MSPS have called for wind turbine contracts to be put on hold after it emerged that officials cannot insist companies guarantee a set amount of the supply chain work to Scottish firms.
The Scottish Government has been told to put a moratorium on new offshore wind contracts until officials can resolve the situation, described as being “in the hands of these developers to give us some of the crumbs”.
The call by Labour MSP Alex Rowley and the SNP’s Richard Lyle comes after Burntisland Fabrications (BiFab) entered administration following the collapse of a £2 billion contract to build turbine jackets.
With the company entering administration, and without a takeover which has been ruled out by the Scottish Government, more than £50 million of public money pumped into the company could be lost.
Officials appearing in front of Holyrood’s Economy, Energy and Fair Work Committee warned that state aid rules stop the Scottish Government from forcing companies to guarantee work or contracts for Scottish firms in the supply chain.
The current system requires bidders for offshore wind farm projects to detail the economic benefits that would come to Scotland, although no legally enforceable minimum is in place.
Simon Hodge, chief executive of Crown Estate Scotland, which controls the leasing of seabeds for offshore wind farms, told MSPs that his organisation is “not requiring any particular response or level of commitment to the different geographical regions as a basis for award of the contract”, despite concerns over supply chain contracts being moved overseas.
Mr Lyle called for a commitment that “we are not going to tolerate this any longer”.
He added: “Many people are upset by the fact we were promised thousands of jobs, companies committed to getting the work done in Scotland and then moved.
“If developers do commit to awarding contracts to Scottish supply chains and subsequently change their mind over the years of development, what penalties can the Crown Estate impose, if any?”
Mr Hodge said: “If a developer has made a commitment through a supply chain development statement and then that commitment isn’t taken through to the final lease then we can apply a financial penalty to that but ultimately, we could actually terminate that option.
“What we’ve being laying out for the sector is a graded scale of matching the delivery to the initial commitment. If that falls below a certain threshold then yes, we would terminate.
“It is something we need to consider very carefully because a termination would result in potentially significant setback in terms of offshore wind development. We’ve considered the option very carefully and concluded that we should retain the termination option.”
After being further pressed on the matter, Mr Hodge warned MSPs that “requiring Scottish content would fail two of the four state aid tests”.
He added: “One is does it have the potential to distort competition and the other is, is it likely to affect inter-community trade.
“There’s also an issue of UK competition law which relates to competition within a UK context.”
Mr Rowley said this commitment over enforcement was “completely teethless” as there is “no requirement for them to be able to say how much work will come to Scotland or indeed the UK” and labelled it a “completely unacceptable situation”.
He added: “We’re in effect begging them…saying to them ‘please give us some of the crumbs from this so that we can get some working into our economy’.”
Mr Rowley added that the reassurance over peanlties or ripping up contracts is “not worth the paper it’s on” and asked the officials “should we not be bringing forward a moratorium on all these developments until we can actually sort it out?”
Mr Hodge said: “We have worked hard to create a context and an opportunity for developers to make a commitment to the Scottish supply chain, to demonstrate how they can work in collaboration, including through the Scottish Offshore Wind Energy Council, to achieve those ambitions of the offshore wind sector deal to play their part in helping to develop a successful supply chain in Scotland.”
In relation to Mr Rowley’s call for a moratorium, Mr Hodge said: “The bidding process is live at the moment and developers are actively working up their bids.
“The bid process is not yet concluded and until that process is concluded then theoretically the process could be halted but there may well be legal challenge and that level of challenge would increase as we move through the stages of the leasing process.”
Mr Hodge confirmed the amount of work given to the supply chain cannot be a “material consideration” when bids are being assessed.
Mr Lyle said Scotland is being “let down” and “ripped off” by “state aid technicalities”.
“Most people feel we’ve been getting ripped off for far too long and I along with Alex Rowley agree that something has to be done,” he said.
“What are we going to do about it? Are we going to take on board what Mr Rowley is saying? I for one agree with him.”
Mr Hodge said a requirement of business could lead to companies not offering bids at all, to which the SNP MSP said: “If they decide to go elsewhere, then we won’t give them the contract.
“It’s time to make sure that the Scottish workforce get a piece of the cake, not just a crumb, at least 50 per cent of the cake.”
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