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Ferguson Marine - Quarterly update

Letter from Ferguson Marine to Convener, 23 December 2021

Dear Mr Lockhart,

Update on Hulls 801 & 802

I write to provide the quarterly update on the progress of Hulls 801 and 802.

Financial

In previous letters I have advised that, treating COVID-19 costs as an exceptional item, we are on track to deliver the project for the budget of £110m to £114m identified in my report to Scottish Ministers in Dec 2019.  I confirm that this remains the case.

Key Issues - Updates

Skilled Workers

I had previously highlighted the constraints caused by a shortage of skilled workers available locally or from the UK and described the solutions implemented.  These have focussed on the use of subcontractors employing overseas workers, and I am pleased to report that this approach is working well.  As planned, the overseas workers are returning to their homes for Christmas but, COVID permitting, they will return in January to continue work on the vessels.

COVID-19

COVID controls described previously have remained in place and there has been limited disruption due to the pandemic for much of the time since my last update, and still a total of only two cases of in-yard transmission.  At the time of writing the Omicron variant is in its early stages but Ferguson has already seen an increase in absence for self-isolation and testing.  It seems likely that we will experience significant disruption in January and that in turn might result in lost productivity.  The resulting impact is impossible to quantify or predict at this juncture. 

System Integration

In my last update, I commented on a risk associated with systems integration and am pleased to report that good progress has been made on linking the 3 core systems which manage engineering information; stock control, procurement, and work order processing; and project planning.  System links have been established, stock recording upgraded, and Material Requirements Planning is operational.  Improved work tracking has been implemented giving a more robust basis for progress reporting and decision making.

Key Issues - New

801 Pipework Installation

Pipework installation rates have increased in recent weeks with a strong focus on maintaining the critical path activities however, the overall rate of pipework installation on 801 has not achieved planned levels.  Actions are in place to increase resource and recover the shortfall in early 2022, but this is an important area and represents a critical risk to the delivery of 801.

802 Ducktail

The hull of 802 differs from 801 in that it has an extra feature known as a ducktail.  This is an additional structure, the full width of the ship and approximately 2.5m long, which is designed to increase the speed of the vessel for a given power output from the engines.  At their request, we have for some time been in discussion with Scottish Government, Transport Scotland and CMAL regarding the ducktail.  These discussions have the potential to impact the schedule for delivery of the vessel and if this occurs we will update the Committee accordingly.

Schedule

The delivery of 801 remains in the range 25^th July 2022 to 25^th September 2022.

The delivery of 802 remains in the range 3^rd April 2023 to 3^rd July 2023.

These delivery ranges are unchanged from the June 2021 update.

Review

Ferguson Marine’s Board of Directors has reviewed, discussed and agreed the substance of this update.  We have considered current risks and have identified three areas of note:

1. Delivery of 801 in the time window described is achievable but remains challenging. The planned increase in production activity in January and February is critical to the achievement of this delivery schedule.
   
   
2. The progression of the Omicron variant has the potential to cause severe disruption at a critical time, but this cannot be quantified at this time.
   
   
3. As noted in previous updates, much of the equipment for the ferries has been installed since 2016 and may have deteriorated since then.Although surveys, remediation and replacement have taken place under Government ownership there is an unquantifiable risk that equipment problems may emerge during commissioning.
   
   

Leadership Succession

We have recently announced that a permanent CEO has been appointed to Ferguson Marine and will take up his responsibilities, including future updates, on 1^st February 2022.

Under Scottish Government ownership Ferguson Marine has again become a functioning shipyard, with three smaller vessels delivered, the completion of the ferries underway and credible future projects in the pipeline.  I am proud to have played my part in the history of the yard, have every confidence that it has a sustainable future, and will watch the next stage of its development with interest.

Yours sincerely,

Tim Hair

Turnaround Director