Clyde and Hebrides Ferry Service 3

We will continue to deliver essential ferry services to connect island and remote communities off the west coast of Scotland with the mainland when the current Clyde and Hebrides Ferry Service (CHFS) contract (CHFS2) expires on 30 September 2024.

The Cabinet Secretary for Transport announced on 8 May 2025 that Scottish Ministers have decided that a direct award should be made to CalMac Ferries Limited. The due diligence work concluded there is no financial, operational or legal impediment to proceeding with a Teckal-compliant direct award of CHFS3.

The Cabinet Secretary said “This is a unique opportunity to change the emphasis from a commercially driven arrangement to a public-focused service wholly directed at meeting the important and particular needs of the communities it serves. Discussions will continue with staff, island residents, businesses and communities and trade unions on the arrangements so that the new contract reflects local needs and interests. Transport Scotland is now working closely with CalMac Ferries Ltd on the necessary arrangements for commencement of the new contract on 1 October 2025. I will ensure that Parliament is kept updated about progress on those new arrangements.

Taken together with our ongoing investment in new vessels and infrastructure, this will improve the overall resilience and capacity of these services, particularly for the future, as set out in the recently published Islands Connectivity Plan.”

The current policy position regarding unbundling of the CHFS network has been clearly expressed and there are no plans to split up the network.

In relation to ferry priorities and governance structures under consideration through Project Neptune, the Cabinet Secretary of Transport has been clear that no immediate decision will be taken on the merger of bodies or governance arrangements.

We will continue to work with key stakeholders, including communities and trade unions, to inform the development of these key services. Details of further engagement sessions will be published on this page in the coming weeks.

The new contract takes into account the wider ferries policy work through the Islands Connectivity Plan, published on 2 May 2025.

The Clyde and Hebrides Ferry Services play a crucial role in our transport system, providing vital links for residents, businesses, and tourists across the west coast of Scotland.

We are committed to ensuring that the views and perspectives of communities and key stakeholders are considered, reflected upon and help shape the detail within the next CHFS contract.

A public consultation was launched on 15 December 2023 and ran for 12 weeks and closed on 8 March 2024.

All public consultation responses have now been analysed and the executive summary and full analysis report are available to view.

The recorded responses have been published and are available to view on Citizen Space.

If you still wish to provide feedback on the new contract, please contact us at chfs3@transport.gov.scot.

We are currently developing the new contract specification and have been welcoming the views of communities and service users on their expectations for the service.

Officials carried out a series of CHFS3 'drop-in' public engagement events on Arran, Mull, Islay, Skye, Lewis, Bute, Cumbrae, North Uist, South Uist, Tiree and Colonsay from November 2023 to February 2024.

The feedback gathered at these meetings will provide valuable insights that will guide the future development of our services. These were also incorporated within the public consultation analysis report which was published on 25 July 2024 (see tab 2).

We appreciate the active participation of all attendees and their contribution to this important process. A webinar is currently being designed to provide an update on the overall project, further information on this will follow in due course.

• View the storyboard presentation provided to communities at these previous events

Direct Award

Why are you choosing a direct award if communities favour a competitive tender instead?

A Teckal compliant direct award will allow us to deliver the improvements that island communities have been calling for, such as improved resilience, greater transparency, better communications, and provides more certainty for communities and staff.

A Teckal compliant Direct award is intended to act as a catalyst for change. Communities have been given the opportunity to contribute to the development of the next contract through public consultation and a series of planned stakeholder engagement events. Improvements to performance reporting have already been implemented to better reflect passenger experience.

Will Ministers have more control in a direct award scenario?

The key benefit of a Teckal compliant direct award is that it would enable the Scottish Government to have greater influence over strategic objectives and significant decisions relating to the provision of future Clyde and Hebrides ferry services. This would provide the flexibility needed to drive improvement and adapt to the evolving needs of our island communities.

CalMac’s track record on service delivery has often been criticised by stakeholders. How confident are you that it can deliver what is being asked?

Some of the criticism of ferry services is due to a reliance on older vessels, which we are addressing through increased investment. But a Teckal compliant direct award also brings other changes and opportunities to improve the business. CalMac will not be delivering to a contract, it will be delivering a public service. And that service will be specified by Ministers informed by input we’ve had from island communities and stakeholders.

A Teckal compliant direct award can also be much more flexible and responsive to changing needs. Difficult operational decisions may still have to be made at times, but it will be possible to alter provision much more easily should it be needed.

What happens if the service provided by CalMac does not improve?

Whilst CalMac will continue to operate the services, this award will not be “business as usual”. We are working with CalMac to embed the improvements required to deliver a safe and reliable service, along with the new vessels and planned harbour upgrades which will improve resilience. There will also be enhanced monitoring and reporting, a new and revised Benefits Realisation Plan and KPIs, greater regionalisation through dedicated area managers and increased stakeholder engagement to ensure improvements to services.

Stakeholder Engagement and Public Consultation

Have local communities and key stakeholders been involved in the contract development process?

Local communities and key stakeholders have been actively involved in the development process for the next CHFS contract. Transport Scotland is continuing to engage with these groups about the future of ferry services and the next CHFS contract. This engagement will continue throughout the life of the contract.

How have you engaged with local communities and stakeholders?

Officials conducted a series of community engagement events across the network, and a public consultation on the CHFS3 contract was launched in December 2023 to gather the views and suggestions of local communities for potential ferry service improvements. The voices of local communities have been heard and taken into account throughout the contract development process.

Transport Scotland will initiate further engagement with communities later this year to present an update focusing on the public consultation analysis outputs, the new Enhancement and Change plan and overview of the new contract.

Will communities still have an opportunity to feed back after the contract goes live?

Transport Scotland will continue to engage with communities and key stakeholders after the contract goes live to ensure their views continue to be considered as the contract evolves.

The introduction of additional Area Operations Managers will improve engagement on a local level throughout the duration of the contract, allowing for more localised decision making to respond to community specific needs.

Communities will also be able to feed concerns through the Ferries Community Board, who will have a strong voice in the new contract.

Was a formal public consultation held as part of the new CHFS contract development process?

The CHFS3 public consultation ran from 15 December 2023 to 8 March 2024. This was an invaluable exercise, providing us with a wealth of insights and feedback from a wide variety of stakeholders across the CHFS network. We heard issues about the reliability of the services, poor communication and the impact service disruption has on passengers and businesses, but we also noted commendations for the support to travellers from vessel crew and port staff.

The final report has provided us with a comprehensive analysis of the feedback received and is playing a crucial role in shaping the next contract. Our aim is to address the issues raised and enhance the resilience, transparency, communication, responsiveness, and flexibility of the services. We believe that these improvements will significantly enhance the overall CHFS user experience.

Where can I view the public consultation analysis report?

The final report and summary are available to view on the Transport Scotland website.

Enhancement and Change Plan/CHFS3 Improvements

When will communities see improvements to the current services?

The Cabinet Secretary has been clear that a “business as usual” approach is not acceptable, and we are already taking the first steps on the path of continuous improvement.

We have developed an Enhancement and Change Plan with CalMac which is bringing in a number of changes ahead of the new contract commencing in October 2025. Some aspects of the Enhancement and Change Plan are already in progress; CalMac have recruited additional Area Operations Managers to enhance local decision making and communication with communities, and have introduced new Regional Performance Scorecards to improve performance reporting to better reflect passenger experience.

What improvements can we expect to see in the new contract?

The new CHFS3 contract includes improvements over the current contract, such as a new Benefits Realisation Plan, new and revised Key Performance Indicators, enhanced monitoring and reporting, greater regionalisation through dedicated Area Managers and increased stakeholder engagement.

The Benefits Realisation Plan and Key Performance Indicators will continue to evolve throughout the duration of the contract through the input of communities, stakeholders and the Ferries Community Board.

Trade Unions

Do the Trade Unions support a direct award?

Yes, the Trade Unions have been calling for a direct award to CalMac for several years.

What involvement have you had with Trades Unions on this work?

Transport Scotland Officials have held regular meetings with the Trade Unions, providing them with updates and ensuring that their input and feedback is captured to support the development of the next contract.

The Cabinet Secretary recently met with Trade Unions and other stakeholders as part of a Roundtable event to discuss shared ambitions and priorities for the new contract. The intention is that in the future these meetings are held annually to ensure the views and perspectives of our key stakeholders continue to be considered throughout the duration of the contract.

CalMac and CMAL staffing

What does this mean for staff in CMAL and CalMac and when will change happen?

We do not anticipate the Teckal compliant direct award of CHFS3 to have any major impact on the staff of CMAL and CalMac. We value and place great importance on the work and functions of CMAL and CalMac and hardworking staff.

Any future reform of the ferries sector will of course involve full engagement with staff on any potential changes.

Culture at CalMac

How do you intend to change the culture of the organisation?

A Teckal compliant direct award provides an opportunity to support cultural change within CalMac, in turn delivering a more efficient ferry service, providing greater transparency in communications, working with the communities to deliver a ferry service which meets their needs.

A new management culture is already emerging following the appointment of the new CalMac CEO and Area Operations Managers, and as the new contract comes into effect, we anticipate this cultural change will foster improved support for the communities, customers and passengers served by the network. The tripartite are working well together and communities are welcoming the joint approach to stakeholder engagement.

Ferries Community Board

Are the Ferries Community Board supportive of a direct award?

We have been engaging closely with the Ferries Community Board as this work has developed and will continue to do so throughout the life of the contract. It is clear from our engagement with communities, including the Ferries Community Board, that regardless of the procurement route, the primary outcome they are seeking is a reliable and resilient service.

Will the Ferries Community Board be involved going forward and what will their role be?Yes, the new contract will embed the requirement for the Operator to engage with the Ferries Community Board going forward.

Teckal Exemption

What is a Teckal exemption?

Regulation 13 of the Public Contracts (Scotland) Regulations 2015 permits a contracting authority (such as the Scottish Ministers) to directly award a contract to an entity over which it exercises a sufficient degree of control, and which carries out the principal part of its activities for the contracting authority. It is often referred to as the “Teckal exemption” to the procurement rules.

Governance at CalMac

What does Teckal mean for how CalMac is governed?

A Teckal compliant direct award means that Scottish Ministers have to be demonstrably ‘in control’ of CalMac. In practice, this means that we will establish revised governance arrangements such that Ministers have greater oversight of CalMac’s strategic direction and major decisions. However, decisions on day-to-day operations will remain with CalMac as it has the expertise and experience required to deliver ferry services most effectively.

Subsidy Control and Due Diligence

What did the due diligence exercise review?

The due diligence exercise considered a range of financial, operational and legal aspects, including any associated risks and issues to ascertain if there was any impediment to implementing a Teckal compliant direct award to CalMac.

Who carried out the due diligence exercise?

Transport Scotland officials worked with wider Scottish Government colleagues (including Finance, Legal & Subsidy Control) in addition to specialist Legal, Technical and Financial advisors to ensure the due diligence exercise was robust and considered relevant risks and issues.

Do you think you will be open to legal challenge?

The process is being delivered in accordance with all relevant legislation.

What are the next steps for the CHFS3 Subsidy Control Assessment?

Transport Scotland will publish the CHFS3 subsidy on the transparency database in the coming weeks.

Contract extension

Why has the new contract been delayed?

A number of complex issues had to be worked through as part of the due diligence exercise, including subsidy control, and individual entity status and associated accounting impact. It became clear that these issues and processes could not be concluded by 30 September 2024, therefore an extension was implemented to enable the work, and associated assurance processes, to be completed before making a final decision on the procurement route.

Contract Duration

How long will the next CHFS contract last?

The initial length of the next contract will be 10 years, with performance reviews at regular intervals.

Value for Money

Does direct award provide Value for Money?

The cost of running the ferry services will be similar regardless of the procurement route taken. This is because the major costs are related to the new vessels coming into service.

However, a Teckal compliant direct award arrangement would be delivered on a not-for-profit basis.

What are the potential costs of a direct award?

The financial due diligence work has been carried out to ensure Value for Money for the taxpayers, and the impact (including costs) has been quantified and considered in a full business case.

Fleet Resilience

What steps will be taken to ensure improvements in service and the resilience of the fleet?

Caledonian Maritime Assets Limited (CMAL) and Remontowa Shipyard in Poland have signed the contracts to build seven small vessels which will support island communities. In addition to the MV Glen Sannox, we have committed to five new major vessels joining the fleet in the coming years.

These improvements form part of the significant investment that has been committed to operate, maintain, and enhance our ferry networks. In addition to vessel improvements, enhanced port infrastructure to support vessel introduction and increased interoperability will boost reliability and resilience of both new and existing vessels.

What efforts are being made to ensure vessels remain in operation and improve reliability?

We have made funding available for upgrades on the CalMac vessels with the introduction of the Ferries Resilience Fund, primarily to replace obsolete systems and reduce the likelihood of breakdowns on older vessels. The fund is therefore a preventative maintenance fund over and above regular maintenance. It could also be used for procuring specialist spares where these parts fall out-with those that would be reasonably expected to be procured.

Transport Scotland and CMAL continue to engage with CalMac on maintenance, repair, and vessel resilience activities, considering preventative approaches as part of this. 

Ferries Reform

What about wider reform of the CHFS tripartite?

No immediate decisions are being made on the subject of reform of the ferries sector, though nothing is off the table. At present, the focus is on the preparation for bringing the five new major vessels into the CalMac fleet and the considerable work involved in putting arrangements in place for the Teckal compliant direct award of the new CHFS contract.

Once this work is complete, we will turn our minds to the future reform of the bodies involved in delivering services, with the initial focus on the relationship between the three tripartite bodies of Transport Scotland, CalMac and Caledonian Maritime Assets Limited.

What will tripartite reform involve?

This is a complex piece of work that requires further engagement with all key stakeholders – including the staff of CMAL and CalMac, as well as Trade Unions and communities. Once we have given full consideration to all options, an update will be provided.

Unbundling

Why are the Clyde ferry route tenders operated as a single bundle?

The Cabinet Secretary has already expressed the current policy position regarding bundling of the Clyde and Hebrides Ferry Service network in a statement to parliament on 16 November 2023, and we have no plans to split up the network.

There is greater resilience provided by maintaining the integrity of our ferry routes as one network. This allows vessels and staff resources to be shared across a number of routes both in terms of periods of disruption, and during the winter dry dock period.

Northern Isles Ferry Services (NIFS)

If direct award has so many benefits, why not use that model for NIFS as well?

The Northern Isles Ferry Services are quite different in nature and complexity to those provided under the CHFS contract, but equally important to the communities and stakeholders served by those routes.

The current NIFS arrangements are working well and our ongoing engagement with key stakeholders has indicated a strong desire for any future arrangements to again be procured on the open market. Market engagement is currently underway to inform the procurement route for the next generation NIFS contract.