Executive summary
Introduction
Transport Scotland (TS) seeks to deliver a safe, efficient, cost-effective and sustainable transport system for the benefit of the people of Scotland, playing a key role in helping to achieve the Scottish Government’s (SG) Purpose of increasing sustainable economic growth with opportunities for all of Scotland to flourish.
Ferry services in Scotland fulfil a critical function within the wider transport system, providing lifeline services to island communities. Ferry services on the Clyde and Hebrides Ferry Service (CHFS) are subsidised by Scottish Ministers and delivered by three parties: TS, Caledonian Maritime Assets Limited (CMAL) and CalMac Ferries Limited (CFL) as a wholly owned subsidiary of David MacBrayne Limited (DML) (together “the Tripartite”).
Purpose
The delivery and cost of ferry services and the relationships between the Tripartite are complex, and Scottish Ministers are mindful of the perception which exists of a lack of accountability among the parties.
The objective of this project is to perform an independent review of the governance arrangements and legal structures between the Tripartite (including DML group structure of which CFL forms a part) to ensure that they remain fit for purpose.
This project will deliver a strategic framework of options for the CHFS network, for consideration by Scottish Ministers, to help to identify the preferred corporate and governance structures for the delivery of ferry services on Scottish Ministers’ behalf under a range of potential future scenarios.
Any structure proposed for delivering ferry services on behalf of Scottish Ministers should enhance passenger experience and be accountable, transparent and capable of achieving best value.
Approach
We have prepared the following reports in relation to this engagement:
Part 1: CHFS Network: Governance, Internal Controls and Value for Money (VfM)
Part 2: Project Neptune: Future Options
This report is Part 1 of our overall work plan.
This report addresses the following scope of our work:
- Perform an effectiveness assessment of the key governance structures and mechanisms in operation across the Tripartite.
- Perform an evaluation of the design effectiveness of key controls to ensure efficiency and Value for Money (VfM).
- Review the processes, controls and governance arrangements designed to deliver VfM against relevant components of the Audit Scotland Best Value Framework and other recognised VfM principles as appropriate.
Overall Summary
The governance arrangements currently in place should be updated to enhance the level of accountability, transparency and shared working across the Tripartite. While we noted strong working relationships at the operational level, there is no overarching Tripartite Framework Agreement to provide clarity and accountability for the Tripartite members on purpose and shared strategic objectives aligned to Ministerial objectives. At times, this has led to delays in decision making / progressing projects, which ultimately creates a risk of ferry services not being delivered and developed in line with the needs of the island communities served by the CHFS contract, and in the required timescales.
A lack of alignment was also evident in our review of key operational controls, which identified that the roles and detailed responsibilities of the various organisations in relation to projects (for example, new ferries; harbour upgrades) are not well defined, documented and formally agreed. The controls review also noted gaps in the early stages of the project lifecycle, such as the lack of a formal project plan in one case, and absence of review of changes made to the pre-approval budget. This could lead to overspend and inappropriate decision making.
The lack of shared governance structures and objectives across the Tripartite, and the absence of expected key controls, means that it is difficult to assess whether the Tripartite as a whole is delivering VfM. We do note that foundational elements of many recognised best value indicators are already in place, either wholly or in part, at an individual entity level – for example, controls around financial stewardship, and engagement with local stakeholders. However, the governance arrangements, the approach to collaborative working, and the controls in place to monitor use of resources all require further development to align with sector leading practice and support the Tripartite to deliver a VfM ferry service that meets the needs of the communities it serves.
Conclusion
There are a number of steps the Tripartite can take to improve their governance arrangements, the control environment for key projects, and their capacity to deliver VfM:
- Develop a long-term strategy for the delivery of ferry services on the west coast, and a complementary suite of KPIs that will incentivise delivery.
- Establish and align desired culture and behaviours across the Tripartite, to support delivery of the strategy. This would involve a collective exercise to decide what to keep, what to change, and ways of working in the future.
- Implement an overarching Framework Agreement, to provide clarity and accountability for the Tripartite members on purpose and shared strategic objectives aligned to Ministerial objectives.
- Formalise the relationships and expectations between Tripartite members. This includes formalising the Board level governance with each Tripartite member and the establishment of a Tripartite Executive Forum to review and agree collective strategic priorities (aligned to Ministerial objectives), plans, risks and provide an escalation / arbitration point for key decisions.
- Implement overall and detailed project planning and budgeting for all stages of a project, including pre-approval.
- Formalise and agree the roles and responsibilities of each organisation involved in the project, including the interaction of these groups and their interdependent responsibilities.
- Define and share a vision and definition of best value for the ferries service, both in terms of efficiency of operations and economic value to communities, considering both sustainability and the views and needs of the Scottish public.
Prompt, successful implementation of these recommendations will support robust governance and should be considered alongside any potential structural reforms.