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SECTION 1
GENERAL

1.1 Introduction

1.1.1 This document invites public transport providers to tender for a subsidy that is available for the provision of lifeline passenger and vehicle ferry services on the Clyde and to the Hebrides and associated harbour services.

1.1.2 This document should be read in conjunction with the draft Public Service Contract.

1.1.3 This document has eight Sections:

• Section 1 - General _ This Section sets out the background to this ITT and describes the policy objectives of the Executive.
• Section 2 - Notices and Instructions _ This Section sets out the purpose and scope of the tender and gives the basis for the subsidy that is available. It sets out the expected timetable for tendering and the process that the Scottish Executive Enterprise Transport and Lifelong Learning Department will follow in evaluating bids. It also outlines some key principles which will be included in the PSC that will be entered into between the Executive and the Successful Tenderer.
• Section 3 - Service Specification _ This Section sets out the Executive's detailed requirements. The Executive's overarching concern is to protect existing fares and levels of service. Section 3 therefore is based on an approach which sets out the minimum levels of service and standards together with the maximum fares that will be required throughout the Contract Period while at the same time providing an opportunity for all Tenderers to offer a service which meets the needs of both the Executive and the Clyde & Hebrides ferry users.
• Section 4 - Content of Technical Submission _ This Section sets out the technical issues which the Executive will require to be addressed by Tenderers in response to this ITT.
• Section 5 - Content of Costed Bid - this Section sets out the financial issues which the Executive will require to be addressed by Tenderers in response to this ITT.
• Section 6 - Form of Tender to the Scottish Executive - This Section requires Tenderers to give a signed undertaking to provide the services in the Service Specification in accordance with this ITT and the PSC.
• Section 7 - Statement of Understanding of Key Requirements of this Specification - This Section is a statement of understanding of the key requirements of the ITT.
• Section 8 - Evaluation Criteria - This Section sets out the evaluation criteria which will be used by the Exexutive in the evaluation of bids.

1.1.4 In addition, there are 14 Annexes which provide further background information about the CHFS Services.

1.2 Definitions, Interpretations and Abbreviations

In this document:

Base Case has the meaning given to it in the PSC;

Cabotage Regulation means the Council Regulation ( EEC) No 3577/92 of 7 December 1992 applying the principle of freedom to provide sevices to maritime transport within Member States (maritime cabotage);

CalMac means Caledonian MacBrayne Limited, which prior to the reorganisation described in Section 1.3, provided the lifeline ferry and associated harbour services on the CHFS Network which are now provided by CFL;

CalMac Brand has the meaning given to it in Section 3.9.1;

CalMac Pension Fund means the fund established by an interim trust deed dated 2 April 1990 and presently governed by a trust deed and rules dated 13 February and 17 March 2003 (as amended);

CFL means CalMac Ferries Limited, which currently provides the lifeline ferry and associated harbour services on the CHFS Network;

Charterparty means an amended version of the BIMCO Barecon 2001 form of charterparty for each of the CMAL Vessels;

CHFS Network means the ferry routes (further details of which are set out in Annex 1) which are to be provided as part of the CHFS Services;

CHFS Services means the Ferry Services together with the Harbour Services;

CMAL means Caledonian Maritime Assets Limited, which is the publicly owned company which owns the CMAL Fleet, Harbours and Port Facilities;

CMAL Fleet means the vessels owned by CMAL listed in Annex 3;

CMAL Vessels means those vessels in the CMAL Fleet to be chartered to the Operator for the provision of the CHFS Services;

Community shipowner has the meaning given to it in the Cabotage Regulation;

Contract Period means the period from commencement of the CHFS Services under the PSC until the expiry or earlier termination of the PSC;

Contracts means the PSC, the Harbour Access and Operating Agreement, the Fleet Charter Agreement, each of the Charterparties, the Property and Equipment Licence, the Licensing Agreements and the Tripartite Agreement;

Costed Bid means the element of the bid which sets out the Tenderer's subsidy bid and the financial basis for that bid;

CPI means Consumer Price Index;

Cure Plan has the meaning given to it in the PSC;

Customer Services Undertaking means the customer services undertaking to be prepared by Tenderers in accordance with Section 3.15 of this ITT and adhered to and updated by the Operator from time to time in accordance with the terms of the PSC;

EU means the European Union;

Evaluation Criteria means the criteria set out in Section 8;

Executive means the Scottish Executive;

Ferry Services means the lifeline ferry services for passengers, vehicles, loose freight and parcels, dangerous goods and livestock in the Clyde & Hebrides as set out more fully in Section 3;

Fleet Charter Agreement or FCA means the agreement to be entered into by the Successful Tenderer and CMAL for the charter of the CMAL Vessels from CMAL;

Handover Assistance Plan has the meaning given to it in the PSC;

Harbours means the piers and harbours for which CMAL is the statutory harbour authority as set out in Annex 8;

Harbour Access Fee has the meaning given in Section 3.5.7;

Harbour Access and Operating Agreement or Harbour Agreement means the agreement to be entered into by the Successful Tenderer and CMAL providing access to the Harbours and setting out CMAL's requirements in respect of the operation and maintenance of the Harbours;

Harbour Facilities has the meaning set out in the Harbour Agreement;

Harbour Operating and Maintenance Fee has the meaning given in Section 3.5.9;

Harbour Services means the services to be provided at the Harbours and at some Ports by the Operator, as set out more fully in Section 3 (and includes those functions listed in Annexes 9 and 10);

HITRANS means the Highlands and Islands Transport Partnership;

Information Room means the electronic data room which will contain the information available to Tenderers to develop a bid;

ITT means this Invitation to Tender;

Licensing Agreements means the trade mark licensing agreement and the heraldic device agreement to be entered into by the Successful Tenderer and CMAL for the use of the CalMac Brand;

Cabotage Regulation CABOTAGEREGULATIONMCA means the Maritime and Coastguard Agency;

Merchant Navy Officer's Pension Fund means the defined benefit pension scheme of that name established by a trust deed dated 29 October 1937 which is operated by Merchant Navy Pensions Administration Limited and is presently governed by a trust deed dated 25 June 1999 and rules (as amended);

Merchant Navy Officer's Pension Plan means the money purchase scheme of that name established and operated by Merchant Navy Pensions Administration Limited;

Merchant Navy Ratings Pension Plan means the money purchase pension scheme of that name established and operated by Merchant Navy Pensions Administration Limited.;

Minimum Standard means the minimum standard of service that is required in terms of the Service Specification;

Mobilisation Plan means the mobilisation plan to be prepared by the Tenderers, the requirements of which are set out in Section 4.13.3;

Operator means the provider of the CHFS Services during the Contract Period;

Ports means the harbours on the CHFS Network for which CMAL is not the statutory harbour authority as set out in Annex 8;

Port Facilities means the assets of CMAL at the Ports referred to in the Property and Equipment Licence;

Property and Equipment Licence means the licence to be entered into by CMAL and the Successful Tenderer in respect of equipment, land and buildings owned and/or and leased by CMAL, as the case may be, and located at certain Harbours and Ports;

PSC means the Public Service Contract for the provision of the CHFS Services which is to be entered into by the Executive and the Successful Tenderer;

Relief Event means an event which allows one or other of the parties to the PSC 'relief' from the usual consequences of not fulfilling their part of the agreement, as detailed in the PSC;

Revised Base Case has the meaning given to it in the PSC;

Service Year has the meaning given to it in the PSC;

Service Specification means the Service Specification set out in Section 3 to this ITT;

SSAC means any Shipping Services Advisory Committee (whose role is set out in Section 3.14.3), of which there are presently 3 serving the Clyde and Hebrides area;

Successful Tenderer means the successful tenderer for the CHFS Services;

Summer shall have the meaning given to it in Section 3.7.5;

Technical Submission means the technical and commercial proposals submitted by a Tenderer to the Executive setting out the Tenderer's proposals for meeting the Minimum Standard;

Tender Period means the period from the date of issue of this ITT to the Tender Return Date;

Tender Return Date means the date on which Tenderers are to make their Tender Submissions as set out in Section 2.4.25;

Tender Submission means the bid to be submitted by Tenderers to the Executive comprising the Technical Submission and the Costed Bid;

Tenderer means an organisation invited to bid for the CHFS Services;

Tripartite Agreement means the agreement to be entered into by CMAL, the Successful Tenderer and the Executive in relation to the CHFS Services;

TUPE means the Transfer of Undertakings (Protection of Employment) Regulations 2006;

Undertaking means the undertaking made under powers granted to the Scottish Ministers under the Highlands and Islands Shipping Services Act 1960 and Transport Act 2003, in terms of which CFL currently provides the ferry and associated harbour services on the CHFS Network;

Winter shall have the meaning given to it in Section 3.7.5.

1.3 Background

1.3.1 Prior to 1 October 2006 CalMac provided ferry and associated harbour services in the Clyde Estuary and around the Hebrides. Scottish Ministers were the sole shareholder of CalMac. The services operated by CalMac were of a lifeline nature and required the Executive's support to keep them in operation.

1.3.2 CalMac was restructured on 1 October 2006 to form two companies:

1.3.3 Under the terms of the Undertaking Scottish Ministers provide an annual subsidy for the support of certain approved lifeline ferry and associated harbour services on the Clyde and in the Hebrides. The revenue deficit subsidy paid by Scottish Ministers meets the operating loss incurred in providing those services.

1.3.4 The European Commission has a duty under Article 88(1) of the EC Treaty to keep under review aid in Member States and to ensure that Member States apply the appropriate measures required by the progressive development or the functioning of the single market. There are further detailed rules (including the Cabotage Regulation) relating to maritime transport (maritime cabotage) within Member States ¹.

1.3.5 The Cabotage Regulation provides that Member States may impose public service contracts in order to ensure the adequacy of regular maritime transport services to a given island (or in relation to a remote peninsula), where Community shipowners if they were considering their own commercial interest would not provide services of an adequate level or under the same conditions .

1.3.6 The Executive has concluded that the ferry services currently provided by CFL are in the nature of public service contracts and they are therefore being tendered in line with the Cabotage Regulation and relevant EU procurement regulations and guidelines. Further, certain of these ferry services sail to locations where, in the absence of these ferry services, there would be no regular requirement for harbour facilities. Such harbour facilities are therefore necessary to ensure the continued availability of the lifeline ferry services and as such they have been brought within the scope of this procurement.

1.3.7 The guidance provided by the European Commission prescribes detailed rules for public service contracts relating to tendering requirements and terms of contract. In particular, Tenderers will wish to note:

• subsidy given for public service contracts must be in compliance with the Cabotage Regulation and the EC Treaty rules and procedures governing State aid, as interpreted by the Court of Justice. In practice this means that the contract should be awarded (except in exceptional and duly justified circumstances) to the bid requiring the lowest financial compensation.
• the subsidy is to be the amount necessary to cover all or part of the costs incurred in the provision of the services which are required to be implemented under the public service contracts, taking account of relevant receipts plus a margin deemed by the Executive to be reasonable.
• the duration of a public service contract should be limited to a reasonable period, in practice six years or less.

1.4 Objectives

1.4.1 The Executive's policy objectives for the CHFS Services are as follows:

• the provision of a suitable standard of transport connection, in terms of quality, frequency and capacity, to island and remote peninsular communities;
• ferry fares and loose freight and parcel charges are not to be excessive;
• ferry services and harbour services are to be delivered efficiently; and
• the necessary level of service is to be provided for the minimum amount of public subsidy.

1.4.2 The aim of this tendering exercise is to meet the Executive's policy and strategic objectives, and to meet islands' and remote communities' needs by ensuring that the service provides a continuing, safe, stable and affordable regime for users in line with the EU rules. The Executive also encourages Tenderers, where possible, to provide innovative solutions and responses when submitting their proposals for meeting the service level requirements for the CHFS Services.

1.5 Tendering Procedure

1.5.1 Tenderers will be aware that this tendering exercise is being conducted in terms of the Public Contracts (Scotland) Regulations 2006 under the restricted procedure. This means that negotiations on fundamental aspects of the PSC and other contract documentation, variations in which are likely to distort competition, as well as on price, are not permissible after the appointment of the Preferred Tenderer. More information is given on this point in Section 2.

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