Scottish Government Plans Four Ship Contract Lifeline for Ferguson Marine
The Scottish government is moving forward with a plan to award the financially troubled Scottish shipbuilder Ferguson Marine four new contracts as a lifeline to keep the yard afloat. The yard fell into administration and was taken over by the government in 2019 in an effort to keep shipbuilding in Glasgow. Awarding the yard new contracts is seen as a step toward transitioning the yard back to private ownership.
“This is a watershed moment,” said Deputy First Minister Kate Forbes during a presentation on the plan to parliament on March 3. “Fulfillment of the proposed program, subject to due diligence processes to assess viability, would secure a pipeline of work and allow the shipyard to move ahead with its modernization plans while pitching for additional orders on the open market.”
The plan calls for direct awards to the yard without competitive bidding for four construction contracts. It would build ships to replace the research vessel Scotia and the fisheries protection vessel Minna, which were built in Glasgow in 1998 and 2003. In addition, as part of the Small Vessel Replacement Program launched by the government, Fugerson would get contracts for two additional ferries.
In announcing the plan, the government said the contracts would be subject to due diligence to assess viability. The four awards would take up most of the yard’s capacity for the next five years and enable the new management team time to pursue additional commercial work.
The government has already made commitments to the yard, and this program would unlock the remainder of a £14.2 million (nearly $19 million) commitment by the Scottish Government to upgrade the yard’s infrastructure over the next two years. Currently, the government is making interim investments focused on essential repairs, health and safety improvements, and equipment upgrades, which it said were necessary to stabilize the operations and to finally complete the long-delayed ferry, Glen Rosa.
Ferguson won a contract from the government in 2015 to build two LNG-fueled ferries, which were considered to be state-of-the-art. Delivery was expected by 2018 at a total cost of £97 million. The project, however, went from one problem to the next as costs mounted and problems persisted with the vessels. The first ferry, Glen Sannox, has been in service for about one year, with reports of additional problems. Delivery of the second, Glen Rosa, is now anticipated for the fourth quarter of 2026. Reports are that the project will come in at five times its original budget.
Speaking to Parliament in February, the leaders said they recognized the skepticism based on the long delays and cost pressures at the yard. They, however, also strongly believe in keeping the shipbuilding industry going in Glasgow. The yard dates back to 1903 and has built ferries, naval auxiliaries, and specialist ships.
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A new management team is leading the yard, which the government asserts has stronger commercial disciplines. They report that it has improved accountability and assurance reporting. They also said oversight has been strengthened.
The management has to present a new business plan to the government, which would be reviewed. If the plan is accepted, the government would seek to move the contract awards forward under the Subsidy Control Act.
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