Overview of CHFS operations

An overview of Scotland’s Ferry Network

Introduction

This section provides an overview of CHFS Ferry Network and the Tripartite bodies primarily providing the service namely TS, CFL and CMAL. We have set out:

  • An overview of Scotland’s current ferry network
  • An overview of the current CHFS network and the background to the current Tripartite Structure

Scotland’s Ferry Network

The organisation of ferry services in Scotland is complex, involving many different organisations. TS (on behalf of Scottish Ministers) currently subsidises routes to the Clyde and Hebrides and the Northern Isles through separate contracts with two ferry operators, CFL and Serco NorthLink.

The infrastructure supporting the routes is owned by a number of different public and private sector bodies creating a complicated operational and funding structure. We have included more detail on the infrastructure arrangements within the table overleaf.

It is also important to note there are a number of other ferry services connecting Scotland’s mainland to its island communities, in which TS does not have control or responsibility. These services are delivered by either local authorities, community trusts or private sector operators. The other models in place include the following:

  • Four councils (Argyll and Bute, Highland, Orkney Islands and Shetland Islands) subsidise 22 routes. Councils operate some of these routes, while others are contracted out to other operators.
  • Strathclyde Partnership for Transport (SPT) subsidises one route.
  • The private sector operates eight routes without public funding and one route with funding from TS and Argyll and Bute Council.
  • Community groups run two routes, one of which receives public sector subsidy from Argyll and Bute, and Highland councils.

We have not sought to include these routes within our analysis of the ferry network, however we have included a number of different examples of these successful routes when undertaking our options appraisal within the Future Options report.

We have included in the diagram below an overview of the subsidised ferry services in Scotland.

Regulatory and Legal Structures

Regulation history

The timeline below includes an overview of the history of subsidised ferry services in Scotland. The SG has provided financial support to the sector since the 1960’s. However, the structurers currently in place differ to those of the past due to the requirement to comply with EU regulation.

These changes were intended to create a fairer competition for future bidders for the CHFS contract because it allowed bidders equal access to the ferry assets by leasing them from CMAL.

Timeline

Previous operating structures

  • 1960 - SG has provided financial support for ferry services since 1960’s
  • 1973 - Caledonian Steam Packet Company and David MacBrayne merge to form Caledonian MacBrayne Limited – a public co wholly owned by the SG

Compliance with Maritime Cabotage Regulation

  • 1997 - to comply with Maritime Cabotage Regulation, Scottish Ministers have been required to tender for ferry services to the Northern Isles
  • 2006 - to comply with state aid rules, the Clyde and Hebridean service was also tendered
  • 2007 - the requirement to tender for the CHFS led Scottish Ministers to change the structure of its ferry operations. The responsibilities of Caledonian MacBrayne Ltd were split between two new organisations, both of which are wholly owned by Scottish Ministers:
  1. CMAL was established to own and manage the assets (that is, vessels and harbours) on the network. CMAL also own the Caledonian MacBrayne Brand.
  2. DML (a holding company) was established and a subsidiary set up (CFL) to bid for and operate ferry contracts.

First CHFS contract tendered and awarded to CFL.

  • 2016 - CHFS 2 – CFL successful in securing CHFS 2 contract until 2024

CHFS Ferry Network: Current Structure

The diagram below includes an overview of the current CHFS Ferry Network.

  • Mission of TS on behalf of Ministers: “We seek 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 Purpose of increasing sustainable economic growth with opportunities for all of Scotland to flourish.”
  • CMAL Mission: “The overall aim of CMAL is to provide safe, reliable, efficient and cost effective vessels, harbours and associated port infrastructure for operators, communities and users in and around Scotland and, through consultation and involvement of all stakeholders and robust strategic planning, advise Scottish Ministers on future development and improvements.”
  • DML Mission: “To continue to grow as a recognised leading international transport infrastructure and logistics services group.”
  • CFL Mission: “To navigate the waters ensuring life thrives wherever we are.”
Overview of the current CHFS Ferry Network
Overview of the current CHFS Ferry Network. As described in text below.

The Scottish Ministers wholly own both CMAL and DML.

CMAL is the asset owner of all of the vessels and 25 of the harbours on the CHFS Network. It receives its funding in the following three ways:

  • Income from the leasing of vehicles to CFL for use on the CHFS network. Leases are on a bareboat charter.
  • Harbour dues payable by CFL / other users for the use of its harbours.
  • Vessel loans and harbour grants payable via TS.

CFL is the current operator of the CHFS 2 Contract. It receives income from TS in the form of subsidy and from CMAL for the provision of maintenance of its harbours. CFL is responsible for paying CMAL for leasing its vessels and for harbour dues. CFL is responsible for all maintenance of the leased vessels.

Roles and Responsibilities

We have included below an overview of the roles and responsibilities of the Tripartite.

Transport Scotland on behalf of Scottish Ministers

  • Sole shareholder in DML - Provide sponsorship function including appointment of DML Board and assurance on governance.
  • Sole shareholder in CMAL - Provide sponsorship function including appointment of CMAL Board and assurance on governance.
  • Procure lifeline ferry services through CHFS and NIFS contracts, including contract award and management.
  • Provide grant and loan funding to CMAL capital investment projects.
  • Sets strategic policy for ferry infrastructure and operation for which Ministers are responsible, including strategic investment priorities, timetabling and fares.
  • TS’s Ferries Unit has 29 members of staff.

Caledonian Maritime Assets Limited

  • Wholly owned by Scottish Ministers. Reports to the Minister for Transport.
  • Board of directors appoint management team at CMAL.
  • Responsible for the provision of vessels, harbours and associated port infrastructure (owns 31 vessels and owns or leases 26 harbours).
  • Charges harbour users, including ferry operators, a ‘harbour due’ for using its harbours.
  • Contracts CFL to operate its harbours.
  • Responsible for harbour works.
  • Procures new vessels. This includes concept design, running the tendering process and overseeing the build.
  • Leases vessels to CFL on a ‘bareboat charter’ agreement.
  • Inspects vessels twice a year, and is responsible for statutory works and owner upgrades.
  • CMAL has approximately 40 members of staff.

David MacBrayne Limited

  • Wholly owned by Scottish Ministers.
  • Parent company of CFL, the incumbent operator of the CHFS network under the CHFS2 contract.
  • CEO is an executive director on the DML Board and a Ministerial appointee.
  • Operator of Marchwood Military Port in Hampshire via Joint Venture with GBA (Holdings) Ltd

Calmac Ferries Limited

  • Wholly owned subsidiary of DML, responsible for the delivery of the CHFS 2 Contract, which has a duration of 8 years, to the end of 2024.
  • Leases vessels from CMAL and decides where they should be deployed.
  • Operates CMAL’s harbours, which includes undertaking routine maintenance.
  • Responsible, through the CHFS contract, for arranging consultation meetings with c. 25 local Ferry Committees.
  • CFL has approximately 1,800 members of staff.

Our review will focus on the governance arrangements between the Tripartite and how they work together to deliver lifeline ferry services. Our recommendations will set out how this could potentially be improved.

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