|How not to run a tender
Herald Editorial Comment November 14 2006
Dashed on the rocks. That is the likely fate of a busy west coast ferry route after more than 100 years in operation. Caledonian MacBrayne (CalMac), Scotland's publicly-owned ferry operator, yesterday confirmed it had decided not to submit a bid to operate the Gourock to Dunoon route (the deadline expired yesterday afternoon). The likely result will be an effective monopoly on the route in the hands of Western Ferries, which runs a separate car ferry service between Hunter's Quay near Dunoon and McInroy's Point, near Gourock. Western Ferries, the only other bidder, also confirmed it had withdrawn yesterday from the tender.
No-one wanted a monopoly (apart, perhaps, from Western Ferries). The executive, the local councils, passengers and CalMac all lived with competition. Yet an outcome has probably arrived which everyone was ostensibly trying to avoid: a monopoly. That this has happened is an object lesson in how not to organise the tendering process. CalMac's other routes had to go out to open tender to comply with EU competition law. The executive decided to handle the Gourock to Dunoon route separately, perhaps hoping that, because it is one of the busiest and most profitable on the west coast, it would attract serious bidders and set the tone for the tenders to follow.
If that was the hope, it has been obliterated. At present, CalMac receives a subsidy amounting to £2.5m a year to run the service. But no subsidy was offered in the tender and CalMac concluded, not surprisingly, that it could not bid without aid to cover likely losses. Western Ferries decided that, if the current service were replicated, fares would have to treble in price just to break even; clearly unpalatable for commuters, businesses and communities that rely on the ferry.
It appeared that CalMac was to be liberated from operating restrictions put in place to compensate Western Ferries for the subsidy hitherto paid to CalMac. But CalMac has decided it could not exploit its new freedom. The aged car ferries it deployes are side-loaders that cannot use the new ramp at Dunoon designed for bow and stern loaders. So Calmac would operate as before at the decaying Dunoon pier, whose long-term future is in doubt. In addition, CalMac would need cash for suitable replacement vessels to use the new ramp, but the executive appears to have ruled out help.
Is it any surprise the ferry operator failed to bid? It is a huge embarrassment for ministers to be told by a business they own that it cannot possibly operate a service on the terms they set. So flawed were these terms that no-one wanted the route. The loss of the service would have implications for the regeneration of Gourock, Dunoon and the Cowal peninsula. This debacle has implications for the tendering process for the rest of CalMac's 26 Clyde and Hebridean routes. Can ministers get it so wrong, so soon, again?