Investigation into the Procurement of the

Rathlin Ferry Service

December 2008

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List of Abbreviations

CALMAC Caledonian MacBrayne Ltd

CMAL Caledonian Maritime Assets Ltd

CPD Central Procurement Directorate

DRD Department for Regional Development

EU European Union

HSENI Health and Safety Executive NI

ISM International Safety Management

MEP Member of the European Parliament

MCA Maritime and Coastguard Agency

MV Motor Vessel

NIAO Northern Ireland Audit Office

OJEU Official Journal of the European Union

PIN Prior Information Notice

PSNI Police Service of Northern Ireland

POCVA _ Protection of Children and Vulnerable Adults

PPTD Ports and Public Transport Division

RDCA Rathlin Development and Community Association

RFL Rathlin Ferries Ltd

RIFL Rathlin Island Ferry Ltd

SLA Service Level Agreement

TUPE Transfer of Undertakings (Protection of Employment) Regulations 2006

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INDEX TO REPORT

l.0 INTRODUCTION
2.0 BACKGROUND
3.0 REVIEW PROCESS

FINDINGS

4.0 THE PROCUREMENT PROCESS

5.0 POST TENDER ARRANGEMENTS
6.0 CONTRACT MONITORING
7.0 MANAGEMENT AND PERSONNEL ISSUES
8.0 OVERALL CONCLUSION AND RECOMMENDATIONS

ANNEXES

Annex 1 Chronology
Annex 2 Three Strand Investigation: Terms of Reference
Annex 3 Summary of Key Allegations
Annex 4 Parties who have made allegations/complaints/raised concerns
Annex 5 Enhanced Service - Tender Requirements
Annex 6 Compliance of Mr. O'Driscoll’s tender with the tender requirement
Annex 7 Contract Monitoring Checklist
Annex 8 July 2008 e-mail correspondence

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INTRODUCTION

1.1
On 18 April 2008, following a competitive tender competition, the Northern Ireland
Department for Regional Development (DRD) awarded a contract for the operation of
passenger and vehicle ferry services between Ballycastle and Rathlin Island to a new
operator, Mr. Ciaran O'Driscoll, operating as Rathlin Island Ferry Ltd.

1.2
Following the award of the contract a number of allegations and complaints were
received by DRD and the Northern Ireland Audit Office (NIAO) about the propriety of
the process and whether the procedure complied with public sector procurement
regulations. In light of these allegations and complaints the Permanent Secretary of DRD
concluded that an investigation into the allegations and complaints should be carried out
on an independent basis by individuals with the relevant expertise and experience. Steve
Rowsell, an independent procurement consultant (and former Director of Procurement of
the Highways Agency in England) was appointed to investigate the procurement process
and Wilfie Hamilton, a retired senior civil servant, was appointed to carry out an
investigation into the complaints against members of DRD staff involved in letting the
contract. These strands of the investigation were to run in parallel with work previously
commissioned by the Permanent Secretary from his Internal Audit Unit and which was
being taken forward by Mark Stranaghan (Audit Manager). A chronology of the
procurement is shown at Annex l and terms of reference for the investigation are shown
at Annex 2.

1.3
In so far as the allegations in relation to staff are concerned the review was undertaken as
a preliminary investigation in accordance with Disciplinary Procedures as set out in
paragraphs 4.1.1 - 4.1.3 of the NICS Staff Handbook. The staff involved were made
aware of this approach and that the Department may consider formal disciplinary action,
depending on the outcome of the review.

1.4
This report sets out the findings of the investigation team.

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BACKGROUND

2.1
Rathlin Island is located six miles from the coastal town of Ballycastle, off the northeast
Antrim coast and is Northern Ireland’s only inhabited offshore island. Up to 1996,
access to Rathlin Island was provided by the Islanders themselves using converted fishing
boats. However, that operation was unable to meet the increasing standards demanded
by new legislation and, following a tender competition, the responsible Department at
that time (Department of the Environment (NI)) awarded a contract to Caledonian
MacBrayne to operate the Rathlin Island ferry service from the 1996/97 year.
Caledonian MacBrayne, now known as CalMac (to avoid confusion we have referred to
"CalMac" throughout the body of the report), is part of David MacBrayne Ltd which is
wholly owned by the Scottish Executive on behalf of Scottish Ministers. CalMac was
successful in a further tender competition in 2003 and continued to operate the ferry
service until 30 June 2008 when a new contract commenced operated by Rathlin Island
Ferry Ltd. The service currently carries approximately 50,000 passengers per year.

2.2
The contract for the provision of ferry services between Ballycastle and Rathlin Island
awarded in 2003 followed a procurement process in which only one bidder, CalMac, was
able to offer a suitable vessel. The intention had been to establish a contract for a
minimum period of five years, but due to an anticipated corporate reorganization of the
parent company, CalMac was only able to enter into a renewable annual contract. The
2003 award was therefore a qualified award.

2.3
The corporate restructuring of David MacBrayne Ltd took place in 2006. In 2006 DRD
decided to initiate a new procurement process to replace the 2003 contract arrangements.
Central in the Department’s thinking was the desire to maximize value for money and to
secure as good a service quality as possible on the route. DRD utilized the services of
the Central Procurement Directorate (CPD) of the Department of Finance and Personnel
(DFP) to undertake the procurement procedures. The work was undertaken by the
Supplies and Services Division of CPD under the terms and conditions of a Service Level
Agreement (SLA) between the two Departments.

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2.4
A Prior Information Notice (PIN) had been published in the Official Journal of the
European Union (OJEU) in July 2005 which alerted potential operators across Europe to
the new competition for the ferry services contract. The procurement was not
commenced during the following 12 month period and so the PIN was resubmitted and
published in the OJEU in June 2006.

2.5
The formal procurement process commenced in May 2007 when expressions of interest
to bid for the contract were invited. In due course, following the tender period, three
tenders were received by the closing date of October 2007. These were assessed by an
Evaluation Panel but it was concluded in November 2007 that none of the bids was
acceptable, two because of non-compliance and one on grounds of non-affordability.
The non-compliance issues related mainly to the inability of alternative operators to
guarantee the availability of an acceptable vessel before the award of the ferry contract.

2.6
In parallel with this procurement process there had been growing local pressure for the
Rathlin Island ferry service to be enhanced to provide an improved level of service in
terms of capacity and comfort for the benefit of local users and to help promote tourism.
This followed the publication of the Rathlin Island Sustainable Tourism Strategy in June
2005 which highlighted the importance of a modern ferry service.

2.7
Following the unsuccessful outcome of the first procurement procedure in November
2007, a new procurement process was commenced in January 2008. This included a
new requirement for the bidders to offer enhanced services in addition to the basic
lifeline service highlighted in the original tender documentation. Central in the
Department’s thinking was not only a desire for a longer term solution, but also concerns
about increasing costs on the route and a desire to secure the best possible scenario for
the islanders within affordable limits. DRD had also had discussions with Caledonian
Maritime Assets Ltd (CMAL), the owners of the MV Canna which provided the existing
ferry services, and they reached agreement that the vessel would be made available under
a leasing agreement to any new operator of the ferry service.

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2.8
The new procurement procedure again resulted in three bids being received, one of
which was determined at an early stage to be non-compliant. The remaining two were
assessed under the oversight of CPD by an Evaluation Panel which comprised of DRD
staff, a member of the Ballycastle Harbour Authority and a marine consultant and the bid
of Mr. Ciaran O'Driscoll was ultimately determined to be the most economically
advantageous. He was subsequently awarded the new contract.

2.9
The new operator commenced the new service on 1 July 2008 following a handover
period from the previous operator, CalMac. A number of complaints and allegations
followed the tender action and it is these which form the substance of the report.

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REVIEW PROCESS

3.1
The investigators quickly concluded that while aspects of the review could be pursued
separately it was not practical to carry out the three strands of the investigation in
isolation, given the number of inter-related issues and a need to see the issues in context.
It was agreed that a joint approach, with a pooling of relevant information, leading to a
single comprehensive report, would best ensure a thorough investigation of the allegations.
On areas relevant to procurement the team relied heavily on Mr. Rowsell’s expertise, on
management and personnel issues, Mr. Hamilton, and on matters of record, Mr. Mark
Stranaghan (the lead Internal Audit official). A further consideration for the investigation
team was a need for the matters to be investigated as quickly as was practicable, given the
on-going confusion, the likely negative impact on the various parties concerned and
possibly on the effective operation of the Rathlin Island ferry service.

3.2
The following approach was adopted by the investigation team:
• Internal Audit working papers relating to the original queries under review in the
Department were made available and scrutinized by the new investigators;
• further examination of documents and records held by CPD and DRD;
• the investigation team liaised with NIAO to agree a way ahead and to facilitate
meetings with ‘whistleblowers’ made known to NIAO;
• meetings were held with ‘whistleblowers’ to provide an opportunity for them to
substantiate their complaints and for the investigators to probe the allegations made
and to seek supporting evidence;
• the allegations made were put to the relevant DRD and CPD staff directly involved
in the procurement of the Rathlin Island ferry service and explanations sought;
• Evaluation Panel members involved in the procurement were interviewed;
• CalMac officials and their company solicitor gave evidence to the review;
• interviews and written submissions were received from a number of other parties
named in the correspondence, to seek corroboration or refute; and
• A meeting was held with Mr. Jim Allister (MEP), who had raised a number of
concerns, to explain the nature of the review and ascertain if he had any direct
evidence or other sources who may be able to inform the review.

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3.3
The Team was to report to the Permanent Secretary of DRD at end September or as
quickly as possible thereafter (depending on the availability of witnesses).

Allegations/Complaints

3.4
In discussions with NIAO regarding the allegations and complaints made directly to them,
we were advised that the term ‘whistleblower’ was being used in the generic sense and
disclosures were not necessarily qualifying disclosures as described under the Public
Interest Disclosure Act 1998. We made it clear to NIAO that we would fully respect the
position of those making disclosures and deal sensitively with any information provided.

3.5
We have summarized the key allegations in Annex 3 of this report and Annex 4 provides
detail of the parties who have made allegations / complaints / raised concerns in direct
correspondence with the department. In the course of the investigation we have also
accepted written submissions from parties detailing specific allegations and complaints.

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FINDINGS

4.1
THE PROCUREMENT PROCESS

4.1.1
Public Contracts Regulations · ,

The Public Contracts Regulations 2006

4.1.2
The procurement of the Rathlin Island ferry service contract was covered under statute
by the Public Contracts Regulations 2006 (the Regulations) which came into force in
Northern Ireland on 31 January 2006. The Regulations set out the requirements of
[European Directive 2004/18/EC on the coordination of Procedures for the Award of
Public Works Contracts, Public Supply Contracts and Public Service Contracts.

4.1.3
Schedule 3 of the Regulations sets out categories of services covered by the Regulations.
This identities services involving "Transport by water" as Category 19 in Part B of the
schedule. The categorization of the contract as a Part B service has important
implications for the procurement process as explained below.

Part B Services

4.1.4
The application of the Regulations to Part B services is set out in Regulation 5 paragraph
(2) The contract is not one excluded by virtue of Regulation 6 or 8 and therefore, the
contracting authority is required to apply the following parts of the Regulations:
(a) Parts 1, 8 and 9: and `
(b) the following provisions in Parts 2 to 7:-
• Regulation 9 (technical specifications in the contract documents);
• Regulation 31 (contract award notice);
• Regulation 40(2) (statistical and other reports);
• Regulation 41 (provision of reports); and .
• Regulation 42 (publication of notices).

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4.1.5
This means that procurement procedures normally required by Parts 2 to 7 of the
Regulations covering the matters set out below do not apply to Part B services:-
• 3 Part 3 Procedures leading to the award of a public contract; A
• Part 4 Selection of Economic Operators;
• Part 5 The award of a public contract (except Regulation 31);
• Part 6 Specialized contracts; and
• Part 7 Matters relating to a public contract.

4.1.6
Although most of the procedures normally applicable to public contracts do not apply to
Part B services, Part l of the Regulations does still apply and places an overarching
obligation on contracting authorities to act in a fair, transparent and non-discriminatory
manner. Regulation 4 (3) states:-
"A contracting authority shall (in accordance with Article 2 of the Public Sector
Directive):-
(a) treat economic operators equally and in a non-discriminatory way,· and
(b) act in a transparent way. "

4.1.7
In broad terms therefore, the procedures used by a contracting authority for the
procurement of a Part B services contract are not constrained by the Regulations except
to the extent that they must be fair, transparent and non-discriminatory. Within this
overarching constraint DRD / CPD had discretion and freedom as to the process that they
adopted and applied. They chose to use some of the standard procedures that would be
used with Part A services but not all elements of those procedures. This partial
application of common practices may have given rise to some of the complaints but DRD/
CPD did follow the obligations in respect of Part B requirements.

EC Communication on Maritime Transport Services

4.1.8
In December 2003 the European Commission issued Communication 595 setting out its
views on the interpretation of Regulation 3577/92 which relates to the provision of
maritime transport services. This includes a section on the procedures for concluding
public service contracts for small island ferry services.

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4.1.9
The Communication document highlighted the cumbersome procedures which over-
complicated the procurement of ferry services for small islands and allowed a simplified
procedure to be adopted. The definition of small islands meant islands where the total
annual number of passengers carried by sea to and from the island was around 100,000
or fewer.

4.1.10
The simplified procedure allows the selection of a suitable operator entrusted to serve a
small island to be carried out following a simple call for expressions of interest without
launching a formal tender, provided that a Community-wide announcement of the service
is maintained, i.e. the publication of a Prior Information Notice (PIN).

4.1.11
On 12 May 2006 the Commission provided an update clarifying that public authorities
can use the simplified process if the maritime services involve less than 300,000
passengers per year. The Rathlin Island ferry service falls within this definition of a
small island and so a simplified process was permissible.

Application of the Regulations to the Rathlin Ferry Contract

4.1.12
Our investigations have established that the procurement procedures for the Rathlin
Island ferry service contract were based on those required for a Part B services contract
as set out in the Regulations and went further than the simplified process permitted under
the EC Communication on Maritime Transport Services. We have identified issues
relating to the application of the procedures which we have examined in detail and we set
out our findings later in this report.

Allegation: Procurement Procedures were not complied with.

4.2.1
Complaints and allegations made about the award of the Rathlin Ferry contract have
included concerns about the appropriateness of the overall procurement procedures that
were applied. It has been suggested by complainants that the normal processes used for
Part A services should have been followed. Specific allegations have related to:
• the assessment criteria;
• the adoption of an open rather than a restricted procedure;
• the lack of a standstill (Alcatel) period before the award of contract; and

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• post-tender negotiations.

4.2.2
As noted earlier, while there is an overarching requirement for the process to be fair
transparent and non-discriminatory, DRD and CPD had discretion within the
requirements of the Regulations governing Part B services, and the dispensation in
relation to small ferry services. In our opinion the specific complaints about the
application of the Regulations to the Rathlin Island ferry contract are based on a
misunderstanding of the Regulations: DRD / CPD were not required to apply the full
Part A procedures.

Key Stages in the Procurement Process

Previous Contract awarded in 2003

4.2.3
The previous contract to provide ferry services between Ballycastle and Rathlin Island
commenced in April 2003 and was operated by CalMac. The contract duration was
originally intended to be for an initial five year period extendable by two years in the
first instance and then with three further periods of one year to provide a possible total of
ten years.

4.2.4
The CalMac tender had been the only compliant bid received but due to a planned
corporate restructuring they were unable to enter into a long-term contract at that time.
This meant that the annual subsidy required by the company to operate the service had to
be renegotiated on an annual basis and the amount of subsidy increased over time without
further competition to test the value for money. Over the period of the contract the
subsidy increased. While on the face of it, it appears that the annual increase in subsidy
since 2003 was not unreasonable, both the original subsidy and the subsequent increases
had not been subject to any competitive challenge.

4.2.5
We are of the opinion that this was an unsatisfactory position and it was necessary and
justifiable for DRD to undertake a new procurement as soon as was practicable.

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Advertising the New Contract

4.3.1
A PIN was published in the OJEU on 19 July 2005 giving early notice that a new
contract was to be procured. This was not taken forward over the next twelve months
and so a new PIN was published on 28 June 2006. In both PINs the ferry services were,
in our opinion, correctly defined as service category 19 which identified the service as a
Part B service as set out in the Regulations and as explained above.

4.3.2
Following the publication of the second PIN an advertisement was placed on CPD
website in May 2007 inviting Expressions of Interest (EOI) from companies in bidding
for the new Rathlin Island ferry service contract. An electronic tendering system was
used to support the process and the return date for EOI was 18 June 2007.

4.3.3
Over this period DRD and CPD developed and agreed a SLA setting out the procurement
service that CPD would provide in line with the standards / principles set out in the
Northern Ireland Public Procurement Policy. The procurement for the Rathlin Island
ferry service contract was covered by this SLA. In addition a Procurement Initiation
Document was drawn up to cover this specific procurement which set out the roles and
responsibilities of the two Departments in taking forward the procurement.

4.3.4
We consider that the development of the SLA and the use of Procurement Initiation
Documents do represent good practice. Our investigations have however, revealed some
gaps in the roles and responsibilities which resulted in a lack of ownership of some
specific duties. This would suggest that the scope and clarity of the initiation documents
should be reviewed.

The Evaluation of Expressions of Interest

There were a total of seven requests for the prequalification documents which resulted in
three tender applications being submitted from:
• West Cork Coastal Cruises (Mr. Ciaran O'Driscoll);
• Rathlin Ferries Ltd (a CalMac Group company); and
• Cove Caravans.

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4.4.2
Following an assessment by the Evaluation Panel, all three firms who submitted an EOI
were invited to tender. We have reviewed the assessment of the EOI and we are of the
opinion that it was appropriate for all three firms to be taken forward to the tender stage.
The incumbent operator, Rathlin Ferries Ltd (CalMac), were considered by the panel to
have made the weakest prequalification submission. As a result they received the lowest
score and were the company at greatest risk of being omitted. We found this surprising
but we consider that the Evaluation Panel took the sensible view that they should be
included on the tender list.

4.4.3
Prior to the invitation of tenders in August 2007 DRD visited its counterparts in the
Republic of Ireland as they operated services similar to the Rathlin Island ferry. In the
context of this process there were discussions about general levels of subsidy, contractual
arrangements and about operators of the services in the Republic of Ireland. The
Department of Community Rural and Gaeltacht Affairs confirmed that in its experience
Mr. O'Driscoll was a potential candidate who had done well on other routes. The
Department of Community Rural and Gaeltacht Affairs has since said that "on three
occasions financial penalties have been imposed on the operator in accordance with the
terms of the contract. They went on to state that “Notwithstanding this however, it is
the Department’s considered view that the service provided by Tithe Saoire Cleire Teo to
Cleire rates on a par with the majority of other island Ferry Services subsidized by it".

The First Tendering Procedure

4.5.1
Tenders were invited by CPD on behalf of DRD on 29 August 2007. The objectives of
the service set out to be:
• to maintain a "life-line" service to Rathlin Island;
• to offer a contract term for the service of six years; and
• to ensure that the maximum annual amount of subsidy to be made available for the
support of the service is based on the most economically advantageous tender.

4.5.2
Whilst the services required under the contract were essentially a continuation of the
existing service, there was a clear indication to tenderers that an improved service to

15
customers was important. At para: 1.2.4. the tender document highlighted the
deficiencies with the current service at that time. It stated that:- .
“The ferry is Rathlin’s lifeline and a critical part of its ability to attract visitors. It
is attractive as a relatively cheap means of access but it almost certainly fails to
meet the expectations of many visitors, in terms of quality, due to the amount of
shelter provided, the design and layout of the passenger accommodation. In
addition the crossing is frequently rough."

4.5.3
In addition, para 2.3.2 of the tender document stated that:-
"Tenderers are encouraged to develop the service provided over and above the
minimum service requirements which add value to the service."

4.5.4
The tender documents also advised bidders that the issue of the Invitation to Tender
should not be construed as a commitment by the Department to place an order as a result
of the tendering exercise.

4.5.5
Tenders from the three bidders were received by the tender return date of 11 October
2007 . There was a short delay until 22 October 2007 to finalize the details of the scoring
matrix to support the marking of the assessment criteria before the tenders were opened.
The assessment criteria and weightings had been set out in the tender documentation but
the more detailed scoring guidance used by the Evaluation Panel in the marking of the
tenders was not agreed until after tenders were received. CPD recorded on the file that
the bids would remain unopened until agreement had been reached with DRD. In our
view the action taken by CPD was appropriate to protect the propriety of the process but
we consider that DRD / CPD should have ensured that the scoring matrix was
established and agreed before the tenders were submitted. There are also issues about
whether the scoring matrix was transparent and fully aligned with the assessment criteria
which we address later in the report.

4.5.6
During the tender period Mr. O'Driscoll had submitted a tender enquiry asking whether
he could submit the tender in his personal capacity rather than in the name of one of his
two companies involved in offshore island ferry services in the Republic of Ireland. It is

16
understood that this was because the company names were specific to the routes that they
served and would not have been relevant to the Rathlin Island service. We note that
CPD replied that provided that the position was transparent and in line with the position
set out in the prequalification submission then it would not be a problem. We consider
that the position as regards the programme for the establishment of the new company
should have been clarified at contract award stage, although in the event Mr.
O'Driscoll’s new company was established before the commencement of operations.

The October 2007 Tender Proposals

The CalMac Proposal

4.6.1
The technical proposal from CalMac was based on the ongoing use of the existing vessel,
the MV Canna. There was a limited improvement in the current service in relation to the
winter timetable, with an additional return sailing on a Monday, Wednesday and Friday.

4.6.2
CalMac stated in their tender that they had consulted with Moyle District Council and the
RDCA about the possibility of implementing both a passenger-only service as well as an
early morning sailing but had concluded that "it was not appropriate at that time to
implement such aspirations".

4.6.3
The subsidy required by CalMac for the first year of the new six year contract would
have represented a 25% increase in the subsidy paid to CalMac for operating the service
over the financial year 2007/08. We asked the company the reasons behind such a large
increase and were advised that this was as a result of sharp increases in key costs such as
fuel and insurance and an allocation of a portion of central management costs against
each route under operation. The Department advised that the level of subsidy required
was above the DRD budget available in 2008/09 for operating the ferry service, without
offering significant improvements to the service.

The O'Driscoll Proposal

Mr. O'Driscoll proposed a two-vessel solution; a second hand ro-ro vessel identical to
the current vessel in service on the route and a new purpose designed and built aluminium

17
catamaran to be available in summer 2009. It was proposed that the two vessels would
operate all year round.

4.6.5
The subsidy required by Mr. O'Driscoll would have been within DRD’s available budget
but in the event he was unable to guarantee a suitable main vessel at that time.

Cove Caravan’s Proposal.

4.6.6
The Evaluation Panel’s comments on this bid were that "the submission from Mr. Grant
failed to demonstrate compliance with the vast majority of the essential requirements as
stipulated within the terms of reference. The panel therefore agreed that the bid could
not be considered compliant.

Assessment of the First Tenders

Allegation: An Evaluation Panel Member had a potential conflict of interest.

The Process

4.7.1
Some complaints have raised questions about conflicts of interest on the Evaluation
Panel. Conflict of Interest forms were signed by the Evaluation Panel members at the
end of October 2007 / early November 2007 prior to the Panel undertaking the
assessment of the tenders. These show that there were no declared conflicts of interest.
It should be noted that these forms also covered the second competition and were not
updated because there was no delay in moving on to the second competition. We have
found no evidence to indicate a possible conflict of interest but in our view it would have
been advisable to require Evaluation Panel members to sign new forms. A specific
question was posed about the Clerk and Chief Executive of Moyle District Council
(Moyle DC) being on the Panel: we do not consider that either his position in the
council or as Harbour-Master should have precluded his participation.

Allegation: The Department was attempting to purchase the MV Bruernish for one of
the Bidders

4.7.2
DRD’s Marine Consultant, accompanied by DRD and CPD officials carried out
inspections of possible vessels proposed by the tenderers, on the 5th, 6th and 8th
November 2007; this included the MV Bruernish which had been proposed by Mr.

18
O'Driscoll. The owner of the MV Bruernish informed a contact in CalMac that it
appeared the Department was interested in the vessel. Having discussed the matter with
the Marine Consultant who led in the discussions and with DRD staff present, we are
content that the Department’s only interest was in checking whether the vessel was
available and suitable for the Rathlin route. In the event it was not. We have concluded
that there is no evidence to support the allegation that the Department was attempting to
purchase the MV Bruernish for one of the bidders.

4.7.3
The Evaluation Panel met on 9 November 2007 to consider the clarification issues.
DRD and CPD followed up on these issues and it became clear over this period that the
O'Driscoll and Cove Caravan tenders would not achieve the necessary technical
requirements and that the CalMac financial bid exceeded the funds available, in 2008/09.

4.7.4
During November 2007 it became apparent to DRD and CPD that the process was
unlikely to result in an acceptable outcome. By this stage it was also known by DRD
that the NI Executive had proposed additional funds for an enhanced level of service on
the Rathlin Island Ferry from 2009/10 onwards. In the circumstances they wrote to the
DRD Minister on 27 November 2007 requesting approval to the abandonment of the
competition on the basis that the process had failed to attract a compliant and affordable
bid within the budget for the ferry service. The minute identified that extra funds had
been made available for future years but that these were linked to an improved level of
service which the only compliant bid would not deliver. The minute referred to the
discussions that had been held with CMAL about the purchase or lease of the existing
ferry to make it available to tenderers as part of a new competition. The Minister
approved the abandonment of the competition and the commencement of a new
procurement to achieve improved service on the route. We recognize that DRD officials
were keen to have kept their Minister informed.

4.7.5
The Evaluation Panel met again on 28 November 2007 to formally assess the suitability
of the bids for the delivery of the Rathlin Island ferry service contract. They noted that
the amount of subsidy required by Rathlin Ferries Ltd to operate the service was not
acceptable to the Department, both in terms of the resource budget available for the

19
service and the proposed increase in cost over and above current levels. The Evaluation
Panel therefore, agreed to reject the bid. The Evaluation Panel also agreed that the bids
submitted by Mr. O'Driscoll and Cove Caravans were non-compliant.

4.7.6
In overall terms, the Evaluation Panel decided that no contract should be awarded on the
basis that:-
• the CalMac tender was financially unacceptable; and
• Mr. O'Driscoll’s and Cove Caravan’s tenders were non-compliant in terms of the
technical requirements.

4.7.7
All three unsuccessful tenderers were advised of the outcome in letters sent on 29
November 2007. The letter also advised them that a new competition would be
commenced shortly.

Allegation: The CalMac tender should have been accepted as it was the only compliant
bid.

4.7.8
It has been suggested by complainants that the CalMac tender should have been accepted
as it was the only tender that was compliant. We are of the opinion that DRD were fully
within their rights to abandon the procurement for the following reasons:
• two of the three bids were non-compliant;
• the CalMac financial bid exceeded the available budget and represented a
substantial increase over the current level of subsidy (a trend the Department
was concerned about when it commenced the tender) with little increase in the
levels of service;
• NI Executive had earmarked additional funds to permit improved service levels
which were not provided by the tender;
• DRD had been in the position of negotiating annual subsidies in a non-
competitive environment since 2003 and the procurement process had failed to
test the value for money offered by CalMac;
• if the contract had been awarded to CalMac the only way of achieving improved
services would have been through further non-competitive negotiation;

20
• the non-compliant tenders had indicated that better value for money could be
achieved if an appropriate vessel were available;
• CMAL had agreed to the proposal of leasing the existing ferry to any new
operator which would mean that an effective competition could be run to
properly test value for money; and
• the tender documents had advised bidders that there was no commitment to
award a contract as a result of the competition and so DRD was entitled to
abandon it.

4.7.9
The Evaluation Panel could have suggested the Department enter into negotiations with
CalMac but decided that, in the light of the above, this was unlikely to produce the
optimum result.

4.7.10
We questioned DRD officials as to why a submission was made to the Minister
recommending a new competition prior to the formal evaluation of the three bids by the
Evaluation Panel. The Department has said that it took this course because it allowed the
Panel to begin planning the second phase of the competition immediately and time was of
the essence if a second competition was to be delivered in 2008. Notwithstanding the
fact that the Department was the primary arbiter on affordability, we consider that the
sequencing of events did not follow best practice and that it would have been preferable
for the Evaluation Panel to have completed their considerations before reverting to the
Minister. The decision not to move forward on the basis of the first tender was
nevertheless in our view the right one to take.

The Availability of New Funding

Allegation: Funding was being made available for the purchase of a vessel for the
benefit of one of the operators

Some of the complaints received about the procurement process relate to the additional
funding that was made available. This appears to be based on a misunderstanding of the
budgeting and funding process. Complainants have expressed concern that funding was

21
being made available for the purchase of a vessel for the benefit of one of the operators
and that other bidders were not advised of the availability of these funds.

4.8.2
We reviewed file documentation and noted that PPTD bids for additional funds in early
2007 were made on an entirely contingent basis against the possibility that the
forthcoming tender would not produce an acceptable outcome. The bid identified £7
million as the cost of a Ro-Ro vessel and £1.2 million for a cheaper alternative. The
Department had no desire to purchase or lease ferries. In the event, the £1.2 million bid
was endorsed by the Executive in its October 2007 draft budget settlement. Central in
this was the expectation of enhanced service and DRD could therefore have proceeded
with a compliant bid which delivered improved service quality. Unfortunately, as set out
above. the only compliant bid received did not offer a significant improvement in the
services on the route and exceeded the budget available for 2008/09.

4.8.3
It has been suggested by complainants that details of the additional funds made available
were not communicated to all. We have no evidence of the position on additional
funding having been communicated to any of the bidders. It would not in any event have
been sensible to advise tenderers of the amount of money available as this would have
undermined the competitive nature of the process. The concern about the funding
position is, in our opinion, a misunderstanding of the impact of finance on the tender
process. The money was available to DRD only if it had been necessary for them to
purchase a vessel which could then have been made available to a successful bidder and
thereby to enhance service levels. There were obvious reasons as to why it would not
have been sensible for DRD to be the owner of a vessel and to carry all of the
responsibilities that would have involved. In addition, DRD was able to reach agreement
with CMAL about the lease of the MV Canna to any new operator of the ferry services
and it was therefore no longer necessary to pursue the purchase option. As a result the
bulk of funds which were available for the purchase of a new vessel were released and
reallocated to meet other budgetary pressures.

22
4.8.4
It has also been suggested in the complaints made about the contract that the subsidy
provided by DRD under the contract should not be used for the purposes of purchasing a
new vessel. The tender documents stated at paragraphs 1.51 and 1.5.2 that:-
“The assistance available to the successful tenderer will be a subsidy towards the
running costs of operating the service. This will be provided to supplement the
Operator’s revenues earned for running the route.
The Department will not be offering assistance for capital expenditure for
upgrading any vessels used during the period of the contract."

4.8.5
It appears that the complaint relates to the fact that Mr. O'Driscoll is proposing to
purchase a new vessel. However we have found no evidence of any offer or expectation
of capital grant for this purpose. It would clearly be inappropriate if subsidy was
directly used as capital for the acquisition of the vessel. It may however, be that finance
charges in relation to the provision and operation of a new vessel could be regarded as an
overhead cost associated with operating the new service. This need not, in our opinion,
be a negative, provided the available amount of subsidy stays within the basis of the
accepted tender. There is no reason to doubt that the decision to propose a new
catamaran vessel was made entirely by Mr. O'Driscoll on the same information base as
was available to the other bidders.

Inviting New Tenders

Advertising the New Competition

Allegation: DRD failed to notify the existing provider (CalMac) of its intention to
retender

Allegations have been made that the Department failed to notify the existing provider
(CalMac) of its intention to retender and that the new procurement process was not
properly advertised. The allegation was not made by CalMac and in the course of the
investigation CalMac officials confirmed that they were informed of the Department’s
intention to retender. Our investigations have identified that a range of steps were taken
by DRD and CPD to advertise the new opportunity:

23
• the letter to the unsuccessful bidders from the tirst competition sent on 29
November advised them that a new competition would commence shortly;
• letters were sent to nine companies on 4 January 2008 who had previously
expressed an interest in the service advising them that tender documents were
about to be published on CPD's website;
• the tender documents were placed on CPD's website on 7 January 2008 with a
tender return date of 28 February 2008;
• an advert was placed in the Belfast Telegraph on 14 January 2008 and in the
Newsletter and Irish News on 15 January 2008 advertising the tender for the
ferry services; and
• the tender was advertised locally in the Ballymoney and Moyle Times on 21
January 2008.

4.9.2
It has been suggested in the complaints that a new PIN should have been published for
the second procurement. In our view this was not essential as the second procurement
followed straight on from the first procurement and it was for the same service as
previously advertised. All firms who had previously responded were informed of the new
competition and it is very unlikely that a new PIN would have attracted new bidders.

4.9.3
In our opinion the steps taken for advertising the second procurement were reasonable
and we have not seen any evidence to suggest that any firm who may have wished to
tender was not aware of the opportunity.

Objectives of new tender

4.10.1
In the second tender the objectives for the service were changed as follows:
"The objectives for the service are:·
• To maintain a "life-line" service to Rathlin Island,· and
• To provide an improved service for the islanders and visitors. "

4.10.2
There were many statements in the tender documents to encourage tenderers to propose
enhanced services. These included paragraphs 1.6.1, 2.3.3, 2.3.4, 2.8.2, 2.10.3, 3.2.14
and 5.10.1 which are set out in Annex 5.

24
Other Changes to the Tender Documents

Allegation - Changes were made to the tender documents to accommodate one specific
bidder.

4.10.3
There have been allegations made that in addition to the requirement for enhanced
services, other changes were made to the tender documents to accommodate one specific
bidder. Our investigations have indicated that DRD, CPD and the Evaluation Panel
reviewed the original tender documents in the light of lessons learnt from the first
aborted competition. This in our opinion would be regarded as good practice.

4.10.4
Changes made included presentational issues, revised requirements and matters which
were no longer considered to be necessary. Examples of changes and reasons for them
are shown below:
• the objectives of the contract were changed to reflect the new essential
requirement to deliver improved services;
• the option of extending the length of contract to twelve years was dropped
because the leasing arrangement for the MV Canna with CMAL only covered a
six year period;
• the risk table was dropped because it was considered that it did not help clarify
the position regards risk allocation and it did not add to the conditions of
contract; and
• one of the financial guarantees was dropped because it appeared that the
Department would in any event pay the cost of the risk through the cost of the
premiums.

4.10.5
We have not found any substantiated evidence to show that they were aimed at favouring
any specific supplier and at that stage DRD and CPD did not know who would respond
to the tender invitation. In addition the amended requirements were set out clearly in the
document and applied on an equitable and transparent basis to all bidders.

25
Harbour Works

4.11.1
The tender documents set out the position in respect of possible improvements to the
existing harbour berths. Paragraph 3.2.27 stated that:
"Tenderers should note that neither the Department nor Moyle District Council
envisage providing for any significant investment in upgrading or improving the
current berths. It is the responsibility of the tenderer to satisfy itself that the vessel
proposed is compatible with existing berths and harbour facilities."

4.10.2
The use of the words "envisage" and "significant investment" in para 3.2.27 did appear
to allow for the possibility of a small level of expenditure to improve the current berths.
If there was no possibility of any money being spent then the word "significant" could
have been omitted.

4.10.3
In addition the tender documents stated at paras 2.10.1 and 2.10.2 that:
"Tenderers should investigate and satisfy themselves as to the compatibility of any
vessels proposed with existing piers and slipways and arrangements for passenger
boarding and disembarkation. "
"Tenderers should note however, the key constraint that any vessel would have to
be capable of use in all reasonable conditions at the existing harbour without the
need for additional investment, and in time for service commencement."

44.11.4
However the tender documents, at paragraph 3.5.13 also stated that:-
"The Operator must consider and make suitable arrangements for disabled access
to and from any vessel. In doing so, the guidelines issued by the international
maritime organization in respect of the carriage of elderly and disabled
passengers, should be taken into account and complied with where possible. Where
constraints of design with an existing vessel prevent full compliance the closest
possible alternative should be achieved. Such constraints and alternatives must be
detailed in the tenderer's technical submission. Tenderers should pay particular
attention to the harbours at Ballycastle and Rathlin when considering the suitability
of any vessel for the embarkation and disembarkation of elderly and disabled. "

26
4.11.5
Our understanding of the above paragraph is that DRD was inviting tenderers to consider
options for improving the access arrangements for elderly and disabled passengers at the
harbours in association with any vessels proposed for use on the service. Mr. O'Driscoll
did submit options on this basis. He identified in his tender that following extensive
discussion with the Ballycastle harbour master that expenditure of £50k would be
required to make berths at both harbours wheelchair accessible and available to all boat
users as well as the ferries. However, Mr. O'Driscoll is firmly of the view that the
proposed works are solely for the purposes of enabling disabled access and are not
necessary to allow the second vessel to be berthed.

4.11.6
Mr O'Driscoll is clear that the passenger only vessels he will be using on the service
can be berthed at the existing harbours without new works and that there are examples of
this currently happening elsewhere in Ireland. We have discussed this with both MCA
and the Department’s Marine Consultant and while neither is in a position to offer a
definitive view, each said that in their general experience and from sight of papers,
drawings etc successful berthing within the existing harbour infrastructure may well be
possible. In these circumstances we cannot conclude that the Evaluation Panel was
wrong to accept this aspect of Mr. O'Driscoll’s bid as being compliant. The proposed
harbour work is to accommodate improved elderly and disabled access which was
highlighted in the tender documents. The final proposals and the cost estimates were
established by DRD / CPD (we are advised that the current estimate is circa £100k)
following clarification meetings about the option Mr. O'Driscoll had set out in his
tender

4.11.7
Complainants have protested that amounts of £50k-£150k cannot be regarded as
insignificant. Unfortunately they appear to have run together the provisions of paragraph
3.2.27 and paragraph 3.5.13 of the tender documents. Certain of the communications in
the Department would appear to follow the same confusion. The bottom line would
appear to be that DRD and CPD have concluded that £100k of harbour works is
reasonable to enhance access arrangements for the elderly and disabled. The
"reasonable" test appears to have been related to the total cost of the contract and the

27
overall value of the harbour. In our opinion Mr. O'Driscoll does appear to have
complied with the requirements set out in the tender documents.

4.11.8
Specifically, CalMac representatives queried Official 2’s e-mail of 16 April 2008 which
says "...We are therefore content to invest this money to secure the bid from Mr.
O'Driscoll" as evidence that Mr. O'Driscoll’s bid was non-compliant i.e. that it could
not have operated without incurring significant costs and evidence of the Department’s
bias towards O'Driscoll. However this was the covering e-mail to the final Tender
Evaluation Report to the Evaluation Panel, explaining that all the clarification checks had
been satisfactorily completed and that the Panel’s original decision could proceed. That
it was loose drafting is not in doubt, but it is certainly not evidence that the Department
was pursuing a particular outcome. The allegation also wrongly relates the spend to the
paragraph 3.2.27 requirement of the tender documents, as opposed to paragraph 3.5.13.
Complainants also cite 13 March 2008 correspondence between Official l and the Clerk
and Chief Executive of Moyle District Council (about Council responsibilities for taking
the final decision on the harbour works as possibly delaying the compliance decision on
Mr O'Driscoll’s tender) as being evidence of a DRD view that Mr. O'Driscoll’s tender
was at that time non-compliant. Having spoken to Official 1 and the Clerk and Chief
Executive of Moyle District Council we do not share this view. While the drafting could
have been better, we view this as a debate on ownership of the critical path on the
exercise. As we note above, we consider the paragraph 3.2.27 requirement to have been
met at that time and, in any event, decisions on the new vessel would not have been
required for several months.

4.11.10
In overall terms, the position on possible harbour improvement works and available
funding should in our opinion have been made clearer. We are satisfied however, that it
was very clear that DRD was seeking an improved service with alternative or additional
vessels which made it possible that some modifications may be required at the harbours.
The tender documents did not rule out insignificant investment in improving the current
berths and in respect of disabled access invited tenderers to submit alternative options.
We are of the opinion that all bidders had an equal opportunity to consider and submit

28
alternative proposals which would not result in significant investment required to
upgrade the berthing arrangements. We note that whilst CalMac say that they raised the
question of potential harbour works at a meeting involving Moyle District Council and
DRI) officials, they did not seek to pursue this matter formally with the Department,
perhaps because they saw little prospect of switching to a new vessel in the foreseeable
future

Tender Proposals for the Second Competition

4.12.1
Three companies submitted responses by the closing date of 28 February 2008 - Rathlin
Ferries (CalMac), Mr. O'Driscoll and Island Ferries. An initial eligibility sift was
undertaken by CPD to determine compliance against the essential criteria. On this basis
the tender from Island Ferries was deemed to be non-compliant. The remaining two
proposals are described briefly below.

The CalMac Proposal

The technical proposal from CalMac was based on the ongoing use of the existing vessel,
the MV Canna. In the peak summer months an increased timetable was offered with
additional sailings operated by the MV Raasay. This was subject to the vessel not being
required on the Clyde and Hebrides service which would take priority. There was also a
proposal to increase the winter timetable with additional return sailings on the MV Canna
on a Monday, Wednesday and Friday. CalMac have expressed concern that they were
unfairly marked down because they could not guarantee that the second vessel would
always be available. In our view it was right and proper for the Evaluation Panel to
reflect the possible non-availability of the MV Raasay in their marking. To do otherwise
would have been unfair on bidders who were offering a dedicated vessel. We have no
reason to doubt or second-guess the assessment scores awarded by the Evaluation Panel.
CalMac repeated the position they had set out in their first tender that they had consulted
with Moyle District Council and the Rathlin Development and Community Association
(RDCA) about the possibility of implementing both a passenger-only service as well as
an early morning sailing. They had concluded "that it was not appropriate at that time to
implement such aspirations". It is understood that this was based on their discussions

29
with Moyle District Council and RDCA during the first procurement process and that
further advice or clarification from DRD had not been sought. DRD had at various
times, during the regular contract quarterly review meetings, discussed with CalMac
management the prospect of enhanced service provision on the route. We were advised
by CalMac that it was unlikely that they would have been able to provide a second
dedicated vessel for the foreseeable future.

The O'Driscoll Proposal

4.12.4
Mr. O'Driscoll proposed a two-vessel solution based on the use of the existing vessel
(the MV Canna) and the introduction of a new purpose designed and built aluminium
catamaran. It was proposed that the two vessels would operate all year round. In the
period up until the new catamaran was built (estimated to be one year) Mr. O'Driscoll
proposed the use of the MV True Light as the second vessel. In the event, a problem
was discovered with the certification of this vessel due to modifications made by
previous owners. This meant that Mr. O'Driscoll could not proceed with the MV True
Light and he identified an alternative and equivalent vessel.

4.12.5
The tender proposal also identified the need for certain minor works needed to be carried
out at both harbours to make the berths fully wheelchair compliant for the new vessel.

Compliance with Tender Requirements

Allegation: The tender submitted by Mr. O'Driscoll was not compliant.

4.13.1
It has been alleged that the tender submitted by Mr. O'Driscoll did not satisfy all of the
essential requirements and should have been treated as non-compliant. We have
reviewed the tender submission to check it against the requirements set out in the tender
documents. Para 5.2 of the tender documents sets out guidelines for submitting a
compliant tender and Annex 9 of the Invitation to Tender provided further information
on supporting material. The results of our review of the essential requirements are
shown in Annex 6 of this report. It can be seen that there were some minor issues. The
VAT form supplied by Mr. O'Driscoll was not fully completed but this was not critical
to the assessment of the proposal and could be easily rectified. It has been suggested that
Mr O'Driscoll's bid was non-compliant because he did not provide a performance bond

30
at tender stage. However, para 16 of the Invitation to Tender said that tenderers should
price for the bond but the bond would only need to be put in place if the bid was
successful.

4.13.2
Complainants have raised concerns about the adequacy of Mr. O'Driscoll’s responses on
timetabling and operational management and implementation plans. We are of the
opinion that the tender did contain all essential requirements. We noted however, that
the level of detail in the O'Driscoll bid was less comprehensive than that contained in the
CalMac bid and we consider that this may have reflected the different nature of the
companies and the resources they have available to support public sector tender
processes.

4.13.3
Insofar as the timetabling and ticketing are concerned, a complaint has been made that
alter the bids were opened, but before the evaluation, RIFL Employee 1 provided
additional information to CPD (on 6 March 2008). This followed an e-mail request from
PPTD / CPD identifying that clarification was necessary in this area and also on the
ticketing system. We are of the view that the process for the Part B Services
Procurement allows such action.

4.13.4
The weakest areas of the O'Driscoll tender submission appear to have been the level of
detail relating to the quality plan and also the risk assessment in relation to the proposed
vessels. It is not clear from the tender documents however, whether the risk assessment
was required at tender stage or needed to be in place before the commencement of the
operations. It would in our opinion have been difficult for tenderers to complete a full
risk assessment for a proposed vessel before the contract was awarded and possibly
before they had acquired a vessel through purchasing or lease arrangements.

4.13.5
In our opinion the Evaluation Panel was justified in their decision that the O'Driscoll
tender submission did achieve the necessary requirements for it to be considered
alongside the CalMac tender. We also noted that the tender documents stated that
"failure to comply may result in a tender being rejected " which gave DRD / CPD
discretion as to whether a bid would be rejected or not. In our view it would have been

31
appropriate for DRD / CPD to take account of the degree of compliance before deciding
whether to reject a bid.

4.13.6
We have also been made aware of allegations relating to issues connected with ferry
services operated by Mr O'Driscoll in the Republic of Ireland. Whilst these issues are
outside the scope of this investigation we have considered whether there are any
implications or lessons to be learnt for the CPD procurement procedures. As described
in para. 4.4.3 DRD officials did visit their counterparts in August 2007 to discuss
procurement procedures and to consider potential suppliers in the ferry services market.
We consider that it would have been desirable for CPD / DRD to require bidders to
provide the names of other Clients so that appropriate checks could have been made if
necessary during the evaluation process. This would need to have been done in a way
which avoided discriminating against any tenderers who did not operate similar services
in the Republic or in Northern Ireland but it would have allowed DRD / CPD to seek
updated views on the performance of any relevant operators and for any issues to be
discussed with the bidders.

4.13.7
We consider however, that if further references had been sought then this would not have
affected the outcome of the process as the Department of Community Rural and
Gaeltacht Affairs in the Republic has since expressed their considered view that the
service provided by Mr O'Driscoll is on a par with the majority of other island Ferry
Services subsidized by it. Some contractual penalties have been imposed by the
Department in the Republic but these would not in themselves rule the operator out from
bidding or for winning other opportunities. We are aware that some allegations relate to
whether tender commitments have been delivered in the Republic of Ireland but we are
not in a position to comment on those issues. In any event these would be matters which
would be covered by the contract and remedial steps could be taken by the DRD as
provided for under the contract if the required level of service on the Rathlin route is not
achieved.

32
Comparison of the Two Main Bidding Companies

4.14.1
The two bidders left in the competition after the initial assessment were fundamentally
different size and types of company.

4.14.2
CalMac was the incumbent who had delivered a satisfactory service over a long period of
time but had not demonstrated a commitment to significantly improve the level of service
to customers. The turnover of CalMac in 2006/07 was £48.5m and they employ over
1100 people through their wholly owned subsidiary companies. The company is owned
by the Scottish Executive and its core business is the coastal services on the west coast of
Scotland. The Rathlin Island ferry service represents approximately 1% of their overall
business.

4.14.3
RDCA told the review team that while the CalMac service had been reliable, the
company had been unable to deliver on talk of better vessels and had, on occasion, been
somewhat remote as regards contact with the Islanders.

4.14.4
Mr. O'Driscoll operates coastal ferry services in the Republic of Ireland but his
company, West Cork Coastal Services, is in terms of size of operation, at the other end
of the scale compared with CalMac Ferries. It is basically a family business with fewer
than 10 staff and an annual turnover of less than £0.5m. He operates a similar scale
service to the Rathlin Island ferry service and brings considerable personal experience
and understanding of the needs of an island community. The Rathlin Island ferry
contract represents a substantial proportion of his overall business and in our opinion it
was reasonable for DRD to expect that it would be a high priority for him to make it a
success. He appears to have demonstrated a good degree of commitment by bidding for
it on three occasions and in each tender he submitted proposals for making substantial
improvements to the service. RDCA told the review team that it had been impressed by
Mr. O'Driscoll’s responsiveness to date.

33
The Assessment of the Second Tenders

Clarification Meetings

Allegation: DRD was involved in illegal post-tender negotiations

4.15.1
Some of the complaints received have related to a number of clarification meetings or
site visits held with Mr. O'Driscoll. The tender documents set out that clarification
meetings and vessel inspections may be carried out as part of the evaluation process.

4.15.2
Para 2.10.6 (repeated at para 5.10.4) stated that:-
"The Department may wish to inspect any vessels as part of the tender evaluation
process. Details of where this can be done should be provided by tenderers in their
technical submission."

4.15.3
Para 5 . 2. 3 stated that: -
"The Department will consider the information provided in the proposal in
response to this document and will reach an objective decision as to whether or
not, in its view, this will be capable of meeting the requirements set out in this
specification. This process may involve a period of clarification with tenderers."

4.15.4
In line with the process set out in the tender DRD, CPD and a Marine Consultant met
with Mr. O'Driscoll on 10 March 2008 at Killybegs boatyard to inspect a vessel
proposed for use on the route. This meeting has attracted complaints of improper
negotiations as it was held prior to the evaluation meeting on ll March 2008; however
there is no evidence to prove that any improper discussions took place. This approach
was identified in advance as part of the tender evaluation process and it is in line with
standard practice.

4.15.5
A clarification meeting was also held at Moyle DC on 13 March 2008 between DRD,
CPD. the Harbour Master, the Marine Consultant, the Clerk and Chief Executive of
Moyle DC and Mr. O'Driscoll to clarify the need for harbour works. This was followed
by a further clarification meeting on the same subject on 20 March 2008 at Ballycastle

34
harbour and which was also attended by a representative from CPD Civil Engineering
section.

4.15.6
Questions have also been raised in the complaints as to why meetings were held with Mr.
O'Driscoll and not with CalMac. In our opinion this was not surprising as DRD was
familiar with CalMac and their main vessel and no meetings were likely to have been
necessary. It was in our opinion appropriate that meetings should be held with Mr.
O'Driscoll to clarify the suitability of his proposals for the vessels and the harbour
arrangements.

4.15.7
There have also been suggestions that matters were discussed at these meetings with Mr.
O'Driscoll which went beyond genuine clarification issues. We have not however, seen
any evidence of this and it is denied by the people who attended the meetings. One of
the clarification meetings was however held at Ballycastle harbour and we understand
that it was, to some extent at least, observed or overheard by staff from CalMac who
were involved in ferry operations at the harbour terminal. The meeting may have
created the perception that Mr. O'Driscoll was being favoured even though, as noted
above. the meeting was for a valid purpose. Having spoken with the complainant we are
content that the concern expressed was genuine but that nothing improper actually
happened. In our opinion this perception could possibly have been addressed by
informing other tenderers that clarification meetings were being held and by possibly
having an independent observer at the meetings. CPD should also have ensured that a
formal record of each meeting was retained which fully documented the discussions and
any decisions. A note was produced for one clarification meeting but in our opinion was
not sufficiently detailed to provide the necessary assurance. We consider that the non-
availability of detailed minutes has fuelled the level of concern.

The Assessment Process

4.15.8
Following the decision to abandon the first competition the Evaluation Panel reviewed
the award criteria at their meeting on 28 November 2007 to consider whether any
changes should be made for the new competition. The revised assessment criteria

35
reflected the new objective of providing an enhanced service on the route. This is
outlined in Table 1 below:

Table 1: Agreed Assessment Criteria for 2nd Tender Competition

Award Criteria - Maximum marks

as used in the evaluation scoring frame
Service levels for passengers, cars, freight, livestock 300
and hazardous goods.
Vessels, including relief, emergency services, disabled 250
access, ship boarding practices, Port Assets.
Compliance with Regulations.
Timetables, performance regime and ticketing . 100
Unscheduled events, integrated transport, consultation, 50
marketing and website.
Subsidy required. 500
Total 1200

36
Allegation: The Criteria used to evaluate the second tender competition differed from
that published.

4.15.9
However, as detailed further at paragraph 4.16.1, the award criteria published in the
tender documents differed from that agreed by the Evaluation Panel. Regrettably this
appears to have been a breakdown in the quality assurance process, perhaps because of
time constraints within which the procurement had to be completed. The differences
between the published criteria in the first and second competitions are shown in Table 2
below.

Table 2 - Comparison of the Published assessment criteria from the first and second
competitions:

Award Criteria Maximum Award Criteria Maximum

First competition mark Second Competition (as mark
set out in tender
documents)
Service levels for passengers, 200 Service levels for 300
cars, freight, livestock and passengers, cars, freight,
hazardous goods. livestock and hazardous
goods.
Timetables, timing and
frequency of sailings,
passage time
Vessels, including relief, 200 Vessels, including relief, 250
emergency services, disabled emergency services,
access, ship boarding disabled access, ship
practices, Port Assets, boarding practices, Port
compliance with regulations. Assets.
Monitoring and safety of 100 Performance Regime and 100
Operations, financial Operational, Quality and
guarantee and insurance. Implementation plans.
Ticketing .
Timetables, performance 100 (item included above) 100
regime and ticketing.
Unscheduled events, 100 Unscheduled events, 50
integrated transport, integrated transport,
consultation, marketing and consultation, marketing and
website. website.
Subsidy required. 500 Subsidy required. 500
Total 1200 Total 1200

37
4.15.10
Notes on Table 2:
• the table shows that in the tender documents for the second competition the criterion
referring to timetables was moved, together with the 100 points allocation, to the
first criterion referring to service levels;
• " Compliance with regulations" was omitted from the second criterion in the second
competition because it was held to be a requirement;
• the wording of the third criterion was also amended in the second competition to
describe the overall performance regime; and
• the weighting for the criterion referring to the vessels was increased from 200 to 250
points to reflect the new objective of improving the services. This was
accommodated by reducing the weighting for unscheduled events by 50 points.

4.15.11
The Evaluation Panel met on 11 March 2008 to review compliance and to assess the
tenders against the evaluation scoring frame and a note of the meeting was produced. We
have inspected the paperwork to review the procedure for finalizing the approval of the
assessment criteria and we are concerned that the amendments to the criteria and
weightings following the first abandoned competition have not been fully documented.
We also have a concern that while the electronic process for recording the development
of key documents may in theory provide an adequate system, in practice there is a risk
that it may not deliver the transparency requirements and can - as happened in this
instance - lead to wrong versions of documents being tabled. Following the assessment
meeting there were a number of outstanding matters of clarification which were resolved
over the next few weeks, with some minor changes being made to the scoring. Again we
have not been able to find a complete record of how these changes were made and
approved. While we have since confirmed the rationale and accept that these changes
were of only a minor nature, the process should have been better documented. The
resolution of these issues delayed the issue of the tender assessment report to the
Evaluation Panel and in our opinion the agreed scores and draft report should have been
issued to the Panel within one or two days of the assessment - for their confirmation -
even if there were minor outstanding issues to be resolved which may have required
amendments to the provisional scores.

38
4.15.12
The final evaluation report was sent from CPD to DRD on 15 April 2008 who sent it to
the members of the Evaluation Panel for approval on 16 April 2008. Approval from all
members of the Panel was received on 18 April 2008 and on the same day. CPD issued
the contract award letter to Mr. O'Driscoll and also sent letters to the unsuccessful
tenderers.

The Financial Assessment

4.15.13
The Financial assessment was completed by CPD with no input from other members of
the Panel and there was very little difference in the subsidy requirements set out in the
two bids. The initial financial assessment did not include allowance for the harbour
works required as part of the O'Driscoll tender. Subsequently an assessment of the
impact of these costs was undertaken. However, the estimated cost of £150k for the
harbour works was the equivalent of only 4% of the total subsidy required over the six
year period of the contract. We have been informed that the estimated cost for this work
is now likely to be £100K. This would have represented approximately 20 marks in the
financial calculation which would not have been significant as the O'Driscoll tender
scored 103 marks more than the CalMac tender on the technical proposal.

4.15.14
In reviewing the financial assessments we have also noted that the subsidy requirements
submitted by the tenderers were based on their own estimates of passenger volumes.
This resulted in different assumptions being made in each bid. The CalMac predictions
were significantly higher than those submitted by Mr. O'Driscoll even though his
proposal offered much higher overall capacity. The significance of this is that the
contract makes provision for a profit sharing system in the event that revenue exceeds the
amount set out in the base case. The operator is allowed to retain 50% of the increased
revenue with the remaining 50% being used to reduce the subsidy payment.

4.15.15
In our opinion DRD and CPD should have considered the potential opportunity of both
bids to achieve profit sharing savings to DRD. If allowance had been made then this
would have increased the attractiveness and scoring of the O'Driscoll bid due to the
substantially higher overall passenger capacity provided by the proposal. Equally, the

39
harbour works expenditure of £150k on elderly and disabled access should have been
formally weighed in a more transparent way against the O'Driscoll bid.

40
Feedback Meeting

4.16.1
Although not formally required under the Regulations applicable to Part B services
contracts, DRD held a debrief meeting with CalMac on 2 May 2008. During the course
of the feedback meeting it became apparent that there was a discrepancy between the
award criteria agreed by the Evaluation Panel and those set out in the published tender
documents. The variations are shown in Table 3 below.

Table 3 - Discrepancies between the criteria published in the tender documents and
those in the evaluation scoring frame:

Award Criteria - Maximum Award Criteria - Maximum

as set out in tender marks as used in the evaluation marks
documents scoring frame
Service levels for 300 Service levels for 300
passengers, cars, freight, passengers, cars, freight,
livestock and hazardous livestock and hazardous
goods. goods.
Timetables, timing and
frequency of sailings,
passage time
Vessels, including relief, 250 Vessels, including relief, 250
emergency services, emergency services,
disabled access, ship disabled access, ship
boarding practices, Port boarding practices, Port
Assets. Assets.
Compliance with
Regulations
Performance Regime and 100 Timetables, performance 100
Operational, Quality and regime and ticketing
Implementation plans.
Ticketing
Unscheduled events, 50 Unscheduled events, 50
integrated transport, integrated transport,
consultation, marketing and consultation, marketing
website. and website.
Subsidy required. 500 Subsidy required. 500
Total 1200 Total 1200

41
4.16.2
Notes on table 3:
• In the assessment process the element referring to timetables was included in the
performance regime criterion rather than as part of the first criterion on service
levels;
• In the assessment process in the second criterion "Compliance with Regulations"
was introduced; and
• The wording of the third criterion about the performance regime was amended. The
reference to the operational, quality and implementation plans was removed but they
can be described as being covered by the overall performance regime.

4.16.3
Until the feedback meeting on 2 May 2008 DRD and CPD staff were not aware of the
discrepancies in the criteria, in particular that the wrong criteria had been inadvertently
published in the second tender document. We were advised by CPD and PPTD officials
that this came as a surprise to them. DRD and CPD accepted responsibility for the
mistake and PPTD immediately asked CPD to review the matter with a view to going
back to CalMac. Unfortunately the paper trail is not conclusive; it appears that criteria
used in the tender assessment process were those agreed by the Evaluation Panel but that
an earlier version of the table was mistakenly included in the tender document.

4.16.4
Clearly the mistake should not have occurred, not least given the increasing legal focus
on transparency. In our opinion, even though the contract had been awarded, the effect
of the mistake should have been formally reviewed by the Panel and the bidders notified
of the outcome in writing. Being seen to be fair is extremely important in public
procurement and transparent action to review the decision and award may have allayed
certain of the concerns which subsequently came to pass.

4.16.5
That said, the key issues are whether the inclusion of the correct table in the tender
documents would have affected the production of the tender submissions and whether the
outcome of the competition would have been different if viewed against the published
criteria.

42
4.16.6
Following the feedback meeting CPD revisited the scoring and concluded that the overall
difference between the two bids was such that the outcome of the competition was not
affected by the discrepancy in the criteria. We have undertaken a separate analysis
which we describe below.

43
The Effect of the Discrepancy in the Criteria on the Scoring of the Tenders

4.17.1
In order to assess the possible effect of the discrepancy in the assessment criteria it is
necessary to consider the scores that were awarded. The scoring for each criterion was
based on an Evaluation Scoring Frame that was established prior to the assessment
process, though there is evidence to suggest the scoring frame should have been
completed earlier in the process. There is also an issue about the transparency of the
sub-criteria and sub-weightings which we address later in our report. The scoring frame,
together with the allocated marks for each tender, is shown in Table 4 below:-

Table 4 - showing the scoring frame and the scores of the two bidders

Criteria Max Sub-criteria Max CalMac O'Driscoll

Mark mark score score
1 300 1A Max number of passenger journey’s (summer) 100 100 100
IB Max number of car journey ’s (summer) 25 25 25
IC Max amount of livestock/hazardous goods 25 25 25
which can be carried (summer)
ID Offset on passengers when carrying 50 30 50
cars/freight (summer)
IE Max number of passenger journey’s (winter) 50 20 50
IF Max number of car journey’s (winter) 12.5 12.5 12.5
IG Max amount of livestock/hazardous goods 12.5 12.5 12.5
which can be carried (winter)
IH Offset on passengers when carrying 25 25 20
cars/freight (winter)
2 250 2A Suitability of main vessel(s) offered 50 30 40
2B Quality and comfort or main vessel(s) offered 100 20 80
2C Suitability of relief vessel offered 25 25 20
2D Quality and comfort of relief vessel offered 25 10 15
2E Extent of access to passenger vessel by 50 30 40
disabled persons
3 100 3A Timetables, timing and frequency of sailing 40 8 32
3B Performance regime 20 20 4
3C Monitoring of operations 20 20 4
3D Ticketing 20 8 8
4 50 4A Unscheduled special events 12.5 7.5 7.5
4B Integrated transport 12.5 2.5 2.5
4C Consultation 12.5 2.5 2.5
4D Marketing and website 12.5 12.5 5
5 500 5 Subsidy required 500 499 500
Total 1200 Total 1200 945 1048

44
4.17.2
It can be seen that the main sub-criteria where Mr. O'Driscoll scored significantly better
than CalMac are:
• 1D (more space for passengers in the summer);
• 1E (more capacity for passengers in the winter);
• 2A (new catamaran to be provided as one of two main vessels);
• 2B (improved passenger comfort offered by catamaran);
• 2E (disabled access improvements proposed); and
• 3A (improved frequency of sailings with second vessel).

4.17.3
The main sub-criteria where CalMac scored better than O'Driscoll are:
• 1B (more car journeys in the summer);
• 3B (better assurance on the required performance regime);
• 3C (better performance monitoring arrangements); and
• 4D (better proposals for marketing and the website).

4.17.4
In our opinion the scoring of the tenders does appear to be reasonable in recognizing the
improved service offered by Mr. O'Driscoll with the new second vessel whilst also
reflecting the stronger management and operational systems provided in the CalMac bid.

4.17.5
The issue identified above is whether or not the scoring would have been affected by the
discrepancy between the criteria in the tender documents and those actually used in the
assessment scoring frame. Three differences are identified in Table 3 above:

a) Timetables - in the tender documents timetables were shown in the first criterion
which had an allocation of 300 marks. In the assessment scoring frame timetables
were moved to the third criterion which had 100 marks. In the assessment
O'Driscoll scored 32 marks for timetables compared to CalMac who only scored 8
marks. This indicates that if timetables had been in the first criterion then the
higher weighting would have benefited the O'Driscoll tender.

b) Compliance with Regulations - this wording was added to the second criterion in
the assessment frame but was a requirement in any event. It was not actually

45
scored but was considered as a pass or fail issue. Both tenderers passed and so this
discrepancy did not affect the outcome.

c) Performance Regime - timetables was added to the third criterion as set out above
and allocated 40 marks with the maximum marks available of 100. The marks
available for performance regime and operational monitoring could have been
reduced by 40 marks as a result. This would have benefited CalMac who scored
40 marks compared to O'Driscoll who only scored 8 marks, which just about
balances out the position with timetables being removed from the first criterion.

4.17.6
In overall terms, in our opinion the discrepancy in the criteria between the tender
document and the evaluation scoring frame made little practical difference to the relative
marking between the two bidders. Both of the bidders were assessed on the same basis
and the effects of the discrepancy on the marking of the first and third criteria would
have broadly balanced themselves out. There would have been little overall change on
the total difference in the scoring between the two bidders of 103 marks, and therefore
no change in the overall decision of the Evaluation Panel.

4.17.7
There is no doubt however that a mistake was made in publishing criteria which differed
from that which was agreed and used in the evaluation and this could have had serious
consequences if a formal complaint had been lodged.

Transparency of the Sub-Criteria and Sub-Weightings

4.18.1
In addition to the discrepancy in the criteria there is a separate issue about the sub-
criteria and sub-weightings in the evaluation scoring frame which are shown in Table 4
above. There have been suggestions made that these should have been made available to
the tenderers alongside the published criteria and their weightings. This is a complex
area of procurement law and is further complicated in this case because the procurement
related to a Part B service which is not bound by all parts of the Regulations.

4.18.2
Most public sector procurements relate to Part A services and the criteria for the award
of contract are covered by Regulation 30. This sets out the type of criteria that shall be

46
used to determine the most economically advantageous offer from the point of view of
the contracting authority. It also requires that the weighting which it gives for each of
the criteria to be stated in the contract notice or in the contract documents. DRD did do
this for the five main assessment criteria even though this contract was not covered by
this part of the Regulations.

4.18.3
In addition to the requirements of the Regulations there have been a number of recent
legal cases where the judgments have established case law relating to the use of sub-
criteria, sub-weightings and scoring methodologies. In their submissions CalMac have
referred to two such cases but they have failed to recognise that they related to Part A
services and so, unlike the Rathlin Island ferry contract, they were subject to the full
Regulations. In general terms the case law allows a contracting authority to divide marks
between sub-headings provided that it does not alter the criteria for the award of contract
set out in the contract documents; it does not contain elements which, if they had been
known at the time the tender was prepared, could have affected that preparation; and was
not adopted on the basis of matters likely to give rise to discrimination against one of the
tenderers.

4.18.4
These three tests set out above need to be applied by contracting authorities in
determining what needs to be disclosed in advance to tenderers for the procurement of
Part A services contracts. The relevant part of the Regulations relating to criteria does
not however, apply to Part B services although the overarching requirement for
transparency does still apply. It is not clear therefore, if the same requirements arising
from case law applicable to Part A services would apply in these circumstances.

4.18.5
The need for transparency is well established but it also needs to be recognized that
important judgments have been handed down by the Courts since the procurement for the
new Rathlin Island ferry service tender commenced in 2007. In the light of these
judgments it would in our opinion, be prudent for the sub-criteria and sub-weightings to
be disclosed on similar future contracts to avoid the risk of a potential challenge on this
basis.

47
Could the Outcome Have Been Challenged?

4.19.1
The only way to have established proper authority on the issues raised in this case would
have been if the unsuccessful tenderer had challenged the outcome. On the basis that we
have found no evidence of discrimination against either tenderer the three possible
aspects on which they could have challenged were:
• the discrepancy in the criteria between the tender documents and the evaluation
scoring frame;
• a lack of transparency of the sub-criteria and sub-weightings: and
• that the process was unfair if the tender requirements were relaxed for one of the
bidders.

4.19.2
On the first issue we have set out above our opinion that there was a discrepancy in the
criteria but that in the event, this would not have a made a significant difference to the
scoring or to the outcome of the competition. Nonetheless this was a basic mistake
which should not have arisen.

4.19.3
On the second issue we have set out above the complexity of the position as regards sub-
criteria and sub-weightings particularly as the Rathlin Island ferry contract is a Part B
service to which not all parts of the Regulations are applicable.

4.19.4
The third issue is considered at para: 4.10.3 - 4.10.5. The question of whether or not to
challenge is one for the unsuccessful bidder, but as stated at paragraph 4.10.5 above we
have found no evidence which indicates that a specific supplier was favoured.

Allegation - DRD officials may have exerted undue influence in facilitating the new
operator during the course of the tendering process.

4.20.1
This allegation was raised specifically by Mr. Jim Allister (MEP) in a letter to the
Comptroller and Auditor General dated 8 July 2008. It is also a general and underlying
concern held by those CalMac staff and representatives interviewed during the course of
this review. In addition NIAO has recently provided a copy of a "whistleblower" letter
dated 20 May 2008 which reiterates most of the allegations considered earlier in this
section but also claims that certain officials wanted a particular contractor to win the

48
competition. While it could be argued that the sum of the detailed analysis of each of the
individual allegations is sufficient to address this matter, we consider there is also merit
in weighing this allegation in the round.

4.20.2
The allegation is of course fuelled by the fact that the CalMac bid was the only compliant
bid in the first competition and also by deficiencies in the process, for example, mistakes
in the second phase evaluation process and the absence of a detailed record of some key
meetings, including clarification meetings. In addition there are perceptions that not all
bidders had access to the same information and that the changed requirements in the
second phase and a lenient assessment when reviewing compliance may have favoured
the new operator. ·

4.20.3
While it is clear that mistakes were made in the administration of the procurement
process and that deficiencies in the degree of transparency have on occasion conspired
against convincing answers being provided to bidders, we have found no evidence of
impropriety or of DRD officials deliberately stage managing the process to favour one
particular bidder. Indeed, apart from the vessel inspections (and Mr. O'Driscoll was not
present at one of these) and the meeting at Ballycastle harbour, there is little evidence of
contact between DRD/CPD and the successful bidder and certainly none of earlier
contact. However, from our interviews with those overseeing the process it is evident
that if there was a leaning it was solely towards delivering the twin objectives of the
procurement - improved service and better value for money. This had seemed unlikely at
the outset, or arguably in the light of the first tender results, but with the prospect of
additional funds to support an enhanced service from 2009-10 on and the possibility of
DRD being in a position to buy or lease a suitable vessel, the situation was transformed.
Given the outcome of the first tender and the extent of the changed scenario, CPD had
insisted on a second phase competition.

4.20.4
Members of the Evaluation Panel have explained to us that throughout the exercise they
were clear on the importance of CalMac as a potential operator and of having a strong
CalMac bid, going so far as to express surprise and concern that the pre-qualification
submission from CalMac was the weakest of the three received. Nonetheless, CalMac

49
was quite rightly included in the tender list. The Department also told us that one of it's
initial considerations when contemplating the purchase or lease of the MV Canna (when
the prospect of additional finance emerged) was that it may provide a means of allowing
CalMac - the only compliant bidder in the first competition - to construct an acceptable
and affordable proposal. CalMac therefore remained very much in the Department's
thinking at that time.

4.20.5
Another possible consequence of the buy or lease option was of course that it may pave
the way for new bidders in the second phase competition - bidders who may previously
not have expressed an interest because of the non-availabi1ity of a suitable vessel for the
route. Again we would suggest that broadening the field was not an obvious way of
favouring the eventual successful bidder. Even at this time a number of members of the
Evaluation Panel said that on a personal basis they fully expected the second CalMac bid
would have improved to the state that it would win the competition. They are clear that
the fact it did not was down to stated service and cost.

4.20.6
The reality appears to be that, in the end, CalMac was constrained by what it could offer
in terms of an enhanced service on the route. This had been clear to the Department, not
only through the tender process, but also in discussions at earlier quarterly contract
review meetings with CalMac, and also to the islanders who informed us that they saw
little prospect of CalMac ever producing a new or even much improved vessel. Indeed at
a meeting with the review team CalMac representatives explained that the only way they
could see a new vessel on the route in the foreseeable future would be if the Department
purchased one.

4.20.7
This analysis, taken alongside our earlier assessment of the various components of the
evaluation process and the fact that the "external" members of the Evaluation Panel are
adamant that they made full contributions to the conduct and evaluation of the exercise,
ie that the outcome was not in the hands of the lead DRD officials, leads us to conclude
that the lead DRD officials did not act improperly in relation to the successful bidder or
unduly influence the outcome.

50
5.2
POST TENDER ARRANGEMENTS

The Handover Period

5.2.1
The contract was awarded to Mr. O'Driscoll on 18 April 2008 and following this, the
Department took steps to facilitate the handover of the ferry operation from CalMac to
Mr. O'Driscoll. However, it is evident that the process did not run smoothly.

5.2.2
PPTD advised that at the outset, 1 June 2008 was set as a target date for the
commencement of the new contract. However this was not achievable and a revised start
date of l July 2008 was agreed with CalMac and Mr. O'Driscoll.

5.2.3
Following the CalMac debrief on 2 May 2008, an Implementation Planning meeting was
held between PPTD and CalMac staff where issues pertaining to the handover were
discussed. We were provided with an agenda for the meeting however PPTD were
unable to provide a detailed record of discussions and agreed actions and therefore we
have little documentary evidence of what was formally agreed between the parties at the
meeting. We were advised by PPTD staff present that CalMac Representative 1 agreed
that CalMac would "do what it could" to help on documentation and facilitate Mr.
O'Driscoll during the handover process.

5.2.4
In discussions with CalMac they advised that in order to assist Mr. O'Driscoll during the
handover, they had made repeated requests for a copy of his Implementation /
Mobilization plan. CalMac provided evidence of a communication from RIFL Employee
I dated 20 May 2008 which stated that there were "a number of blanks" that had to be
completed before a “sensible" implementation plan would be available. In CalMac’s
view. the successful tenderer did not submit a proper implementation / mobilization plan
and that failure to provide such a plan made it progressively difficult for CalMac to
complete demobilization of its operations. CalMac advised that TUPE obligations could
not be taken forward as Mr. O'Driscoll had not provided details of his pension
provisions and this resulted in a number of reminders and representations by CalMac to
the Department.

51
5.2.5
In discussions with Mr. O'Driscoll he advised that while CalMac officials undertook to
facilitate a smooth handover this did not transpire. However, he felt that as the core
service was based on the same vessel and same crew this should not have presented
major difficulties. The important issue for him was meeting the documentation
requirements for MCA. He advised that this was subject to delay as he understood that
CalMac staff were assisting with this documentation only to be advised three weeks later
that this was not the case. He also advised that CMAL, the owners of the MV Canna
held the process up as they insisted on a bank guarantee as a condition of the lease. This
requirement was not detailed within the tender and as a consequence he had to arrange a
£75k bank bond. He advised that this cost was on his balance sheet however he was not
receiving any additional subsidy for it.

5.2.6
Whilst initially PPTD’s approach to the handover was sound in facilitating the process,
we consider that the failure to formally establish the roles and responsibilities of the
various parties at the outset and to ensure that appropriate monitoring mechanisms were
established to measure progress, contributed to the difficulties encountered. We also
consider it to be fundamental that a documented record of discussions and decisions taken
at key meetings should have been maintained.

5.2.7
PPTD advised that they saw much of the detailed responsibility falling to the outgoing
and incoming operators. The Branch did not have a full complement of staff at this time
and was under considerable pressure due to priorities that had to be taken forward on the
Airports side and from the volume of e-mails and FOI requests that were now being
received in relation to the award of the contract and the investigation that had
commenced. All of these factors impacted on the level of oversight by the branch during
the handover period.

Contract Compliance Issues

5.2.8
In the period following the award of the contract and indeed up to the time of writing this
report a number of allegations have been made and concerns raised regarding the
certification of vessels used in the Rathlin Ferry service and also the contractor’s

52
compliance with the terms and conditions of the contract. The allegations and our
findings are detailed below:

Allegation: One of the new vessels to be used by Mr. O'Driscoll has failed a crucial
safety test

5.3.1
The statutory framework for regulating the safety standards for ferries in UK waters is
administered by MCA. We met with MCA to discuss the allegations and concerns raised.

5.3.2
The International Safety Management (ISM) code requires all operators to meet
international standards for the safe management and operation of ships and for pollution
prevention. This requires operations risk assessment and safety plans approved by
MCA. In addition, all vessels on the Rathlin Ferry route require an International Safety
Management Certificate, issued by MCA. MCA also completes annual inspections of all
vessels.

5.3.3
The ISM code is enforced in two ways, firstly by ensuring that the operator has in place
a Document of Compliance for the Company and Premises. These documents are
periodically audited and initially the operator is given an interim document of compliance
for six months until the completion of the audits which are carried out within the six
month interim period. Secondly, all vessels are required to have Passenger Certificate
and Domestic Safety Management Certificates in place however, due to the nature of the
Rathlin Ferry service (Ro-Ro ferry service) the higher International Safety Management
Certificate has been issued. Again these are awarded on a six-month interim basis
pending verification.

5.3.4
There are three main categorizations of non-compliance relevant to MCA. These are
Observation, Minor Non-Conformity and Major Non-Conformity. We were advised that
any operation that incurs a Major Non-Conformity is immediately shut down until the
issue is rectified.

5.3.5
We have established that Mr. O'Driscoll currently operates two vessels on the Rathlin
Island ferry service route. The first vessel is the MV Canna which has been used on the

53
route for a number of years by the previous operator CalMac. MCA has confirmed that
this vessel has been certified (issued with an International Safety Management
Certificate) by them. Concerns have been raised surrounding the second vessel initially
proposed for the route, the MV True Light. Mr. O'Driscoll advised that issues arose as
to the certification of this vessel by the equivalent maritime body in the Republic of
Ireland. The vessel had been certified for several years but the stability booklet had not
been properly completed. When this became known to him he did not proceed with the
purchase of the vessel. MCA advised us that any issues regarding the vessels
certification were a matter for the maritime body in the Republic of Ireland. Mr.
O'Driscoll acquired another vessel, the MV Ossian of Staffa, which had already been
surveyed and certified by the 01 July 2008 deadline and this vessel operated until it was
replaced by the MV St Sorney which also received MCA certification. A further relief
vessel MV Causeway Explorer has also been certified by a certifying authority
recognised by MCA. We reviewed the certification documentation relating to all vessels
used on the Rathlin Island ferry service and confirmed that MCA are content that all
documentation is in order.

5.3.6
We have provided details of the certification in Table 5.

Table 5: Vessels Used on Rathlin Island ferry service

Name of Vessel Type of Vessel Date of Certificate

MV Canna Ro-Ro 01 July 2008
MV Ossian of Staffa Passenger only 27 March 2008
MV St Sorney Passenger only 28 July 2008
MV Causeway Explorer Relief for Passenger only 13 October 2006
vessel

5.3.7
We have concluded that the allegation that the winning contractor’s vessel has not been
approved by MCA has not been substantiated.

Allegation: The MV Canna operated for a period from 31st August 2008 until 12th
September 2008 without a valid passenger certificate.

5.4.1
MCA advised that the MV Canna’s Passenger Certificate, under its new management,
was issued on 01 July 2008 to expire on 31 August 2010. At the time of issue the vessel

54
entered her annual survey process within normal range dates. The vessel’s out of water
annual inspection was due on 18 Sep 2008. For operational purposes it was requested
that this date be extended to 29 Sep 2008. MCA advised that this is not an unusual
request and reflects the availability of suitable slips / dry-docks. The request was agreed
under the terms of MCA Instructions to Surveyors MSIS 23 Chapters 2.9.4.4 and
2.9.4.5. The extended period (up to a maximum of 4 weeks) is covered by the new
certificate issued on 12 Sep 2008. At no time was the Canna out of survey nor was her
certificate out of date. We were advised that a new five year certificate will be issued
following her next successful bottom inspection.

5.4.2
We have concluded that the allegation that the MV Canna operated for a period from 31
August 2008 until 12 September 2008 without a valid passenger certificate has not been
substantiated.

Allegation: Mr. O'Driscoll's company has yet to have an approved safety management
plan in place.

5.5.1
We have also investigated concerns raised about whether Rathlin Island Ferry Ltd had
adequate safety management plans and related health and safety documentation in place.

5.5.2
We have been advised by MCA that on the date of handover, 1 July 2008 there was a
safety management system in place which was acceptable and worthy of interim
certification. On this basis the Rathlin Island Ferry Ltd was provided with an Interim
Document of Compliance which certifies that the Safety Management System of the
Company has been recognized as meeting the objectives of paragraph 1.2.3 of the
International Management Code for the Safe Operation of Ships and for Pollution
Prevention (ISM Code) 2 for a Passenger Ship. We were also advised by MCA that in
relation to the new Rathlin Island ferry service operator (Mr. O'Driscoll), any issues
brought to his attention have been addressed within agreed timescales and MCA are
content that Rathlin Island Ferry Ltd is operating within the established codes of
compliance. We also contacted the Health and Safety Executive NI (HSENI) who
advised us that with regard to the Rathlin Island ferry service there is general compliance
with required safety standards.

55
5.5.3
On the basis of feedback from MCA and HSENI we have concluded that adequate safety
management plans and related health and safety documentation are in place and that
Rathlin Island Ferry Ltd is operating within the established codes of compliance. We
also noted that MCA arranged a meeting of key stakeholders at Ballycastle harbour on
24 July 2008 where all the various issues relating to the operation of the service were
discussed and proposed actions agreed. MCA is satisfied that the safety operations on
vessels on the Rathlin service are up to standard and indeed informed us that they have
allocated disproportionate staff time to demonstrate that this is the case.

Allegations Rathlin Island Ferry Ltd is not registered with the Fair Employment
Commission (now known as the Equality Commission).

5.6.1
Concerns have also been raised surrounding the registration of Rathlin Island Ferry Ltd
with the Equality Commission. All private sector employers with more than ten full-time
employees (working more than sixteen hours per week) are required to register with the
Equality Commission and under the contract the operator is required to comply with all
applicable fair employment, equality of treatment and anti-discrimination legislation.
At the time of issue of this report PPTD advised that this issue had been raised with the
operator who has confirmed that discussions had taken place with the Equality
Commission and as his operation did not fall within the criteria for registration, the
company had not registered with the Equality Commission.

Allegation: Staff have not been adequately trained or subject to POCVA checks.

5.7.1
We have also investigated complaints surrounding the training of staff and whether all
relevant staff have been subject to POCVA checks. MCA advised that as the crew
transferred under TUPE arrangements it was essentially the same crew used by the
previous operator. MCA confirmed that they are content that the crew of the Rathlin
Island ferry service is adequately trained and that the training of staff will again be
reviewed in a follow-up audit which they have scheduled for December 2008. PPTD
advised that the issue of POCVA checks was raised with the contractor at the quarterly
review meeting on 15 October 2008 and the operator advised that he had contacted
Access NI to complete the POCVA checks.

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5.7.2
On the basis of discussions with MCA we have concluded that the crew of the Rathlin
Island ferry service is adequately trained. We have also concluded that POCVA checks
have not as yet been completed and that the Department is monitoring the situation to
ensure that this contract condition is met.

Allegation: The winning contractor did not have employers and public liability
Insurance in place from the date of handover and that there are no insurance
certificates on display anywhere within Ballycastle terminal.

5.8.1
In discussions with Mr. O'Driscoll he advised that necessary insurances were in place
from l July 2008 however due to an oversight on his part, certain of the documentation
was not displayed in the terminal building until 10 July 2008. Mr. O'Driscoll advised
that they were displayed on the vessels.

5.8.2
We have reviewed the Certificate of Employer’s Liability Insurance and can confirm that
the date of commencement for the insurance was 1 July 2008. Similarly, we have
reviewed the insurance certificates for all vessels used on the Rathlin Island ferry service
and confirmed that all vessels have had appropriate insurance in place for the periods in
which they have been operating on the Rathlin Island ferry service.

5.8.3
We have concluded that the winning contractor did have employers and public liability
Insurance in place from the date of handover. However, as a result of an oversight by
the operator, certain of the documentation was not displayed in the terminal building
until later that month.

Allegations No written risk assessment prior to takeover on 1 July 2008 and that a new
risk assessment had not been carried out regarding the passenger only vessel MV
Ossian of Staffa.

5.9.1
MCA have advised that boarding practices and procedures for the MV Ossian of Staffa
were examined during the inspection of the vessels in late June 2008 prior to the
handover of the service to Mr. O'Driscoll and the Interim Document of Compliance
audit of the Company’s Safety Management System identified a general requirement for
risk assessments which MCA was giving the operator time to complete. We noted that

57
Mr O'Driscoll engaged a consultant to draft his Health and Safety Manual and also
complete Risk Assessments. MCA informed us that they were content with the
completeness and quality of the Risk assessments received from Mr. O'Driscoll in
respect of the Rathlin Island ferry service.

5.9.2
On the basis of discussions with MCA we have concluded that adequate risk assessments
are in place and that Rathlin Island Ferry Ltd is operating within the established codes of
compliance.

Allegation: A Performance Bond is not in Place

5.10.1
We noted that clause 29.1 of the Terms and Conditions of Contract advises that "the
contractor shall deliver to the department the Performance Bond on the execution of this
Contract (or such later date as may be permitted by the Department)" Clause 29.3 states
"the Contractor shall not be entitled to receive any Payment under this Contract until
such time as the Performance Bond is furnished to the Department ". At the time of our
investigation we were advised that the performance bond was not as yet in place.

5.10.2
We were advised that as the cost of insurance for the bond is built into the tender price
by the operator, the cost of servicing this bond is effectively being carried by the
Department within the subsidy payments. It was therefore considered that it was not
practical to include the bond in the contract. However, it was discovered that the clause
referring to the bond had not been removed from the tender documentation. PPTD
advised that in the 2003 competition CalMac advised that they were unable to obtain
insurance to cover the bond and now Mr. O'Driscoll was having the same difficulties as
CalMac had previously.

5.10.3
PPTD advised that CPD were currently in discussions with Mr. O'Driscoll in relation to
his difficulties securing the bond. Mr. O'Driscoll confirmed to the investigation team that
he was having difficulties obtaining the bond and that his subsidy claim was being
reduced to take into account the fact that he is not paying for a bond. PPTD advised that
the subsidy claims were subject to ongoing monitoring to ensure that a reduction was
applied at the appropriate level and there had been no loss.

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5.10.4
We have concluded that the department has not complied with its own conditions of
contract in making payments to the contractor prior to the appropriate bond being put in
place. This is regrettable given that it would appear that the inclusion of the clause was
an oversight on the Department’s behalf. We consider that had appropriate checks been
completed at pre tender/pre commencement stage of the contract, this oversight may not
have occurred.

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6.0
CONTRACT MONITORING

Monitoring of Rathlin Ferry Service

6.1..1
We noted that within a number of days of the contract commencement on 1 July 2008,
allegations and complaints were made in respect of Mr. O'Driscoll’s compliance with the
terms and conditions of contract agreed with the Department for the operation of the
service. We found that the Department has been proactive in investigating the allegations
and complaints received, especially those in relation to health and safety, and ensuring that
the operator is complying fully with the terms and conditions of contract.

6.1.2
Central in the evaluation, and therefore the contract award, has been the expectation of a
new vessel. It has been drawn to our attention during the course of the review that Mr.
O'Driscoll was successful in a tender competition in the Republic of Ireland when he
proposed to introduce a similar catamaran (albeit as a back up vessel to be available in
event of breakdown) to that proposed in the Rathlin Ferry Service operation and that this
vessel has not been delivered on time. The new operator has assured the review team that
an interim arrangement is available in the Republic of Ireland situation and that the
procurement of the catamaran for the Rathlin service is well under way and he is confident
of having the vessel on route on l July 2009. We understand that the Department has
agreed a provision with the contractor which allows for a penalty in terms of reduced
subsidy in the event of delays in the delivery of the proposed catamaran. Notwithstanding
the availability of this option to protect the public purse, it is important that the
Department makes the monitoring of progress on delivery a priority in its monitoring
regime. In the eyes of many, certainly the Islanders, delivery of the new vessel on or near
time may be the acid test of the procurement process.

6.1.3
We were advised that monitoring of the new operator’s compliance with the terms and
conditions of grant will be over and above that exercised in the previous CalMac contract.
A Monitoring Action Plan for the Rathlin Island ferry service has been developed (see
Appendix 7) which includes weekly, monthly, quarterly and annual monitoring checks and
these will be carried out by PPT D staff on the service provided. In addition, formal
quarterly meetings will be held with the operator to discuss performance.

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6.1.4
We noted that monitoring of the contract is ongoing with a physical spot check of ticketing
having been completed by PPTD staff in September 2008 and a further physical check on
the operation carried out in November 2008. We were also advised that the first quarterly
review meeting with the operator took place on 15 October 2008.

6.1.5
As part of the monitoring arrangements the Department consults with key stakeholders to
establish if they have any issues with the operation of the service. Recent feedback from
the RDCA advised by way of a letter received in the Department on 03 October 2008 that
"overall the RDCA is very satisfied with the quality of service that has been offered by
Rathlin Island Ferry Ltd since its recent undertaking of the operation". The letter also
stated that "There were some initial problems securing bookings by telephone but these
were ironed out fairly quickly. There have also been some issues regarding the
mechanical reliability of the passenger only vessel, the St. Sorney, and we hope that the
operator will do everything to ensure that the vessel is fully and properly maintained at all
times". The letter went on to state "The extra scheduled sailings have been a great
success and are greatly appreciated by both islanders and by visitors to the island. The
extra employment that has resulted is also helping to maintain the island as a unique and
viable community".

6.1.6
We are of the opinion that the Department has established adequate arrangements for the
effective monitoring of the operator’s compliance with the terms and conditions of
contract.

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7.0
MANAGEMENT AND PERSONNEL ISSUES

7.1.1
A number of allegations/complaints have been made about the conduct of staff,
particularly DRD staff, in the context of this procurement exercise. Certain of these
have been considered in previous sections, when they form an integral part of other
aspects of the procurement process. However, a number relate to the conduct of the
officers when dealing with a range of stakeholders and resolution of these issues will
directly inform DRD’s decision on whether or not formal disciplinary action should
follow. These are considered in this section.

7.1.2
Unfortunately an obvious difficulty arises almost immediately, in that often the
complainants were not present at the events referred to or are relating one view of a two-
way conversation where firm corroboration is elusive. Clearly, and for their own
reasons, CalMac has chosen not to formally pursue those matters in which they have a
locus. We have however taken evidence from CalMac representatives and in other
situations have sought to view the allegations in the timeframes and context of the
exercise, to allow us to form a conclusion.

Allegation - That the tender process was a ‘done deal’ prior to Christmas 2007 and the
outcome was politically motivated.

7.2.1
An email from a "whistleblower" received by the Northern Ireland Audit Office on
7 May 2008 includes the following references:
"During this discussion [the CalMac debrief on 2 May 2008] .... DRD
representatives Official 1 and Official 2 eventually admitted that it had been a
‘done deal ’ prior to Christmas 2007 and the decision was politically motivated. "
The review team was subsequently advised that a "whistleblower", who had previously
used the pseudonym ‘Sonia Monahan’, was in fact Complainant 1. (see Annex 4).

7.2.2
Having spoken to Complainant 1, and Complainant 2’s line manager, CalMac
Representative 2 (who attended the debrief meeting and has since explained that given
Complainant 2’s contribution to the CalMac bid he (CalMac Representative 2) had
considered it right to provide feedback to Complainant 2 on associated developments)

62
and to others present at the meeting, we can find absolutely no evidence to substantiate
this allegation. Certainly the two DRD officials and CPD officials present at the
meeting deny any such references were made. Nor can CalMac Representative 2 recall
such references.

7.2.3
At the debrief explanations may have been provided by DRD officials of the bidding
process for additional resources, that the Northern Ireland Executive had supported the
case to finance an enhanced ferry service and that this was why enhanced service had
been reflected more directly in the second tender competition. As noted earlier, CalMac
staff may have decided that, given CalMac’s ownership position, there was a "political"
consideration to be weighed before pursuing a formal complaint about the outcome of
the tender: this may have been shared with Complainant 2.

7.2.4
Whatever the case, we can only conclude that the allegation came as a misunderstanding
or misrepresentation of what was said at the debrief. Further, when we weighed the
comments of other members of the Evaluation Panel about their expectation that the
second CalMac bid would be very strong and DRD’s explanation that its interest in
leasing or purchasing the MV Canna was initially conceived as a means of allowing the
only compliant bidder at that time (CalMac) to produce an affordable bid, it is even more
difficult to give credence to the ‘done deal’ before Christmas 2007 claim.

Allegation - Personal information relating to Complainant 2 was passed on to third

parties by Official 1.

7.3.1
There are essentially two issues here. First, that on 18 April 2008 (after the contract
award) Official l (DRD) rang Complainant 2 outside normal work hours and in
discussion said that he had given Complainant 2’s mobile number to Mr. O'Driscoll.
Second, that on 7 July Complainant 2 (who was now employed by Mr. O'Driscoll having
moved under TUPE arrangements) sent an e-mail from home to Official 1, amongst other
things raising concerns about the new operation, and Official l copied this e-mail to
Mr. O'Driscoll (Complainant 2’s new employer) without recourse to Complainant 2.
This e-mail and those that followed are included at Annex 8. Complainant 2 is
concerned that this disclosed personal information (his e-mail address) to a third party

63
and, given the nature of the content, potentially compromised his position with his new
employer. Complainant 2 lodged a formal complaint with Central Management Branch,
DRD on 9 July 2008 and Complainant 1 made a wide-ranging formal complaint, which
included this matter, to Mr. Paul Priestly, Permanent Secretary, DRD, on l2 July 2008.

7.3.2
In interviews with Official 1, Official l advised that he cannot recall the precise details
of the call to Complainant 2 or what telephone number he may have provided to
Mr O'Driscoll. Insofar as he knew he was simply passing-on the contact number held
by the Department for business purposes. Official 1 is adamant that his sole concern
was to place Mr. O'Driscoll in contact with Complainant 2 at the earliest possible time.
He held Complainant 2 in the highest regard and saw Complainant 2 as potentially the
most important player in a smooth handover process. It was for this reason that he
arranged for Mr. O'Driscoll to meet Complainant 2 shortly thereafter (on 22 April
2008).

7.3.3
While we can understand what Official 1 was seeking to achieve, and accept that there
was no desire by Official l to release Complainant 2’s mobile phone number, it may
have been more appropriate for Official 1 to have discussed the matter with Complainant
2 in the first instance.

7.3.4
The passing-on of the e-mail correspondence is a more complex and far-reaching matter.
Extensive concerns had already been raised about the procurement by ‘Sonia Monahan’
(subsequently confirmed to the investigation team as being Complainant 1) and an
internal audit investigation was underway. Complainant 2 was part of a TUPE-based
transfer to a new employer with all the attendant stress that such processes carry. He
had been working for Mr. O'Driscoll for less than one week. He had written from
home, specifically to Official l (“... concerns that I think you should be aware of ...").
Official 1 confirmed in an interview with us that he had forwarded the e-mail to
Mr O'Driscoll.

7.3.5
Official 1 advised us that he took the view that if Complainant 2 was writing to him
about problems, including health and safety concerns, it was imperative that they be

64
addressed as quickly as possible. It seemed clear that Complainant 2 was having
difficulty contacting Mr. O'Driscoll and Official 1 thought Complainant 2 was seeking
his intervention. The e-mail hadn’t explicitly referred to concerns about confidentiality
and may have expressed concerns shared by other employees. Official l said that it did
not occur to him that the e-mail may effectively be a complaint against Complainant 2’s
new employer. Official 1 is clear that these were primarily company matters and that
Complainant 2 could and arguably should have had these matters resolved with Mr.
O’ Driscoll.

7.3.6
While we can lend some weight to Official l’s explanation, we consider it surprising that
Official l did not consider that the substance of the e-mail could present a problem for
Complainant 2 with his new employer. Given that public servants are urged to use
caution when dealing with e-mail material, the context in which the e-mail had been sent
and an ongoing Internal Audit investigation into the procurement, we find that a
considered view would have required Official 1 to speak to Complainant 2 before
reverting to Mr. O'Driscoll. Even if this could not have taken place immediately and
time was of the essence, Official 1 could have raised the substance of the concerns with
Mr. O'Driscoll without attributing them to Complainant 2 (See also Paras 7.6.l-7.6.6).
We consider failure to do so to have been an error of judgment on Official l’s part.

7.3.7
As the allegations received raised concerns about Complainant 2’s position with regard to
legislation including the Data Protection Act 1998, the Telephone Communications
(Lawful Business Practice) Interception of Communications Regulations 2000 and the
Human Rights Act 1998, the review team sought legal advice. The advice received is that
the complaints do not constitute a breach of Complainant 2’s rights under the various
legislation quoted.

Allegation - Official 1 had pressurized Complainant 2 to copy CalMac documentation

to facilitate the handover to Mr. O'Driscoll.

7.4.1
Complainant 2 alleges that at his introductory meeting with Mr. O'Driscoll on 22 April
2008 and in subsequent contacts Official 1 pressed Complainant 2 to copy or use CalMac
sources as the basis for Mr. O'Driscoll’s necessary documentation and that in

65
Complainant 2’s opinion this was tantamount to harassment. Complainant 2 further
alleges that in a meeting on 7 May 2008 Mr. O'Driscoll asked him to write a Safety
Management Plan for the new operation, but that he declined on grounds that at that
time he was a CalMac employee and did not have the time. Complainant 2 says
Mr. O'Driscoll returned to the subject a few weeks later and seemed angry when
Complainant 2 reiterated his position and suggested a marine consultant be employed.
Complainant 2 reported these matters to CalMac and claims that CalMac requested
Official l to make all further requests through Headquarters. Mr. O'Driscoll claims that
the only reason for his annoyance was that Complainant 2 had initially agreed to
consider preparation of the plan and by not informing him sooner that he could not
accept the commission, he cost Mr. O'Driscoll three weeks in lost time.

7.4.2
Official l is adamant that in mentioning documentation at the 22 April 2008 meeting he
was only interested in documents such as operational and safety procedures on the Canna
and that CalMac senior management had subsequently undertaken to do their best to help
in these areas at the meetings on 2 May 2008. Official 2 confirmed that the reference to
documentation at the meeting on 22 April 2008 was very low key. Official 1 further
states that he did not persist in pursuing this matter with Complainant 2, as he saw this
as a matter to be resolved by Mr. O'Driscoll and the CalMac management team in the
context of the mobilization plan. Official 1 advised that apart from the implementation
meeting involving Mr. O'Driscoll and CalMac on 02 May 2008, there was no
communication between himself and Complainant 2 between 22 April 2008 and 7 July
2008.

7..3
CalMac Representative 2 recalls Complainant 2 approaching him on this matter and
saying he did feel pressurized by Official l. He informed us that in his view Official 1
was a strong personality and could come across as being quite assertive: for example,
when querying CalMac decisions about not sailing in bad weather. CalMac
Representative 2 explained that he decided to ask Official l to take a step back in a low-
key way and sent an e-mail which suggested:-

66
"I would confirm that in the meantime, as discussed with CalMac Representative 1,
given the local sensitivities, all communication and discussion should be directed
via CalMac Representative 1 or myself and not via Ballycastle/Canna. "
DRD officials did not equate this signal with there having been undue pressure applied
to Complainant 2 and have stated that CalMac did not raise the issue more explicitly at
any other time.

7.4.4
This would appear to confirm some empathy in CalMac towards Complainant 2’s
position, or at least a general concern, but CalMac Representative 2’s e-mail was dated
24 April 2008 and the formal notification of the award decision had only issued by letter
on Friday 18 April 2008. Also, the introductory meeting with Mr. O'Driscoll (and also
involving Official l and Official 2) which appears to have been the alleged trigger point
for these documentation requests took place on 22 April 2008, only two days earlier.
These dates would seem to suggest a very small timeframe during which pressure about
copying or assisting with documentation could have been applied on Complainant 2 and
therefore tends to argue against it. Of further note is that Complainant 1’s letter of
12 July 2008 to Mr. Priestly states that the CalMac intervention meant that "... Official 1
was prevented from contacting Complainant 2 directly during May and June 2008".
This again appears to rule out a period over which pressure could have been built up.

7.4.5
The strict reality is, of course, that after the 24 April 2008 Complainant 2 should not
have been the recipient of further requests (although Mr. O'Driscoll has told the review
team that he tended to contact Complainant 2 rather than Gourock, simply because of
accessibility). Exactly what CalMac was prepared to do to facilitate the handover,
including assistance with documentation, should have been agreed between the lead
parties. Yet when DRD hosted a meeting involving CalMac and Mr. O'Driscoll on the
afternoon of 2 May 2008 and prepared a detailed agenda of the issues to be considered, a
formal record of the outcome was not produced and agreed. In the area of assistance
with documentation the only outcome appears to be that CalMac would do its best to
help. This is the line that had emerged from the debrief meeting earlier that day, but
CalMac had also made it clear to DRD that they would not share any documentation
which they considered had an intellectual property value and subsequently made sure

67
Complainant 2 was clear on this point. CalMac also told us that they had, on a number
of occasions, sought details of Mr. O'Driscoll’s mobilization plan to allow them to
facilitate the handover but had never had a reply. In the end they had brought this I
concern to Official 1’s attention.

7.4.6
Clearly there was a lack of clarity as to which documentation might reasonably be
provided. Although the Department did have a checklist of issues for resolution, it was
under considerable pressure in other areas at this time and, perhaps not unreasonably,
would have expected the new operator to play the primary role in resolving these matters
and ensuring a smooth transition. Whether or not, as a small operator, Mr. O'Driscoll .
would have had the necessary experience and support mechanisms is another matter.

7.4.7
In his e-mail response to Complainant 2’s e-mail of 7 July 2008 Official 1 said:-
"Despite an undertaking by CalMac Representative I present that CalMac would
"see what it could do to help RIF [Mr. O'Driscoll] has reported that CalMac
management on the ground provided no such cooperation and consequently
additional time was needed to develop the necessary manuals “from scratch". Whilst
MCA approved the RIF operation by the handover date, I am disappointed at the
approach taken by CalMac management, which, in my opinion, was not in the best
interests of safety of the service. "

7.4.8
This would appear to say that RIFL (Mr. O'Driscoll) considered that the lack of
progress on documentation was due to CalMac management at local level and perhaps
that Official l would agree with this assessment. Official l said in interview that he did
not see the "on the ground " reference as meaning only staff in Ballycastle, but we would
not share this interpretation. Complainant 2 certainly feels the term referred to him and
that he was therefore left to carry the blame. Given a lack of clear agreement between
the lead parties, that Complainant 2 was a CalMac employee in the May/June period and
had been given clear direction by his line management about not copying documents,
reference to CalMac management on the ground was at least imprecise and possibly
unfair to Complainant 2.

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7.4.9
At our meeting Complainant 2 said that he considered his treatment by Official l over
the preparation of documentation to be tantamount to harassment. Official l denies this
and the very limited time period around the end of April would reason against persistent
approaches. In the public sector we would consider that harassment would normally
relate to aspects of a person’s social identity and, given the previous good relationship
between Complainant 2 and the lead DRD staff, and the respect and esteem in which he
was held, we can see little evidence of it here. Bullying is another category of behaviour
we- considered but here again a working public sector definition of “persistent offensive,
abusive, intimidating, malicious or insulting behaviour, which makes the recipient feel
upset, threatened, humiliated or vulnerable, which undermines his/her self confidence
and which may cause him/her to suffer stress " is difficult to sustain in this case. While
occasional abruptness or rudeness, even if it did occur, would be unacceptable, it falls
well short of the term ‘bullying’. We are also mindful that the contact between Official
I and Complainant 2 was on the basis of client/contractor, not manager/employee.

7.4.10
However, that Complainant 2 would have been under considerable pressure during the
handover period was not in doubt. Quite apart from his concerns about the procurement
methodology, the TUPE process and the possibility of an imposed change to a new
employer was of itself hugely trying. He also feels unjustifiably blamed over allegations
about non-cooperation. However, we cannot conclude that there is evidence that Official
1's contact with Complainant 2 over this matter was unreasonable, nor that it can be
described as harassment or anything similar.

Allegation - Official 1 informed CalMac that Complainant 2 or his family were the
source of questions about the tendering process and that disciplinary action should be
considered.

7.5.1
These two related allegations were made by Complainant 2 in his 9 July 2008 complaint
to Central Management Branch (DRD) and again by Complainant 1 in her letter of
12 July 2008 to Mr Priestly.

7.5.2
There would appear to be two separate events which may have led to these allegations.
First. according to CalMac, Official l rang CalMac Representative 1 after the CalMac

69
debrief to express concern that certain of the information shared at the debrief had found
its way into the public domain and that if this had happened at the CalMac end
disciplinary action should be considered. CalMac Representative 1 explained that the
schedule detailing the comparison of financial bids (the evaluation sheet) which
contained the information referred to, had not been made available to CalMac staff at the
debrief and there could, therefore, be no question of a leak of this information from the
CalMac side. Official 1 denies making direct reference to disciplinary action but
confirms that he accepted CalMac Representative 1’s explanation.

7.5.3
Second, CalMac Representative 2 reported that at the final Quarterly Review meeting
between CalMac and DRD in July 2008 Official l had referred to further information
requests from Complainant 1. CalMac Representative 2 confirmed that he had
subsequently mentioned this exchange to Complainant 1. CalMac Representative 2 felt
that notwithstanding the general confidentiality considerations governing these meetings
he had a duty to Complainant 1 and Complainant 2 to let them know this had occurred.
Official l informed us that he was well aware of the sensitivity of such information and
would not treat it lightly. The point had arisen in the context of a wider discussion of
information requests in which CalMac had an interest, primarily because of a concern
they had that commercial in confidence material might become public. Official 1
considered it valid to make them aware of related issues which DRD was dealing with,
but the comment about Complainant 1 had slipped out inadvertently. This explanation
squares with the way in which CalMac Representative 2 reported it to us.

7.5.4
While we acknowledge that Complainant 1 and Complainant 2 would be understandably
concerned about reports of such discussions coming back to them, we do not consider
that Official l acted maliciously. In the first case he was concerned that a leak may have
occurred on the CalMac side but he did not pursue the matter when he heard CalMac
Representative 1’s explanation. The second appears to have been an unfortunate slip in
a confidential meeting: Official l is aware this should not have happened.

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Allegation - Official 1 is abusing his position and undermining Complainant 2’s
position within Rathlin Island Ferries Ltd.

7.6.1
Again these allegations are made in Complainant 2’s complaint of 9 July 2008 and in
Complainant 1’s letter of 12 July 2008 to Mr. Priestly. Whatever concerns Complainant
l and Complainant 2 may have had, their relationship with DRD was clearly exacerbated
by Official 1’s decision to copy Complainant 2’s e-mail of 7 July to Mr. O'Driscoll (see
paras 7.3.5-7.3.8) and, insofar as Complainant 2 is concerned, Official 1’s reply to him
on the same day at least appeared to suggest that in RIFL’s view the problems over
cooperation with CalMac centred on Complainant 2 (7.4.7-7.4.8). Complainant 1 and
Complainant 2 also have a concern that Official 1 may have shared his views on the
sources of the "whistleblowers" with Mr. O'Driscoll. Complainant 2 was greatly
concerned by the tone of the final paragraph in Official 1’s e-mail which read: " ...... I
would be grateful for some clarification of your role now within the management
structure of the Company". In hindsight, perhaps this may have been best left unsaid.

7.6.2
Complainant 2 certainly sees the sum of the comments as further isolating his position in
the new operation.

7.6.3
That there appears to have been a cooling-off in Complainant 2’s relationship with DRD
officials over the Spring 2008 period is self-evident. Prior to then each of the two lead
DRD officials had spoken very highly of Complainant 2’s professionalism and
qualifications, with only occasional disagreements, and the relationship was generally
good. Indeed Official l and Official 2 commended Complainant 2 very highly to Mr.
O’ Driscoll, when the latter won the contract. However, the handover period was clearly
a stressful time for all concerned and one or two events appear to have destabilized the
relationships, resulting in the tabling of a formal complaint in July 2008.

7.6.4
As we have already observed, the events around the series of e-mails commencing 7 July
2008 were crucial and Complainant 2 feels very upset about the way in which events
unfolded. Official 2 informed us that up until April 2008 he had been in Ballycastle
every month, perhaps more than once, but that because of other work pressures he had
not been there since then. This tailing off in personal contact may also have had an

71
adverse effect, lessening the opportunity to talk over issues and concerns, and resolve
issues before they gained significance.

7.6.5
While Mr. O'Driscoll is clear that he regarded Complainant 2’s e-mail of 7 July 2008 as
a complaint against RIFL, he is adamant that neither Official 1 nor Official 2 went
further in either complaining about Complainant 2 or questioning his commitment to
RIFL. On the contrary, he feels they were generally complimentary about Complainant
2. Mr. O'Driscoll told us that his assessment of Complainant 2’s worth to RIFL came
solely as a consequence of working alongside him since 1 July 2008 and having regard
for the state of the business and market conditions.

7.6.6
While we understand that Complainant 2 may feel that DRD officials turned against him
in the light of events and specifically in the email of 07 July 2008, we consider that the
email was more a misjudgement than a direct attempt to malign Complainant 2.

Allegation: A DRD official had asked the Scottish Executive, who own CalMac, not to
challenge the outcome of the tender.

7.7.1
It has been alleged that DRD staff may have brought pressure to bear on Scottish officials
to forestall any possible challenge to the award decision.

7.7.2
We interviewed DRD staff who had contact with the Scottish Executive surrounding the
proposed leasing of the MV Canna and subsequent award of the competition to Mr.
O'Driscoll. Both officials categorically denied that they have ever asked the Scottish
Executive not to challenge the outcome of the competition. CPD informed us that none
of their officials had any contact with the Scottish Executive in regard to the competition.
We also contacted officials within the Scottish Executive who confirmed that at no time
had a DRD official asked them not to challenge the outcome of the Rathlin Ferry tender
competition. We have found absolutely no evidence of any intervention whatsoever,
apart from DRD officials notifying the Scottish Executive of the outcome of the
competition.

72
7.7.3
It is possible that as CalMac are owned by the Scottish Executive they may have
considered it inappropriate to challenge a decision made by another public sector
administration.

Allegations The Department applied pressure on MCA to award the necessary

certification to the winning contractor

7.8.1
We interviewed Official l and Official 2 in relation to the allegations and they
categorically denied that they had contacted MCA in regard to this matter and applied
pressure to award certification. We also contacted the Area Manager of MCA who
oversaw the proposed certification of the vessels proposed for use on the Rathlin Island
ferry service. He advised that there had been no contact between himself or his staff and
DRD officials to discuss the survey and certification of vessels in relation to the service
and therefore that no pressure had been exerted directly, or indirectly, on himself or his
staff by DRD officials. He also advised that there have been no negotiations involving
anyone from his office and DRD officials on behalf of Mr. O'Driscoll.

7.8.2
The Area Manager of MCA also confirmed that neither he nor his staff had heard a
DRD official suggest that the tender or certification of vessels for the Rathlin Island
ferry service was a "political issue".

7.8.3
We have concluded that there is no evidence to support the allegation that the
Department applied pressure on MCA to award the necessary certification to Mr.
O'Driscoll.

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8.0
OVERALL CONCLUSION AND RECOMMENDATIONS

8.1
Overall Conclusion

8.1.1
A number of allegations have been made about the appropriateness of the procurement
process and it has been alleged that key elements failed to comply with the Public
Contracts Regulations. We are of the view that these allegations are based on a
misunderstanding of the Regulations. The complainants have failed to recognise that most
of the Regulations do not apply to ferry services of this nature which are classified as a
Part B service. Contracting Authorities have considerable discretion on the process used
for Part B services within the overarching requirement for the process to be fair,
transparent and non-discriminatory. in this case CPD adopted elements of standard Part A
procurement procedures but not all of them. This was entirely legitimate but it may have
resulted in some confusion, with complainants thinking that this was a conventional Part A
procedure.

8.1.2
Whilst we consider that the overall procurement procedure was appropriate a number of
mistakes arose in relation to process and administration, the key one being that the wrong
assessment criteria was set out in the second tender documents. This only came to light at
the CalMac feedback meeting when it was found that there were discrepancies between the
assessment criteria in the tender documents and those used by the Evaluation Panel for the
assessment of tenders. Clearly this should not have occurred: even basic quality assurance
of the tender documents should have prevented it. However having assessed the
consequences of the error we do not believe that it materially affected the outcome of the
competition. We consider that once the problem had been highlighted CPD could have
done more to reassure CalMac that the issue had been investigated and to advise them of
the outcome.

8.1.3
Complaints have been received about a lack of transparency of sub-criteria used by the
Evaluation Panel in the scoring of the tenders. This is a complex area of procurement law
with a number of important legal judgments having been made since this competition was
undertaken. The position is further complicated because the Rathlin Ferry procurement
relates to a Part B service which is not covered by the Regulations which apply to the

74
setting of criteria and weightings. Complainants have referred to court cases which relate
to Part A services which are subject to all of the requirements of the Regulations. We are
of the view that if this had been a Part A services procurement then the procedure would
have been exposed to a high risk of a successful challenge. The position is less clear for a
Part B service and we camiot predict the outcome had a challenge been made on these
grounds. We are of the view however, that CPD should on future procurements of this
nature. ensure that the same level of transparency is applied to Part B services as it is to
Part A services.

8.1.4
The bid made by Mr. O'Driscoll includes proposals for minor works to the harbours at
Ballycastle and at Rathlin to improve access for the elderly and disabled. Complaints have
been made that his bid should have been declared non-compliant because the tender
documents suggested that tenderers should have ensured that any proposed vessels were
compatible with the existing berthing facilities. The requirements within the tender
documents were not as clear as they could have been but in our view they did not rule out
modest expenditure and did specifically invite proposals for improving disabled access.
The definition of significant expenditure is open to interpretation but the £150k estimated
cost (latest estimate (£100k) is a small percentage of the overall contract value. All
bidders had the same opportunity to clarify the position with DRD and no formal requests
for clarification were received as part of the tender process. Mr. O'Driscoll has confirmed
that the proposed works relate only to the need to improve disabled access and are not
essential for the berthing of his proposed vessels. Having discussed this with others
involved in the assessment (see para: 4.11.6) we are inclined to accept this view. We are
therefore of the view that Mr. O'Driscoll’s proposals did meet the tender requirements and
that in any event this level of expenditure would not have materially affected the outcome
of the competition, if factored into the overall evaluation.

8.1.5
It has been alleged that the abandonment of the first procurement in 2007 was because the
Department wanted Mr. O'Driscoll to win the contract. Two of the bids were considered
to be non-compliant, including Mr. O'Driscoll’s, because at that time he could not
guarantee that a suitable vessel would be available. The CalMac bid did meet the
minimum technical requirements but the cost exceeded the available budget and offered

75
little by way of enhancement to the existing level of service. By this stage DRD had
received confirmation that extra funds may be available for improving the service. In our
view it was appropriate therefore, for the competition to be abandoned on the basis that the
bids received were either non-compliant or unaffordable. If the CalMac bid had offered
meaningful service improvements then DRD may have proceeded with it or sought to
negotiate a better price, but this was not the case.

8.1.6
There have also been allegations that Mr. O'Driscoll’s bid was non-compliant in other
respects. We have examined the bids and there is no doubt that Mr. O'Driscoll’s bid was
less comprehensive and less detailed than that submitted by CalMac. This may reflect the
different sizes of the two companies and the resources that each had available for
submitting tenders of this nature. While there was a lack of detail in certain areas, we are
of the view that Mr. O'Driscoll’s tender was sufficient to achieve overall compliance with
the requirements. Also the tender documents stated that bids may be rejected if they were
non-compliant and this gave DRD / CPD discretion in deciding whether to reject a bid.
We are of the view that it was reasonable for the Evaluation Panel to conclude that the
detailed weaknesses in the bid did not justify the rejection of Mr. O'Driscoll’s tender.

8.1.7
The overall complaints about the procurement process appear to be based around sensing
that Mr. O'Driscoll was favoured from the outset and that anything would be done to
ensure that he won. We have found no evidence of this. We are of the view that the main
desire was to achieve the best value bid which would deliver the desired level of
improvements to the ferry services to benefit the local community and to support tourism.
Whilst CalMac had provided a very competent and professional lifeline service over a
considerable period of time they had been unable to significantly enhance services and this
was also reflected in their tender proposals. The enhancements included in their bid were
modest and did not offer a dedicated alternative vessel.

8.1.8
We consider that the decision making and quality of administration was, at least in part,
adversely affected by the timescales and scheduling associated with the second phase
competition.

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8.1.9
Our overall view is that notwithstanding established procurement procedures and an
existing SLA there is no doubt that mistakes were made in the procurement process.
These will need to be addressed and we set out our recommendations in this respect
below. However, these problems in both CPD and DRD did not in our view materially
disadvantage the non-successful bidders or fundamentally undermine the competition. We
consider that the tender assessment did fairly reflect the considerable difference between
the level of improvements offered in the two bids and that the procurement process did
identify the most economically advantageous proposal.

8.1.10
While the incoming service has been well received it is evident that the handover period
did not run smoothly. The relations between the incoming and outgoing operator could
have been improved as could the Department’s oversight of the handover process. This
certainly would have allowed a more effective handover period and better implementation
planning. The Department has accepted that there were some delays in establishing the
monitoring regime, although this is now substantially in place. An outstanding issue for
the Department to address is the Performance Bond. The Department was under the
impression that this requirement was excluded from the contract however, as the bond
remains a condition of the contract, this issue remains to be resolved.

8.1.11
We consulted with MCA and HSENI in relation to health and safety concerns and
allegations that vessels did not have appropriate passenger certification. On the basis of
feedback from MCA and HSENI we have concluded that adequate safety management
systems and related health and safety documentation is in place and that Rathlin Island
Ferry Ltd is operating within the established codes of compliance. We were advised by
MC A that they have allocated disproportionate staff time to demonstrate that this is the
case.

8.1.12
In the area of personnel and management our greatest concern has been with the conduct
and management of the exercise. We have found no evidence of impropriety in either
DRD or CPD, nor that officials had any improper contact with the Scottish Executive,
MCA or any other party with an interest in the outcome of the procurement. That said,
the management and oversight deficiencies (arising largely from breakdowns in

77
communication and understanding of roles between DRD and CPD, and also from limited
staff resources and extenuating circumstances in PPTD) have damaged the effectiveness
and transparency of the procurement and fuelled perceptions of bias or wrong-doing.

8.1.13
Certain of these deficiencies are identified above in relation to the tender and evaluation
processes, but even basic aspects of good practice such as a documented record of some
clarification, debrief and implementation planning meetings have been overlooked and on
occasions planning correspondence (mainly e-mails) between DRD and CPD have not
been saved to the electronic filing system. This has left DRD and CPD in an exposed
position when seeking to explain themselves to interested parties and exposed the two
Departments to justified criticism.

8.1.14
Insofar as criticisms of Official 1 by Complainant 2 is concerned, we find that there is no
evidence to support either harassment or bullying. While there was some contact around
the end April period (after the award of the contract became known around 18-21 April
2008) we have found nothing to suggest that it was unreasonable in the context of a
client/contractor relationship and the evidence provided to the team by Complainant 1 and
Complainant 2 says that the CalMac intervention prevented contact between the two
parties in May and June 2008.

8.1.15
We consider the most significant single issue we established in this area to be Official 1’s
decision to forward Complainant 2’s e-mail of 7 July 2008 to Mr. O'Driscoll
(Complainant 2’s new employer) without recourse to Complainant 2. Official 1 says his
only intent was to have the issues identified in the email addressed as quickly as possible.
That may be the case but the e-mail could have been read as a complaint against the new
employer (certainly Mr. O'Driscoll viewed it as a complaint) and that Official l did not
exercise more caution or sensitivity was in our view an error of judgment on his part
which should not have happened. Certainly this act and Official 1’s subsequent reply the
same day appears to have been a turning point in Complainant 2’s relationship with the
Department.

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8.1.16
Complainant 2 contends that this event helped sour his relationship with Mr. O'Driscoll
and that the reference in Official 1’s reply that RIFL (Mr. O'Driscoll) blamed
"management on the ground" for the poor cooperation with CalMac as being evidence of
this Complainant 2 also considers that subsequently Official l may have spoken against
him in conversations with Mr. O'Driscoll. Both Official 1 and Mr. O'Driscoll deny that
this was so.

8.1.17
In our view it is not unreasonable to conclude that the "management on the ground"
reference meant management in Ballycastle, i.e. Complainant 2, and that this did not
reflect the very difficult position Complainant 2 found himself in the May/June 2008
period. We do not however concede that this was a defining act in the relationship
between Complainant 2 and Mr. O'Driscoll. Mr. O'Driscoll is adamant that his view of
Complainant 2’s capability and potential was based solely on working alongside him in
the July - September 2008 period and that neither Official 1 nor Official 2 had played a
role in this. On the contrary, Mr. O'Driscoll confirmed that both of the lead DRD
officials had commended Complainant 2 to Mr. O'Driscoll in high terms.

8.1.18
Our terms of reference require us to advise on the need for specified formal disciplinary
charges in relation to Official l or Official 2. In seeking to weigh the actions of Official l
and Official 2 during this procurement it would be wrong to overlook either that this was a
complex and demanding challenge for a small Branch with limited procurement experience
(made more difficult and stressful by the allegations which arose during the procurement
process) or that the Rathlin Islanders have nothing but praise for the outcome. That said,
the public interest demands high standards of administration from public servants and in
our view certain aspects of the administration and management of this process fall short of
the required standard. Notwithstanding that mistakes were made, we have found no
evidence of impropriety or misconduct on Official 1’s part and we therefore consider that
it would be inappropriate for the Department to pursue formal disciplinary action against
Official l. Rather we consider that the Department should weigh Official 1’s actions and
wider management responsibilities in this procurement in the context of his 2008-09
annual performance assessment in terms of his overall box marking. The deficiencies in
the procurement process have impacted adversely on the standing of the Department and

79
the Department will no doubt wish to make its concern about these matters known to the
individuals involved. A smaller number of allegations relate directly to Official 2 and
here again we have found no evidence of impropriety. We would view any questions
against him as relating solely to the effectiveness of his role as project manager and
therefore to aspects of performance as opposed to formal disciplinary action. Again we
consider that Official 2’s actions should be weighed in the context of his 2008-09
performance assessment. There certainly appears to have been an over-reliance on CPD
and, as a result, the Department’s position has been compromised. This has been reflected
in the recommendations below.

8.1.19
We have found nothing to suggest that action is necessary in relation to other DRD
officials.

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8.2
Recommendations

8.2.1
In the course of our investigation we have identified a number of deficiencies which in
the main relate to a dislocation in the apportionment of responsibilities between CPD and
DRD. Notwithstanding the fact that a SLA was established between CPD and the
Department and that CPD have established procedures to ensure fairness, equality and
transparency in the procurement process, on the basis of our findings, it is evident that
further action is required to improve and monitor compliance with the procedures so that
Departments are not exposed to criticism and loss. We have therefore made a number of
recommendations which are detailed below.

Recommendation

8.2.2
SLAs between CPD and Departments should be reviewed to ensure that there is absolute
clarity regarding the roles and responsibilities and accountability of the respective
parties.

Recommendation

8.2.3
Notwithstanding its existing procedures and that a Tender Initiation Document was used
in this case, CPD should review current procedures to ensure that schedules for key
stages of the process detail all documentation requirements and ensure that the process is
operating effectively. The schedule should be signed and dated at each of the key stages
and be subject to supervisory review to confirm that the process is carried out in
accordance with procedures and is complete, accurate and reliable. For example there
should be no question of debate as to when evaluation criteria/sub criteria are agreed.

8.2.4
Given that there have been a number of recent legal cases where judgments have
established case law relating to the use of sub-criteria, sub-weightings and scoring
methodologies, CPD should consult with DSO to ensure that procedures are appropriate.

Recommendation

8.2.5
There must be absolute clarity on the category of service i.e. Part A/B, and the impact
this has on processes. Failure to do so may lead to confusion amongst bidders.

81
Recommendation

8.2.6
CPD should ensure, perhaps through the Tender Initiation Document referred to at Para:
8.2.3 above, that for all meetings e. g. tender evaluation meetings, clarification meetings,
debriefs etc. an adequate note of the meeting is formally recorded and retained on file.

Recommendation .

8.2.7
Given the recent transition to non paper based scoring and electronic record storage
within CPD, we recommend that the system is formally reviewed to ensure that it is
operating effectively and provides a complete and transparent means of supporting public
procurement decisions.

Recommendation

8.2.8
Notwithstanding that CPD has an established complaints procedure, we recommend that
CPD should develop a formal process to govern situations where a material error arises
in the management of the procurement. Formal documentation in relation to decision-
making must be retained for management/audit trail purposes.

Recommendation

8.2.9
CPD and Departments should ensure that all Evaluation Panel members, both internal
and external to the department, are aware of the roles and responsibilities of an
Evaluation Panel member and have received appropriate training.

Recommendation

8.2.10
Conflict of interest declarations should be completed for every procurement competition.
In this case conflict of interest declarations were completed by Panel members in the first
procurement competition but they were not reviewed in the second.

Recommendation

8.2.11
DRD should reiterate established procedures to staff, to ensure that significant e-mail
communications are saved to the electronic filing system (TRIM) on a timely basis and
that a complete management/audit trail is maintained to support key decisions taken.

82
Such failures in this procurement were potentially serious and the problems experienced
in DRD may hold lessons for other Northern Ireland Departments.

Recommendation

8.2.12
The Department should ensure that prior to the commencement of service contracts
necessary checks are completed to confirm that the new operator/contractor has met all
prerequisite conditions of contract.

Recommendation

8.2.13
The Department should review the performance bond requirement in this contract, to
ensure that it is necessary and cost effective.

Recommendation

8.2.14
The Department should ensure that all staff are aware of the requirements in relation to
the handling of personal or sensitive internet and e-mail data and in particular ensure that
these guidelines adequately cover the passing on of personal data.

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 ANNEX l
RATHLIN FERRY TENDER PROCESS - CHRONOLGY

The table below provides a chronology of the main events in the Rathlin Ferry Tender process.

Date Comment

May 2007 Advertisement placed on CPD website inviting Expressions of Interest (EOI)
from companies

18/06/07 Closing date for EOI

29/08/07 Tenders invited by CPD on behalf of DRD

11/10/07 Closing date for return of tenders

22/10/07 Tender bids opened for the first competition

05/11/07 Marine Consultant inspected the vessel used by CalMac, the MV Canna.

06/11/07 Consultant inspected the MV Bruernish proposed for use by Mr.

O'Driscoll.

08/11/07 Marine Consultant inspected a vessel similar to one proposed for use by Mr.
O'Driscoll.

09/11/07 Evaluation Panel met. Record states that purpose of meeting was "not to
evaluate but to determine points of clarification".

27/11/07 Submission to Minister requesting abandonment of first tender competition

27/11/07 Minister’s agreement to the abandonment of the first tender competition.

28/11/07 Rathlin Ferry competition abandoned by the Evaluation Panel. Abandoned

on the grounds of affordability and compliance.

28/11/07 Panel review of evaluation criteria and weightings for the second competition

29/11/07 Abandonment letters issued by CPD to all parties who tendered for the
competition.

12/12/07 Initiation document signed by PPTD and CPD for new Rathlin Island ferry
service competition (Ref: S1584306).

13/12/07 Terms of Reference forwarded from PPTD to CPD containing incorrect

Scoring Matrix.

84
04/01/08 Amended OR forwarded from PPTD to CPD.

04/01/08 PPTD (Official 2) approves Tender Documentation by e-mail to CPD. .

04/01/08 Letters issued by PPTD to interested parties stating that the new tender will be
placed on CPD's website over the next few days.

07/01/08 Tender Documents published on Procurement Directorate’s website and

advertised. Deadline of 28 February 2008 set for return of tenders.

09/02/08 Tender documentation delivered to PPTD

10/03/08 Meeting with Mr. O'Driscoll at Killybegs boatyard to review plans for vessel
proposed by Mr. O'Driscoll in his tender.

11/03/08 Evaluation of Bids by Evaluation Panel. Scores agreed subject to clarification

on some points.

13/03/08 Clarification meeting with Mr. O'Driscoll, Harbour master, Marine Consultant,
PPTD, CPD and the Clerk and Chief Executive of Moyle District Council held
at Moyle DC to discuss proposed harbour works.

20/03/08 Clarification meeting with Mr. O'Driscoll at Ballycastle Harbour. Same

attendees as previous meeting and in addition, a CPD Civil Engineer attended.

09/04/08 Report received on Harbour Works from CPD Civil Engineer.

15/04/08 Evaluation Report produced by CPD and forwarded to PPTD

16/04/08 Report forwarded by email to members of Evaluation Panel by

PPTD confirming successful completion of clarification.

18/04/08 Approval of Evaluation Panel forwarded to CPD by PPTD.

18/04/08 Award and regret letters issued by CPD.

21/04/08 Press Release issued outlining award of new contract

22/04/08 Mr. O'Driscoll meets CalMac staff at Ballycastle terminal

24/04/08 CalMac request de-brief from CPD.

25/04/08 Debriefing letter issued to CalMac by email from CPD

28/04/08 Island Ferries request de-brief from CPD.

85
02/05/08 CalMac Debrief. Attended by PPTD and CPD staff. Notes taken of meeting.
Tender Scoring issue raised by CalMac.

02/05/08 Handover meeting attended by CalMac, PPTD and CPD staff.

09/05/08 Debriefing letter issued to Island Ferries by email from CPD

01/07/08 Rathlin Island Ferry Ltd commence service

07/07/08 Exchange of e-mails between Complainant 2 and Official 1

09/07/08

24/07/08 Meeting held at Ballycastle to review of Health and Safety arrangements

surrounding the Rathlin Island ferry service

15/10/08 PPTD quarterly review meeting with Rathlin Island Ferry Ltd

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 ANNEX 2

Three Strand Investigation: Terms of Reference

The Permanent Secretary of DRD set out the following Terms of Reference in order to deal
comprehensively with the full range of allegations and complaints that the Northern Ireland Audit
Office (NIAO) and Department had received about the Rathlin Ferry Contract. It was agreed with
NIAO that the investigation would have three inter-related strands:

Internal Audit Investigation

The ongoing Internal Audit investigation into many of the original allegations and complaints
(terms of reference detailed below) will feed into the other two strands of the investigation.

"In the light of the Northern Ireland Audit Office’s letter of 7 May 2008, to examine the
concerns and issues raised by ’Sonia Monahan’ regarding the procurement procedures for
the recently awarded contract for the Rathlin ferry service and to report. The examination
should take into consideration earlier criticisms raised by ‘Sonia Monahan’ directly with the
Department. The examination will involve seeking information from the Central
Procurement Directorate which advised the Department during the course of the two
relevant tender processes. "

Procurement Process Investigation

The terms of reference for this part of the investigation are as follows:

"In light of the allegations and complaints received by NIAO and the Department for
Regional Development, to investigate all aspects of the procurement process for the
Rathlin Island Ferry contract and provide assurance that:

a all tenderers received equal treatment and there was no discrimination;

b there was transparency about the decision-making process; and
c there was no manifest error in the award of the contract. "

87
Investigation of Complaints against DRD Staff

The terms of reference for this part of the investigation are as follows:

"To carry out a preliminary investigation in accordance with the procedures, approach and
timescale referred to in an attached letter and in order to:

a enquire into the complaints against Official 1 and Official 2 concerning their role in
the procurement process for the Rathlin island Ferry Contract and associated
issues as set out in the attached letter and enclosed matrix;
b establish the nature, background and facts to these events;
c identify and enquire into any additional conduct matters that may emerge as part of
the investigation in relation to Official 1 and Official 2 or any other identifiable civil
servant involved in the process; and
d provide a report on your investigation and advise on the need to put specified
formal disciplinary charges to Official 1 or Official 2 or any other civil servant
involved in the matter. This will be incorporated into a composite report to reflect
the totality of the findings from the 3 strands of the overall investigation into matters
relating to the Rathlin island ferry contract.

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 ANNEX 3

Summary of Key Allegations

• Procurement Procedures were not complied with.

• An Evaluation Panel Member had a potential conflict of interest
• The Department was attempting to purchase the MV Breurnish for one of the Bidders.
• The CalMac tender should have been accepted as it was the only compliant bid.
• Funding was being made available for the purchase of a vessel for the benefit of one of the
operators
• DRD failed to notify the existing provider (CalMac) of its intention to retender
• Changes were made to the tender documents to accommodate one specific bidder.
• The tender submitted by Mr. O’Drisc0ll was not compliant.
• DRD was involved in illegal post-tender negotiations
• The Criteria used to evaluate the second tender competition differed from that published.
• DRD officials may have exerted undue influence in facilitating the new operator during the
course of the tendering process.
• One of the new vessels to be used by Mr. O'Driscoll has failed a crucial safety test
• The MV Canna operated for a period from 31st August 2008 until 12th September 2008
without a valid passenger certificate .
• Mr. O'Driscoll’s company has yet to have an approved safety management plan in place.
• Rathlin Island Ferry Ltd is not registered with the Fair Employment Commission (now
known as the Equality Commission).
• Staff have not been adequately trained or subject to POCVA checks
• The winning contractor did not have employers and public liability Insurance in place
from the date of handover and there are no insurance certificates on display anywhere
within Ballycastle terminal.
• No written risk assessment prior to takeover on lst July 2008 and that a new risk
assessment had not been carried out regarding the passenger only vessel MV Ossian of
Staffa.
• A Performance Bond is not in Place
• The tender process was a ‘done deal’ prior to Christmas 2007 and the outcome was
politically motivated

89
• Personal information relating to Complainant 2 was passed on to third parties by Official
1
• Official 1 had pressurized Complainant 2 to copy CalMac documentation to facilitate the
handover to Mr. O'Driscoll.
• Official 1 informed CalMac that Complainant 2 or his family were the source of questions
about the tendering process and that disciplinary action should be considered.
• Official 1 is abusing his position and undermining Complainant 2’s position within Rathlin
island Ferries.
• A DRD official had asked the Scottish Executive, who own CalMac, not to challenge the
outcome of the tender.
• The Department applied pressure on MCA to award the necessary certification to the
winning contractor

90
 ANNEX 4

Parties who have made allegations/complaints/raised concerns

REDACTED

91
REDACTED

92
 ANNEX 5

Enhanced Service - Tender Requirements

1.6.1
Caledonian Maritime Assets Limited (CMAL) is making the Ro-Ro (‘roll-on roll-off’)
vessel. "Canna" which is currently serving the route (“The current vessel") available to
Operators on a lease basis through an agreement with the Department. Companies
tendering for the operation of the service may elect to use this vessel, or may elect to
provide alternative vessel solutions, or a solution which includes the use of the current
vessel. supplemented by other vessels in a way designed to best serve the route.

2.3.3
Tenderers are encouraged to develop the service provided over and above the minimum
service requirements which add value to the service.

2.3.4
Tenderers will particularly wish to note that in considering ways to generate extra
revenue. there are restrictions in place in relation to the number of vehicles which can
travel to Rathlin (see Annex 6). However, it would be possible for tenderers to enhance
the passenger element of the service. If using passenger/vehicle ferries this might mean
running this in passenger-only mode, for certain services.

2.8.2
Any additional vessels that tenderers propose using, other than the current vessel, will
have to be suitable for berthing at the existing harbour facilities at Ballycastle and Rathlin
Island. Moyle District Council proposes to extend the current facilities at Ballycastle in the
event of a new ferry service being put in place between Ballycastle and Campelltown.
Tenderers should satisfy themselves of the details of any planned changes and that any
planned change to the current harbour, planned by Moyle D.C. at the time of the tender,
will not adversely affect their ability to provide services between Ballycastle and Rathlin
Island.

2.10.3
The Department does not specify the number of vessels to be used, or that the same vessel
has to be used throughout the period of the contract, other than the current vessel, if used.
Provided that any vessel to be used meets the service requirements of the contract, then

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the Operator has flexibility in deciding on the vessel to be used. The Department does,
however, specify that a vessel should be based in Rathlin overnight to facilitate its use in
an emergency.

3.2.14
Tenderers must however provide full details of any additional or alternative vessels
proposed. Tenders must make it perfectly clear which of the alternatives are being
proposed.

5.10.1
Pull details of any vessels proposed for use in the route, other than the current vessel,
should be provided.

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 ANNEX 6

Compliance of Mr. O'Driscoll’s tender with the tender requirements

Tender Requirement O'Driscoll Tender Comments

Form A: Form of Tender. Form submitted
Form B: Certificate relating to Form submitted
bonafide tender
Form C: VAT registration Form submitted
Form D: Fair employment and Form submitted
treatment
Form E: Freedom of Form submitted
information statement
Form F: Conflict of Interest Form submitted
statement
Form G: Indemnity See comments. The Part 1 ITT stated at para 16
Performance Bond that Tenderers must price for the
bond but formal agreement on a
bond would only be required if a
bid was successful.
Statement of compliance with Provided in section 3.3 on
safety legislation etc.. ‘ H&S policy
[Part 2 para 2.6.6]
Disabled access -details to be Provided in section 2
provided on constraints and under financial
alternative options. projections.
[Part 2 para 3.5.13]
Financial Plan Financial projections were
[Part 2 para 5.2.2 & section 4] provided in the required
format
Schedule of service Provided at para 5.3.1 and The proposal was to begin the
[Part 2 para 5.3.1] also section 3.5. service with the existing timetables
Operational Management Plan Provided at para 5.4.1.
[Part 2 section 5.4] Details of the management
structure, key staff and
other crew and shore staff
were set out. Other
operational aspects were

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 set out in the technical
proposal.
Quality Plan Section 5.4.3 of the tender The tender documents required
[Part 2 para 5.4.3 & Annex 9] provided the headings of outline details to be provided
the quality plan rather than a fully developed
requirements. These were quality plan. It would have been
supported by further detail unreasonable to require a full plan
set out in the content of. at tender stage
the technical proposal.
Key Minimum standards Provided at section 5.5 The tender proposal noted the
[Part 2 para 5.5.1 & Annex 7] and further information in content of section 7 of the ITT
section 3.2 and 3.4. which set out the required
performance regime.
Environmental protection Provided at section 5.6
policy
[Part 2 para 5.6.1 & Annex 9]
Implementation Plan Provided at section 5.8
[Part 2 para 5.8.2 & Annex 2] and further details
provided in sections 3.2 to
3.5. .
Proposed vessels Provided at section 5.10
[Part 2 para 5.10.1 & Annex 9] together with further
detail in the technical
proposal.
Current business activity Provided in the technical
[Annex 9] proposal in section 1.
Safety record Provided in the technical
[Annex 9] proposal in section 1.
Marketing Plan Provided in section 3.6.
[Annex 9]
Insurance See comments; third party Insurance was not required to be
[Annex 9] insurance was not place at the time of tender but the
required at tender stage Client required details on the
but needed to be in place arrangements that would be put in
before services . place for third party liability and
commenced. Insurance for any vessels they proposed for
was not in place at tender their own operation
stage for the proposed
vessels but details of
insurance were supplied
of the company’s vessels
being used on other

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 services to show what the
arrangements would be.
Risk assessment There was no specific Tenderers were asked to provide
[Annex 9] section on risk assessment details of the risk assessment
in the tender but various carried out for the operation of the
risks were identified in the proposed vessels.
tender together with
proposals for risk
management. The tender
identified at para 3.3.2
that the existing H&S
manual for the MV Canna
would be reviewed and
updated where necessary.

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 ANNEX 7

Contract Monitoring Checklist

Monitoring Action Plan for the Rathlin Island Ferry Service Contract
between RIFL and DRD 2008-2014

Information Required Received DRD

on time Comments
(Yes/No)
Weekly Monitoring
Cancellations, delays or relief events - these should be provided on the
appropriate forms with all necessary documentation attached. (If no
cancellation/delay or relief event occurs over the week an email from the
operator saying a nil return)
Monthly Monitoring
Summary of cancellations, delays or relief events
Weekly ticket reconciliation provided, this should include a breakdown
and evidence of discounted fare entitlement as well as Accounts in use.
Full list of Smart Pass/Half Fare Smart Pass journeys
Full list of Residents & Residents Vehicle journeys
Monthly balance sheet - one month in arrears
Monthly summary of Passenger Figures on both the 'ro-ro' and Passenger
Only vessels.
Monthly summary of Vehicles and Commercial vehicles carried
Progress reports iro the new build catamaran
Health & Safety Incidents Report - this will cover any health and safety
incidents which have occurred and how these were dealt with.

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 Quarterly
Spot Audit Checks (see attached audit check list)
Residents Pass Verification - 10% check on weekly records provided by
RIFL Send this to MDC to receive verification of genuine Pass details.
Smart Pass/Half Fare Smart Pass Verifications - 10% check on weekly
records provided by RIFL. Send this to AD for verification of genuine
card details.
A sample of weekly ticket returns showing date & time of sailings and
passenger numbers
User Charter Return to be raised and discussed at the Quarterly review
meeting (this includes reports on On-board/on-shore facilities,
Cleanliness, Staff conduct and complaints received and action taken to
address these.
Annual Staff Training Report
Compliance Confirmation - this will be raised, discussed and signed off
at the Quarterly Review meeting.
Annual
Financial Summary showing all end year figures
Annual safety reports including detailed information about any
reportable accidents, including any major injuries and serious injuries,
and any hazardous events
Company Annual Report
A copy of the company's audited accounts; a copy of the audited
accounts for the subsidised services; and audit certificates for both.
Review of Fares
Annual environmental report including detailed information about any
reportable pollution incidents. All pollution incident reports to MCA
should also be copied to the Department.

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 Additional Monitoring
Vessel Documentation (in date and ensuring that all minimum levels of
carrying capacity can be met in the events of relief vessels in use over 3
days) The following list of documentation must be provided were
applicable for each vessel used on the route:
-Where & when the vessel was built
-The Port of Registry
-The previous names
-The service speed & consumption
-The carrying capacity
-Copy of the current passenger certificate
-Copy of the current load line certificate (if applicable)
-Any Flag / Port State inspection records
-General arrangement drawing
-Copies of all necessary insurance for the vessel
-Copy of the agreement for use of the vessel if not owned by the
Operator
MCA Survey and inspection Reports
Insurance Documentation - copies of all renewed insurances and
policies

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Remainder of Report

REDACTED

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