[UPDATED] Redacted! Several sections blacked out in declassified LCS report: memo

KUALA LUMPUR – The declassified report by the Investigating Committee on Procurement, Governance and Finance on the littoral combat ship (LCS) controversy has several redacted sections.

This is according to a memo signed by Senior Deputy Secretary-General (Finances and Development) of the Prime Minister’s Department Datuk Sollehuddin Alyubi Zakaria and sent to Chief Secretary of the Government Tan Sri Mohd Zuki Ali.

The redactions in the 106-page report were made on the advice of the Attorney-General’s Chambers, and include paragraphs 2.39.1, 2.39.2, 2.39.4, and tables 9, 10, 11 and 18.

Among the redacted items are names of Boustead Naval Shipyard Sdn Bhd’s (BNS) board directors and shareholders, the status of BNS’ loans as of May 2019 – including the loan terms – and details on Perstim Industries Sdn Bhd.

In a statement late this afternoon, Public Accounts Committee chairman Wong Kah Woh noted that several facts in the report were redacted by the Prime Minister’s Department. However, these do not affect the overall facts and summary of the report, he said.

“Notwithstanding, PAC still maintains its stand that the redaction of the information is unnecessary, because the details regarding the directors and shareholders of Boustead Holdings Bhd, Boustead Naval Shipyard and Perstim Industries Sdn Bhd that were redacted are actually open information and can be found through a search with the Companies Commission of Malaysia,” he said.

He added that the PAC is still awaiting the forensic audit report done by BNS to be declassified in line with the cabinet’s decision.

In the investigative committee’s report, it proposed two options: either to continue or to cancel the project entirely.

If the project was to continue, the committee suggested, BNS should provide a detailed design and the Defence Ministry must provide a clear deadline in writing.

The committee also suggested that the government maintain strict control over payments to BNS so as to ensure that the payments made are to be used strictly for the project.

Similarly, the government should enforce liquidated damages or pre-estimate compensation for the probable damage that will result from a breach of contract towards BNS as per the contract for each LCS, among other recommendations.

However, the committee advised the government to consider several facts if it was to cancel the project. So far, the government has paid RM5.94 billion for all six LCS, with a ceiling price of RM9 billion.

The remaining RM3.188 billion is not enough to fund the completion of the ships. The incompletion rates for all six ships are between 63.25% and 100%.

BNS is also financially strapped according to the records as of May 31, 2019, where the company owed RM956.89 million to banking institutions and RM801.11 million to equipment suppliers.

Hiring new contractors while using BNS facilities to finish the construction of the ships would also increase the project cost and not necessarily benefit the government.

“The committee opines that option one (to continue the project) should be considered by the government. However, the committee suggests that the Defence Ministry immediately table all the findings of this investigation, the financial implications to the government, and the direction of this project to the cabinet, and make the right decision on the direction of the construction of all six ships,” said the report.

In conclusion, the report found that the procurement contract lifecycle management by the Defence Ministry was weak and several clauses in the contract disregarded set procedures and were not in the government’s favour.

“Weaknesses were also found in BNS’ management as well as critical financial constraints.

“The weaknesses in the contract clause and in BNS have led to the delay in the construction of the six LCS ships.”

The report also indicated involvement by members of the administration prior to the start of the contract signing had led to a change in the ship design at the cost of recommendations by the Royal Malaysian Navy. – The Vibes, August 17, 2022