Managers at a beleaguered shipyard were paid £87,000 in bonuses despite a lack of certainty over the cost and delivery date of two over-budget and late ferries.
Ferguson Marine Port Glasgow (FMPG) has been mired in controversy since it was nationalised in 2019 – when problems with the Glen Sannox and as-yet-unnamed hull 802 were discovered.
Originally due to cost £97 million, the two ferries are now estimated to cost at least £293 million and could rise by a further £9 million, according to the Auditor General.
It’s deeply concerning costs to complete two ferries escalate. There’s no certainty Ferguson Marine shipyard has a viable future. And it’s unacceptable bonuses were awarded to senior managers at the shipyard without proper governance.
My new report: https://t.co/lziWEEcY6v pic.twitter.com/AZDgxjHHy1
— Stephen Boyle (@AuditorGenScot) March 14, 2023
In a scathing report released on Tuesday, Stephen Boyle said six managers at the yard had been handed a total of £87,000 in bonuses for the year 2021-22, without government knowledge.
The payments were approved by the remuneration committee at the yard and based on a paper from former turnaround director Tim Hair, who recommended a 7.5% bonus for the directors, which he later said in a letter was “was payable as a result of the structural completion of the hull on vessel 801”, according to the report.
The report added: “There was a lack of transparency and good governance around the assessment and approval of these payments. FMPG was unable to evidence the evaluation over the discretionary element of this payment.
“The Scottish Government was not made aware of these bonus payments, and they were not subject to approval by the sponsor department.
“I would consider it as a matter of good practice and governance for FMPG to have sought advice and approval from the Scottish Government in this case.”
Mr Hair, the report found, was also paid a total of £1.8 million during his time at the yard between August 2019 and February 2022.
The final cost of the ferries, the report added, remains “uncertain”, with another £9.5 million potentially needed for the completion of the vessels, due to be finished in May of this year and March of next.
Uncertainties also remain in the future viability of the yard, with its only income coming from the government to complete the two ferries and the secondment of 18 of its employees to the Govan-based shipyard of defence giant BAE.
“It is deeply concerning that the costs to complete these ferries have continued to escalate, whilst the island communities these boats are meant to serve remain significantly impacted,” the Auditor General said.
“Despite substantial sums of public money being invested, there is still no certainty over how much the ferries will cost, when they will be ready or whether the shipyard has a viable future.
“It is unacceptable that performance bonuses were awarded to senior managers at the shipyard, without proper governance for such payments. The Scottish Government needs to make sure its rules over pay are followed by this public body.”
A spokesman for the Scottish Government said: “The Scottish Government is committed to helping Ferguson Marine Port Glasgow (FMPG) secure a long-term sustainable future for the yard.
“We expect the company to provide a strategic business plan to ministers in due course for comment and agreement.
“It is a concern that FMPG did not inform or seek approval from the Scottish Government before bonus payments were paid to senior managers. This should be done as a matter of good governance.
“However, the new senior management team is committed to consulting with the Scottish Government as required on this issue in the future. Significant progress has been made by the Chief Executive and Chair of the Board on the governance structure at the shipyard over the last 12 months.
“We deeply regret that work on the two ferries is taking longer than it should. The Scottish Government remains focused on supporting our island communities that rely on this type of vessel.”
Scottish Tory transport spokesman Graeme Simpson said islanders would be wondering “when this SNP ferry fiasco will ever end”, as well as describing the bonuses as “deeply concerning” and reiterating calls for a public inquiry into the scandal.
Scottish Labour transport spokesman Neil Bibby added: “While the public purse picks up the tab for spiralling costs, senior management are being handed fat cat bonuses with no scrutiny.”
David Tydeman, the FMPG CEO, said the yard has “taken on board the remarks” from the report, adding: “The Ferguson Marine board has already introduced greater transparency and governance in terms of future retention incentives.
“Scottish Ministers appointed a new chair, Andrew Miller, in January 2023 and we now have in place a framework that will improve the governance of future performance-related payments.”
On the price of the ferries, the CEO – who believes the yard has a “strong future” – said: “We appreciate the points Mr Boyle is making regarding the completion of the ferries/funding gap, given that the shipyard is funded by public money.
“However, it is important to understand that the gap he identifies is largely to cover increased contingency expenditure – recommended by independent experts appointed by the Scottish Government, as well as funding for additional warranty spend that may arise in the 12 months after we hand over the vessels.
“I would stress that the construction costs to build both vessels are not a major contributing factor to this funding gap. FMPG is largely holding to the budget submitted in September 2022 to complete construction.”
