SCOTTISH EXECUTIVE

[Previous] [Contents] [Next]

Final Report: Options for the Ferry Services Between Gourock and Dunoon

APPENDIX 1 TERMS OF REFERENCE

FUTURE OF GOUROCK-DUNOON FERRY SERVICES

1. This brief sets out the requirements for consultants to consider the future pattern, structure and regulation of ferry services between Gourock and Dunoon. [It is being jointly financed by The Scottish Office, Caledonian MacBrayne and Western Ferries]. It is not the purpose of the study to make a single recommendation. Rather its objective is to comprehensively assess the options available, and report the advantages and disadvantages of each in an objective manner. The consultants will however be invited to put forward those options which they see as most viable and deliverable. The scope for using the PFI in any solution involving CalMac will be a core part of the study.

2. Consultants will be given access to information by each of the 3 clients, and this should be treated with strictest confidence and should not be relayed or used in any way without the prior agreement of the relevant client. Further the consultants will be expected to treat the whole exercise as in confidence and no information on the study should be made available outside the firm. The consultants will be expected to agree a code of conduct for dealing with commercially sensitive information at an early stage.

3. The consultants are invited to set out a timetable for the study, which should be completed at the latest by the end of August 1997.

BACKGROUND

4. The sea route from Gourock to Dunoon is currently serviced by 2 operators. The operators do not share the same piers, but the services provided are close enough to indicate direct competition. CalMac sail from Gourock pier which is serviced by a railhead, to Dunoon pier. Western Ferries sail from McInroy's Point to Hunter's Quay.

5. The 2 operators differ in their frequency of service. CalMac sail hourly due to restrictions imposed. Western Ferries sail on the half hour and on the quarter at peak time, and provide a service over a longer operating day. Ferry crossing times average around 20 minutes for both CalMac and for Western Ferries.

6. CalMac receive state revenue subsidy on the basis that they provide a socially necessary passenger service. Western Ferries are a private company and do not receive subsidy. The Scottish Office accept that it is unsatisfactory to provide operating subsidy to a public sector ferry operator to compete with an unsubsidised private sector operator.

STUDY OBJECTIVES

7. First

The first stage of the study should be a detailed assessment of the current situation, involving:

• a description of the services offered by CalMac and Western Ferries.
• the capacity requirements now and in the future (by desktop methods) on the route, and how this compares to current availability.
• the revenue raising capability on the service, taking into account: actual rates charged net of discount; tariff levels published; optimal revenue for the route; and comparisons with comparable services elsewhere. the profitability of the 2 services.
• the requirements for replacement capacity as current tonnage becomes obsolete in legislative, mechanical or safety terms. the need for, and specification of, new pier facilities at Dunoon.
• the role of The Scottish Office in terms of restrictions on CalMac's operations and the provision of public support.

8. The objectives of the first stage should be to:

• comprehensively analyse the current situation.
• provide pointers to the next stage of the study, which will be to assess the options for change.

9. A further requirement of the first stage will be to consider the inter-relation with the other Clyde routes, particularly the Wemyss Bay-Rothesay route which shares tonnage with

the Gourock-Dunoon service. The objective here should be:

• to consider whether the inclusion of the Wemyss Bay-Rothesay service in the overall consideration is likely to enable a solution to be found to the Gourock-Dunoon services, or to judge whether this wider consideration should be included in the next stage or ruled out. A particular concern here is that differing vessel standard requirements may make the inclusion of the Wemyss Bay-Rothesay route infeasible on technical grounds, leading to excessive costs. Consultants should address this issue.

10. It is anticipated that the first stage could be completed by end-November with a full interim report prepared in mid-November for agreement by the Steering Group.

Second Stage

11. The consultants are invited to develop options and comprehensively assess them against the following criteria;

• the role of the private sector should be maximised, wherever possible.
• public sector support for shipping services should ideally be limited to that required to meet' the Secretary of States commitment to the provision of passenger services between Gourock and Dunoon. the benefits of competition should be maximised, wherever possible.

• the harmful effects of any monopoly situation should be controlled in an effective manner, to ensure competition policy is observed.
• the economic efficiency of the solution should be maximised with the service provided at lowest cost possible.
• the solutions offered should represent a long term solution to ferry services in the area.

12. The consultants will be encouraged to bring forward new ideas and fresh insights. It is suggested, however, that the following core options, in terms of capacity and service specification offered be considered.

• the "status quo", which would probably involve a broadly like for like replacement of existing CalMac services.
• the "CalMac minus" option, which would involve the reduction of service on the Gourock-Dunoon service to a passenger only service, with no change in current Western Ferries service.
• the "CalMac plus" option, which would involve an enhancement of service on the Gourock-Dunoon service.
• the "Western Ferries" minus option, which would involved withdrawal of the Western Ferries capacity.

• the "CalMac plus/Western Ferries minus" option, which would be as above but balanced by some reduction in Western Ferries services.

13. These core options cover the capacity and service specification on the routes, and assume, unless otherwise stated, the continuation of existing Western Ferries services. Within each option, the following sub options should be considered.

• the case for operating controls on CalMac services as currently exist and which could be adapted under the other options.
• the case for price controls on either or both CalMac and Western Ferries services, while maintaining independent, competitive conditions.
• the scope for a joint venture agreement between CalMac, or an operator on CalMac's behalf, and Western Ferries. This should also include consideration of the scope for subcontracting part of the timetable to another operator.

• the scope for single owner operation of both services, through either complete withdrawal of CalMac, and the provision of passenger services by grant support to the private sector, or the provision of all services by CalMac. Again, this should consider the scope for subcontracting. For example, there may be scope for full provision by CalMac, with subcontracting of a part of the timetable to Western Ferries or another private operator, or vice versa.

14. It is envisaged that the core options in paragraph 12 and the sub-options in paragraph 13 will represent a matrix of possible solutions. It may be that some could be ruled out at an early stage, but the consultants will be required to provide full reasons for suggesting this and Steering Groups agreement will be required.

15. The consultants will then be invited to suggest a range of feasible options for further consideration, which will be addressed by and agreed with the Steering Group.

16. Each of the options are likely to involve some form of vessel replacement. For those options which are agreed to be worthy of further consideration, a full assessment of how the option could be developed using the Private Finance Initiative should be provided.

Final Report

17. A final report covering in detail the assessment of the options and the financial model prepared to consider them should be prepared for discussion by the Steering Group.

[Previous] [Contents] [Next]