as you go along, you're bound to get some of that. Is that natural? That's the variation to contract piece, so there seems to be complete confusion within the minders of the previous owner as to what a comment is. There is formal variations to contract, which I've explained, there was 111 discussions, there was 81 actuals, 46 proposed by the yard, 35 proposed by us, resulting in the 1.55 million. Owner's observation reports is actually us attempting, and we attempted an awful lot to help the yard to say, look, that is not normal ship building practice, can you please rectify the problem that has manifested itself? That is not a change, that is simply saying that you are not building a ship to normal ship building standards, so that isn't a change, that's asking for what we're paying for. The documentation we have suggests or says that there was 346 of these observation reports. While they're on going every day, it's a moving feast. Are all of these commentary about the failure to apply standards? Yes, yes. Again, there's two elements, it's whether the standards have been applied in its normal ship building practice, but also one of the problems that you have with any shipyard is that they are building a ship and they're warranting it for a year, you're expecting to operate it for 30 years, so some of the comments are about the ability to maintain a ship. So if you can imagine pipes, you would want pipes side by side, so you can get access to them, you don't want them on top of one another, so if the bottom one goes wrong, you've got to dismantle many, many pipes to actually access the problem area. So again, it's quite complicated. So to be totally clear, these observation reports are not connected to specification changes and design changes, spec changes, none commentary about the construction going on during the process. None whatsoever. As I say, the variations to contract VTCs, those are actual changes that are being actively discussed and have to be paid for. And the number that were asked for by FML sometimes resulted in us getting a credit as well. So the 1.55 is some credits where they say, well, do you really want this? We would like to do it in a different way, and we actually agree with that. And other ones are us saying, can we change something? And one of those specific changes was to ask for a couple of extra crew cabins for cadets so that CalMac can train more cadets. Okay. My last comment on that area, convener, the information I have is that by April this year, there's still about 211 of these observation reports outstanding. Is that normal practice then? Or does that tell us that there's a bigger... No, no, no. It's normal now. What basically happens is it ebbs and flows. So, you know, as you are building out a ship, some of the observation reports are dealt with and they fall away and other ones are raised. So, you know, this is dynamic within a shipyard every single day of the week. So when people say there are a certain number of OORs, that is taking it at a particular point in time. It is not. You know, that is a definite number and it's there forever. Okay. What is happening now, very simply, is that the new CEO, David Tideman, who wrote to the NSET's committee back in March, there will be another letter going to the NSET's committee presumably before the end of this month or very early next month. That will actually call out the number of OORs and what you will see is that those are dramatically reducing as it stands at the moment. But as the vessel is built out, there will be some additional ones that come in and then they have to be resolved. So this is agile. Okay. Overall, they don't give you cause for concern about further delay, further cost. They're just the normal part of the construction process. That whether we were building in Ferguson's or previously in Poland at Remontower of Flensburg in Germany, that is the normal part of the course that you see in every shipbuilding contract in every yard throughout the world. Okay. Thanks very much for your answers. Thank you. Thanks, Willie. We are coming towards the end of our session, but I've had an indication from both Craig Hoy and Sharon Dowd that they want to come back in with a very short question each. Craig, I'm going to go to you first then, Sharon. I may have picked this up incorrectly, but just on the technical point that you said there, Kevin, you attribute a lot of the cost overrun to the fact that the ship of the vessel 801 was put into the water and that meant it's more expensive. So are you implying that the vessel was launched too early? Yes. Absolutely. I mean, there's been discussion around this. Our opinion and normal shipbuilding practice is you do as much as you can undercover in the first instance, you join up outside and you do as much as you possibly can when the ship is dry and it's only then that you launch a ship. So, very, very simply, the 21st of November, which is when 801 was launched, we were having discussions. We cannot dictate to the yard what they do, but we have very active discussions with Jim McCall's team to say this is too premature. Mr McCall said, I'd be not launched 801. It would have impaired the work in 802, so it was the proper logistical thing to do. Could it potentially be that another great fanfare, photoshoot with the First Minister, might have ended up costing millions to the taxpayer? It was the launches driven by FMEL, as far as we were concerned, and there's a note from Andrew Duncan, our director of vessels, saying that FMEL is the main priority of putting the ship in the water on the 21st of November, regardless of the problems that will be encountered later. That was Jim Anderson, so he said Andrew Duncan. So, at that point, that was coming from FMEL, I think, for two reasons. One, it released money from the investec bond for them, I think, this summer of around £5 million, as well as a minstrel agreement. But at that point, there were two versions of the truth about whether those vessels were delayed or not. We were saying that there are real issues here. We don't believe that they're going to meet the deadline dates, the delivery dates. FMEL were saying that that's nonsense. Seamall aren't telling the truth here. There's not a problem. So, there was a drive to launch to show, actually, that there wasn't a problem when they were right and we were wrong. Do you think that there could have been a political imperative on that? Because that's the second time that the First Minister has turned up when you seem uneasy about the process. I can't comment on that. Sharon Dowey. His work started in the bunkering facilities to store this, and there was also comment, as well, that the vessels are larger than the ones that are currently in operation, so the ports were too short to take them. Again, his work started in that. The answer is yes. One of these vessels is designated, as it stands today, for the Arran route from Ardrossan to Brodic. Again, it's a bit of an urban myth. We have been accused by some people of spending money unnecessarily. If you look at Brodic, it was the oldest port that we had. It was over 50 years old, and it needed to be replaced naturally. Structures do not last forever. As far as the LNG is concerned, there is an intermediate tank. Basically, you have tankers that can either deliver directly to the ship. That is quite tricky, because if you deliver directly to the ship, you basically have to stop all operations and we don't want that to happen. There is an intermediate tank of 200 cubic metres, where the road tanker can deliver to the intermediate tank, and the vessel can then connect to the tank at the port and take the fuel on board. The answer is yes. The tanks are being built. As we speak, there will be one at Oig, and that is a Highland Council port, and that is being redeveloped to take this tank. The other one, as it stands today, is Ardrossan. That port is going to be redeveloped by the private operator of that port, and we will provide the intermediate tank and its bund and all the rest of it. That is cryogenic material, so it is stored at 200 degrees below zero. It is quite specialist kit, but it is on order. Are they expected to be completed by the time the vessels come into operation? Okay, thank you. I have one final question for Mr Ostagard. First of all, in your opinion, given your experience, do you think that these ferries will be fit for purpose? Although they are coming in late, they are highly needed in the network. It is quite obvious that the average age of the CalMac fleet at the moment is 24 years, so that would not solve the entire problem of bringing down the average age of the fleet, but they will. They were specified. The original specification was defined by CalMac at the time, and the latest report that I have heard is that they both will go into service in the course of next year. 801 in spring and the 802 in the end of the year, October. From January of this year, you are now the chair of David McBrain Ltd. You have gone from being the client body to being the chair of the body, which is going to receive and operate these ferries. That is correct. That is why I am also interested in your opinion about whether you think that they are going to be fit for purpose or not. I am quite sure that they will be able to carry passengers and cars and trucks, as was intended in the contract, and they will be operating on the route. Going back to the beginning of this evidence session, you were chair of the board that was whether, by instruction or otherwise, signed off on these contracts. Now you are the chair of the board that is in receipt or will be in receipt these contracts. Is there no conflict of interest there, Mr Osigard? No, I do not see that conflict of interest. The dispute about signing and not signing the contract was hooked up on one particular issue, and that was the issue of refund guarantees, and had nothing to do with the vessels as such or the ferries as such. They will enter into the CalMac fleet once they are delivered in entirely the same way as Lock Seaford, which was built in Flensburg, or the Finlaken, or the tree hybrids. It will go into service in a completely normal way in a dialogue between the two bodies that together are responsible for delivering on the contracts to operate to the islands. For us, this is not just about the contractual relationship and the business refund guarantee arrangements. It is about the fact that these ferries are five years late and counting, and two and a half times over budget and counting. They are, and that is a fact. And where do you see the conflict of interest? My understanding is that CalMac cannot refuse these ferries, for example. They will be required to operate these ferries, and we have been given evidence from people that suggests that there will be problems because of the length of time it is taking to build these vessels. You do not see that. If I could just come in there, this is a highly regulated business, and ultimately any vessel that carries passengers can only operate, or any vessel full stop of substance will only operate if it receives a passenger certificate. It is not up to CML, it is not up to the builder, it is not up to CalMac as to whether it receives a passenger certificate. That is a matter of flag state, so flag state in the UK is controlled by the MCA. So it will be the MCA that ultimately give its passenger certificate, and that is a certificate that says it is safe and it is a good vessel to operate. That can be taken away at any point in time full stop. Anybody saying that, or making the suggestion that somehow corners will be cut and all the rest of it. Basically, there is us being CML as owners, there is a classification society, which effectively in the sense of a car does the MOT, and then ultimately the MCA as flag state representatives will give that vessel a certificate. If it does not get a certificate, it will not be operating. That is nothing to do with CML or CalMac or any of us sitting here today. CalMac is planning for these two ships to enter service next year. That is in the planning. In 2023. We have run out of time. As you say, Mr Hobbs, it may be that we have got further areas that we want to explore with you, but can I thank you very much, all three of you, for the time and the openness that you have given us this morning? It has been appreciated. As I mentioned at the start, we have had some written evidence, which we have been able to publish. There is subsequent evidence that we are also keen to publish as well, but we have got to go through a certain due process in order to be able to put that into the public domain. However, we will do that and we will give that further consideration. It may be that we will come back to you with questions that arise from that. As a committee, we will also need to consider whether there will be a value in having a further evidence session. There are some areas that we have gone into in some detail, but other areas probably have not had the time to scrutinise as much as we would like. It may not feel it from your end of it, but that is our take. I will suspend the session in order that we can change over witnesses. Can I welcome people back to the Public Audit Committee's 20th meeting of 2022? The next item on our agenda is consideration of evidence and witness information, which we, as a committee, have taken a long-standing interest in, which is major capital projects in Scotland. I am delighted that we have with us this morning Helen Carter, who is the Deputy Director of Infrastructure and Investment at the Scottish Government. Lauren Shackman is the Director of Major Projects at the Scottish Government, and from Transport Scotland we have Bill Reeve, who is the Director of Rail at Transport Scotland. We have a fairly limited amount of time this morning, but we will try to maximise the best use of it. I have a couple of opening questions that I wanted to explore with you. First of all, this is partly for my benefit. We have received a briefing that suggests that, as far as the capital budget allocations that you have got are concerned, there has been a higher than expected financial transactions budget allocation, but a lower than expected capital budgets allocation over the next few years. Can you explain to us how the financial transactions budget allocations, what they derive from, and where do the capital budget allocations come from? Helen, I am going to ask you if you don't mind. Yes, that's fine. I'm happy to do that. The capital budget allocation comprises capital grant funding from HM Treasury, and capital borrowing powers. Financial transactions funding also comes from Treasury, but it is a specific type of funding that can only be used to make loans or equity investments, so it cannot be used to build things in the traditional sense. It has to be repaid, so it has much more limited use. Where we have deployed that is, for example, in the Scottish National Investment Bank, where it can use financial transactions funding to make loans and invest in businesses and investment propositions, and in housing as well as some of the shared equity schemes. It is just a different type of capital funding, but it is all part of the overall capital package of investment. Primarily this morning, we concentrated on transport projects, both on the road and rail, especially. Again, for my information, there is a targeted review of the capital spending review, which sounds to me like a review of a review. Could you explain that a bit more to us what that is comprised of and how, at the end of that, priorities are set and allocations are awarded? In 2021, we published the capital spending review, which was a multi-year plan for capital investment up to 2526. That coincided with the publication of the infrastructure investment plan, covering the same period. The infrastructure investment plan set out our priorities, and essentially the capital spending review at the time allocated the funding over the same five-year period. There was a clear link with finance and the strategy and the priorities. However, we published that in advance of the UK Government spending review, which took place in October 2021. As a result of the UK spending review, the capital grant that we had modelled in the capital spending review was less. We had to undertake a review to work out what to do about the shortfall. At the same time, since February 2021, when the capital spending review was published, there has been a significant change to market conditions, supply chain issues due to the following Covid and the issues in Ukraine. The impact of high inflation has had an impact on our capital programme. That is evident from the major capital projects update that we also received. However, we wanted to take that into consideration with the capital spending review targeted review. The final factor that gave rise to that review was the new government that was formed after the CSA had been published. Although net zero and climate change were a feature, there was an increased commitment with the new government, so there was a realignment of some priorities to invest more in those low-carbon initiatives. Those three factors were rationale for doing an updated review over just over a year after we had published a plan. However, one of the principles that were set out within the infrastructure investment plan and the initial capital spending review were, by and large, the strategy is the same. However, it has meant that portfolios had to re-evaluate their plans based on the latest projections on time and budget for those particular projects. In order to accommodate some increased areas of priority spend, for example, in low-carbon initiatives, including increasing active travel, some other priorities have been slowed down and stretched out longer than the original CESR period. However, the government remains committed to those projects and programmes that were set out, so there has not been any deviation from what we have set out initially. However, it is absolutely a balancing act between managing the pressures that the volatile market conditions will change again and the projections that are set out. I am sure that, with the best will in the world, those will ultimately change because of the uncertainty that exists within the delivery environment just now. I am going to bring Willie Coffin in a second. Do you do any work to disentangle the relative weight and impact of Covid, the Russian invasion of Ukraine, Brexit, for example, and the effect that that is having on your supply chain costs and availability? There is quite a lot of work on going. It is primarily led by our procurement department, but the Minister for Business and Trade and Economy has been involved in those discussions with the construction industry. There is certainly a lot of work on looking at the impact and what can be done to help. It is not an issue that relates to Scotland, but it is a worldwide issue, so we are not alone in experiencing those issues. It is fair to say that the committee has been keenly focused on the capital projects report from year to year. Our approach has probably changed over the years about how we ask questions in relation to that, but what has probably been a constant is to focus in on projects that are possibly delayed over running and over budget. That is the first thing that jumps out at committee members on these. That is still there. From my perspective, I am always interested in how we apply standards to the construction of anything, whether it is roads, bridges, schools or even ferries. Just to ask you in broad terms from all the suite of projects that are under way, are there recognised quality management construction standards being applied across the board, and are we able to see that in any way, simply or form, to assure the committee that that is taking place? Perhaps that is more time for my transcode perspective. In terms of roads and railways, it is very similar. There is a suite of design standards, which specify how a designer and ultimately a contractor should go about designing and building a project. For roads, it is the design manual for roads and bridges, which is a well-known, well-recognised document. Alongside that is a specification for highway works or roadworks in Scotland, which specifies what concrete you should use in certain locations, the quality of curbing and all the parts of the infrastructure that you would expect. That is always under review, that document, and it is shared generally across the UK. Scotland contributes to that in terms of many aspects that are local to Scotland. It has Scotland-specific parts to it as well. That is the general backbone of what we do when we are designing and building a road. For rail, similar standards and build could probably comment on that. Once we take the process forward, there is a whole system of quality checks through the design process. When you get to site, our projects have a certification requirement from the contractor to not only make sure that the works are constructed correctly, but that they are designed correctly. They employ an independent checker to make sure that all the design is competent and that it complies with the standards and that the works have been progressed on-site into what was envisaged at the outset. There are a whole series of checks and balances from the contractor's point of view and the designer's point of view. Over the top of that, Transport Scotland will have a consultant or the employer for a contract who undertakes monitoring of all the works. It audits on-site and has the eyes and ears on the ground to make sure that there is a further additional check on what is produced. On the outside of that, we obviously have the gateway review process to make sure that a project is competent at various different key stages. We will also have audits from the likes of Audit Scotland to make sure that we have sense checks on what we are doing. The governance that we have in place for all our projects is very comprehensive. It depends on the scale of the project, but it could be that we have a project board for the bigger projects and it is more a team taking a project forward at a smaller scale of projects. There is a whole range of governance. I will not go into all the details, but that gives you a flavour of how we make sure that projects are built to quality, to time and budget, and they are built safely as well. Colleagues will no doubt pick some examples from the portfolio, but with the all those standards in place at the outset, why do projects sometimes go over budget and over time? You are applying the standards, construction and design techniques are being followed to the letter, why do they overrun? There are a number of reasons why. In the design and development phase for roads, they need to go through a statutory process to give people a chance to air their views on a particular or variety of routes. If it is at an early stage of a road project and at a later stage it will be on the specifics of the chosen route. To go through the statutory process, some people may have objections to that particular chosen route and it could lead to a public inquiry, as you are probably well aware. That can take a lot of time and it is how long is a piece of string sometimes. It is very difficult to determine how long that process is going to take. It is not more in the construction phase, not from the initial. It is late, it is over budget. Why does that happen? If everything is agreed up front, specifications, designs, budget, everything is in place and it still overruns. On-site, you have a number of variables. For example, the weather conditions can vary greatly from what was envisaged. Normally at the start of a contract, whether data is provided to the contractor can provide or reach their own conclusion about how long it is going to take them to do that particular project. Sometimes the weather can be worse than normal and it can also be at a certain time of the year or a certain phase of a project. For example, when the surfacing is being laid, it could coincide because of delays earlier in the project to the wrong time of the year when the temperatures are very low and it is not conducive to laying surfacing, so you get knock-on effects to the programme there. You can try and mitigate that by getting in extra resources and that sort of thing, but it is sometimes quite a challenge for a contractor to meet a programme because of unforeseen conditions if you like. My last query is, if and when a project begins to slip from delivery, schedule or budget, how soon does that get spotted and who gets told about it? Where does the chain of information full go? It will eventually come back here at some point and we will see it through Audit of Scotland's reporting, but how soon is it captured that there may be an issue with delivery? All the projects are monitored formally on a monthly basis. By Transport Scotland's site representatives, Transport Scotland will attend those site meetings together with the contractor and his consultant and they will address the programme where you said you were going to be, where you actually are, so you can flag up early warnings, obviously looking at the risk register and seeing how that is moving forward. All the key different risks on a particular project monitoring that, the spend profile as well, so if there is an issue with a contractor maybe not realising some of the milestones that are going required for certain payments slipping from one year to the next, all those sorts of issues will always be flagged up by the site team and recorded formally a monthly progress meeting and then escalated up accordingly to a project board if it is a big project and then on to IIB and all the various other reporting. I'm going to turn now to Craig Huy who's got some questions. Thank you. Good morning. I'm just wondering if you'd like to perhaps expand out on what the present governance arrangements are for roads and rail projects, including possibly just a little bit of an illustration on the present interactions between the Scottish Government and Transport Scotland. Transport Scotland receives the budget for the capital programme across all modes. All major capital investments are authorised through our investment decision making process at which all the directors of Transport Scotland come together to advise the chief executive and his accountable officer role on the best approach to any particular investments. There's then for each of the modes a set of separate project delivery and governance arrangements, for example we have a rail portfolio board and sorry but I'd have to defer to you Lawrence for your equivalent. The portfolio is then reviewed and then we would have project specific review meetings with Transport Scotland project sponsors in our case dealing with our delivery partners in Little Rail and ScotRail to review progress on individual projects and items needing escalation or items that have a portfolio impact. Interestingly Mr Colffy your point about standards you know what can we do to improve standards to drive through efficiency those things would be considered at a portfolio level as well. So I'm not sure that that's very much in outline. I just want to add to that that in terms of the governance and the budget that's all when as Bell has said that those issues are discussed within the portfolio or within the projects then they go up to portfolio. When if there is an underspend or overspend for that matter emerging then that's reported through the monthly budget monitoring and to Scottish Government so for Transport Scotland that would be through their portfolio the net zero portfolio we're returning into each month budget monitoring report and then centrally we would look at the overall capital position and then that is where decisions would be taken if there is an over or underspend what to do and if there are projects among other portfolios if not within transport but you know we look at health or any other portfolios where that underspend could be utilised that can be sometimes be very difficult depending on when the underspend emerges if there is an underspend because it's hard just to turn the taps on the capital project but that's the sort of the next step and the other part on governance is that the infrastructure investment board does receive this six-monthly reporting as well so we would then look at that and send to infrastructure investment board key themes that have emerged so that they may want to explore further and look across portfolios. Just as you've got any example particularly in the roads area where any re-profiling or cost overruns or any other issues are impeding progress. Can I give an example from the Queensbury crossing just going back a few years but such a huge project and the ability to be able to manage the spend profile between the different years of construction depending on the contractor's progress was something that was quite an art to do and obviously trying to flag and monitor the programme and the ability to hit the milestones and meet the in-year budgets was a constant issue all the way through the project and early warnings of not meeting that budget or not actually going to spend all the budget or needing further budget were flagged up appropriately at the monthly progress meetings which I mentioned before that project also had a project board which was chaired by the chief executive of transport Scotland and various other representatives of Scottish government finance and legal and a whole wide range of of interested parties attended the six-weekly project board so all of those issues surrounding budgeting profiling and whether we were going to actually meet the huge amount of money that was spent on the project each year or not and managing that process was was very well scrutinised and managed seeing in terms of major infrastructure projects there's the finances there's also the planning system for example then there's a broader policy dimension obviously in the last 12 months we've seen the green party come into government and an attitude within the party I'm looking here in relation to a headline from a few years ago green's launch campaign to stop sheriff for spaghetti junction and it's a particular quote that stands out says since the 1960s we've known that if you build more roads they'll fill up with cars that's why the proposal to turn sheriff all around about into spaghetti junction isn't an upgrade is another change in policy focus that you think is going to impede some of these major major infrastructure projects particularly in relation to roads so yeah I mean that times have changed and we have the climate crisis we have difficulties with the economy and a lot of number of number of factors the Covid impact on transport and how people are traveling is is another key issue so with sheriff hall though the key thing about that is although it will help to smooth the flow of general traffic which ultimately will become electric traffic if I can use that phrase it also frees up the connectivity across the junction which is stifled at the moment so in that scheme there's a huge amount of active travel infrastructure proposed and also priority measures for bus traffic as well so it's not just about moving the cars out of the way and trying to to help solve the problem in terms of car movements it's not really what the aim is it's to help the active travel and that's that's one of the key factors on a lot of the road scheme so you might not think building a new road is is a good use of money in in the current climate but it actually provides the ability to to go back and the relieved part of a town or whatever it might be such as may bowl bypass which was opened earlier this year it means it's a whole new lease of life so the town centre can be can benefit from enhanced air quality it doesn't have the congestion of traffic going through it it's much safer place to to live and work and enjoy but could sheriff hall what I mean is there a risk that we could get an anti roads agenda coming in mean job you guys could all be over job so I mean the plan is that we did have a number of a large number of objections for sheriff hall I think over 2,700 objections and the best place to resolve the issues around the design of the of the of the project and what it will provide in terms of the benefits it will go to a public inquiry and and that will take its course through the statutory process and you know we'll we'll determine well the reporter ultimately will determine and Scottish ministers will determine whether we should should go ahead with the project obviously once it's been through public inquiry and and it gets the available funding which is obviously part of the the Edinburgh city deal but just looking to the planning process is there a risk that the campaign groups could hijack this the planning process in order to slow down what you're seeing as an essential infrastructure or a development well everyone needs to have their say so you know if people don't like a project for whatever reason it could be climate it could be because it's near to their property or whatever it is then they need to have their say so it's it's very hard to to say whether to use the term hijack is appropriate or not but but people have to have their say thank you thank you so and I should have said mr shackman it might mistake I introduced you as being from the Scottish government you are in fact employed by transport Scotland thank you calling Beatty I'm going to follow on from my colleague Craig Hoy and be absolutely parochial about this because I'm the constictancy MSP for in which sheriff hall falls so I get a huge amount of correspondence on this and you know I've put on record my support for the for the sheriff hall development but also there's a massive massive support among residents in mid in specifically in the middle othian area and in the shaw fair development and there's a great deal of anxiety that this is being delayed and there's always a fear of course the longer something's delayed the more at risk it becomes how secure is the funding for this is it is it is it to set in stone so I think sheriff hall has the advantage of being one of the city deal projects so there's a committed funding to to that that mechanism to take projects forward so it's slightly different to some of the other projects on the book where funding maybe isn't quite so guaranteed um so the programme um I think we're we're we're anticipating that the public inquiry would be maybe later this year and I think a reporter has just been appointed to the public inquiry and we would be hopeful of a ministerial decision um autumn 2023 and then we'd have to make the road orders and and acquire the land and take on the procurement of the project to get a contractor on board with an anticipated scheme opening of probably 2028 which I think is still within the timeframe of the um city deal but it depends on how the public inquiry goes and how long that takes because um on some sections of the A9 we've had inquiries and we've been waiting a very long time for the reporter to actually publish their report I mean in excess of a year in some stages some stage some stages of the A9 just going back to that and we haven't had to have a public inquiry at all because there's been unanimous views that the road that the dueling should go ahead on that particular section now obviously there's a there's a great deal of objections been lodged she said over 2700 there's obviously been a a large campaign orchestrated by one of the political parties plus I understand the cycling organisations have also geared up and I understand that the vast majority of these objections are actually outside my constituency and the immediate area of sheriff hall how I mean 2700 how most of these objections been satisfied well we've written back to all the objectors um outlining what the scheme will um do to mitigate their concerns as far as possible um obviously they've still got their objections and we need to resolve that and but there are a number of objections as I understand which are very similar in nature um which do concern cycling and the active travel facilities and there was a review undertaken of the junction um just a few years ago to to to see whether the current proposals needed to be changed to provide better facilities for active travel and for public transport and it was determined that the the current design was actually the most appropriate design and I'd just like to add that there are as I say extensive footway and cycleway facilities which will mean that pedestrians and cyclists don't have to cross the the roundabout physically they've got I think there's five underpasses being constructed or proposed to be constructed as part of the project to to be able for people to to go from north to south without interfering with with or traffic interfering with their path and as I say in in terms of public transport that the the emphasis being on active travel um and public transport there will be uh uh the junction will be configured to encourage buses through and and uh make sure that they they can do so uh as seamlessly as possible so that there's a lot of good things say the word good things in the design to to make sure that active travel is encouraged as much as possible and that people who are using public transport and obviously we want to encourage people to use public transport more can also access north south in particular through the junction as smoothly and effectively as possible. It appears to me that design does take the boxes from most people which makes it even more less understandable why organisations have been getting whipped up into this now this just we're talking about net zero and environmental sustainability um I don't think this actually has any attachment to covering land is it intended to develop that later in terms of sustainability I mean in terms of what the project will do um in terms of climate change we will obviously be um avoiding a huge amount of congestion in the the short term um by removing I think 48 percent of the the traffic um which currently flows around the roundabout will actually be over the top of the roundabout so there'll be a lot less congestion um and um there'll be um measures in terms of the the actual construction to try and minimise the amount of carbon that is generated through the construction so there's a lot of new techniques coming out in the construction industry um to make sure that all the plant is or I say all the plant but most of the plant is um carbon free so they don't use diesel anymore it's battery powered plant um and using a lot of technology to to control the plant as well to make it more efficient um to avoid double handling of materials in terms of the design making sure that we use sustainable drainage systems that have got the correct capacity for future um water flow through the the infrastructure there so there's a whole host of things that are being done to try and minimise the carbon impact of the project both during construction and after the construction's complete just one final we are really pushed for time so if you can make your final point very very short that would be very welcome it's a fairly obvious one which probably applies to all contracts I mean obviously there's been an estimate of 90 to 120 million on this project inflation is galloping we're talking about not being finished perhaps until 2028 which to me is a long time away from the 2008 when it was first identified as being desirable inflation is probably going to be with us for some time how are you going to manage that I mean that I think as I said earlier the volatility in the market is impacting on all of all the projects and all of the projections that are that are being proposed and we will manage we have to use the budget that's available and you know we can't if projects cannot be funded within that available budget then decisions will have to be taken which ones will will will be progressed and but that will be that will be worked through annual budget processes we'll look at the the funding available at the time decisions on borrowing so there's a there's quite a lot to go into the mix and also then as Roslont said that the profile of the project may change depending on those other factors as it develops so it's not even certain what that profile funding profile might look like at this point in time but it will all those projects will be managed looking at the range of factors that exist but sorry there's not more more certainty at this point in time thank you Sharon Dally I tried to keep my question quick then it was just one specific to a road that goes through my area so the e77 you mentioned earlier on that we've just did the mable bypass put in which is great it's got a couple of passing points but it's not dual carriageway so the e77 basically is a main route from Scotland to northern Ireland it's single carriageway for the majority of the way from air down to Cairnryan with the exceptions a few passing places now in the mable bypass so the question was when you're deciding major capital projects what consideration is given to spreading the allocation of funding around the country south west scotland for example and with environmental targets having an impact on road investment and you've mentioned as well about reviewing work that's getting carried out of just wondering how often these reviews are are carried out because at the carlock wall at the moment it's not just single carriageway it's it's went to one lane and it's on traffic lights and they've been there now for nearly three years so the main main means of of reviewing the needs of the transport network are through the strategic transport projects review which i'm sure you've heard about which is coming up with a development plan which i believe is going to be published later this year and that's looked at all the transport needs across the network we don't currently have a scheme on the a77 at the moment but that's been mentioned as part of the stpr and needs to be considered with all the other competing priorities and one of those priorities is looking at road safety as well which you rightly state is a key aspect and also looking at the environmental impacts and how it fits with with the climate agenda and a range of other factors so the a77 has been mentioned as part of the stpr too so we're just waiting to see what that actually means moving forward and so just in that how you often you review the projects because obviously the carlock wall's been three years now and it's a single lane on a transport route okay i'm not actually that familiar with that scheme it's one of my let's dealt with with another department in transport scotland sort but i can certainly come back to you with some further information on that yeah that would be helpful and just very finally because i'm conscious of the fact bill reeve has not had many opportunities to come in because all these people are asking about one by passes and roundabouts so let me finish up with the east Kilbride rail enhancement because as described in the briefing that's been given to us the project has been enhanced in size but all of my mailbag tells me it's gone from being a project which includes dualling of track to retaining it as a single track so the people of east Kilbride are not very happy about the project as stands they see it as being a diminution of the original project and in fact i saw a letter as recently as yesterday sent by the leader of south Lanarkshire council to the transport minister complaining about that very fact could you explain why it's seen as an enhancement an additional scope is involved when the empirical evidence i get on the ground is that that's the opposite i'm very happy to address that so first thing to say is that the principal expansion of the of the project well let's go right back we looked several years ago at the need to improve the capacity and the performance of the east Kilbride line and there were a number of options for doing that and we looked at options that included full doubling of the railway as a diesel railway we looked at options that included electrification of the railway partial doubling a whole range of options as you would imagine just just to be clear at no stage was there a decision taken that we would proceed with a double track railway throughout i think that has been misreported in some places but at no stage have we ever with our colleagues in network rail and indeed with our colleagues in scot rail firmly concluded and decided that that's the project that we would proceed with what we have done as we've gone through properly the analysis of the complex system is worked out the best value for money investment on that route and we've also I think this is important taken the opportunity to extend the project to cover the line as far as barhead as well in terms of electrification and and three key factors I think took us to the to the conclusion around value for money best value for money option on these routes the first was inescapably the cost of different options and one of the things we learned in working through with the network project teams on the skill ride route was that to double the full length of that railway would be extremely expensive the physical constraints the nature of the geology meant that that turned out to be more expensive than had been hoped when we first started to look at this I'm just a sort of a physical reality on the ground the second thing that we did and bear in mind when we started this wasn't necessarily committed an electrification project was we did mindful of the decarbonisation agenda but also of the superior performance of electric trains and the lower operating costs of electric trains we did conclude that this was a railway that that would benefit from the superior performance and lower costs and improved emissions of electrification one advantage of electric trains is more bluntly they go faster and so a train occupies a section of track for less time than a diesel train does and one of the problems with the with the skill ride line was given that there are some severe gradients on it at some times of the year with heavy loads the diesels were struggling to keep time so so when we looked at the performance of the electric trains the cost of the the diesel trains that pointed us in one direction the final issue I think that that that we had to take account of was just the change in travel patterns that has become manifestly clear as a result of the the pandemic and the use of digital meetings rather than physical meetings we are seeing a very welcome return of business to the railway as we're emerging from the pandemic but the nature and the time of the travel patterns is quite different so we are not seeing the Monday to Friday commuter peak that we used to see we are seeing the busiest time now for example is on a Saturday and rather than on Monday to Friday Friday afternoons and evenings are also very busy so so a scheme and this is the true by the way across the entire rail investment portfolio schemes that might have been focused on dealing with the Monday to Friday peak hour traffic for one or two hours now don't look like the the necessary priority because we're not seeing that level of peak traffic but schemes that help us address the the environmentally sustainable movement of people in a more cost effective manner through electrification therefore come much higher up the the agenda so after that analysis the conclusion was taken to electrify the railway all the way through to Barhead and to East Kilbride to to invest significantly in the upgrade of hair mires as a public transport interchange with bus and active travel stronger bus and active travel links as a park and ride site and the last bit of scope to be determined is the extent of the loop that we will be putting in at at hair mires and I expect to have a sensible conclusion on that shortly which will get us the same outcomes for a usefully lower cost Bill Rood thank you very much indeed I should have declared my interests as the RMT parliamentary convener and and in that capacity might dispute some of your views about the settled patterns as they're going to be in the future as as compared to coming out of the pandemic willy coff is is trying his best to get in and I am going to give him the last word so willy thank you just to get in my parochial question bill when can we expect the electrification to extend from Barhead to Kilmarnock in my constituency well thank you mr coff in message that's very nice to see you at the opening of the the brody engineering plant in Kilmarnock so it's good to see the railway industry of Kilmarnock flourishing at the moment so it was it's clearly more than a gleam in our eye that in extending the electrification to Barhead that's the first step of what we call the Glasgow and southwestern mainline through to to Carlisle through Kilmarnock and Dumfries to Carlisle really important strategic route not least in terms of freight capacity as we look to the growing use of both passenger and freight trains across the border we know in future we will need to enhance the capacity of that route and electrification helps us to do that so the hard answer is I don't have a date there are no firm plans however if you read our decarbonisation action plan for railways Scottish Government's decarbonisation action plan for railways you will see that we envisage the electrification of that route as a sensible part of that decarbonisation programme the rate at which we can do that will depend upon the availability of funding but the fact that it's a good idea I would not take frightfully much persuading off okay thank you excellent well on that positive note for public transport I will draw this session to a close Bill Reeve Helen Carter Lauren Shackman thank you very much indeed for your time this morning I think there are one or two points that we want to follow up so we will we will do that but thank you very much indeed and I now draw this public session of the committee's deliberations to a close and we will move into private session thank you very much